Samsung Reclaims No.1 After 10 Years, Shinhan Resolute... Hyundai Emerges as Dark Horse Leading Apple Pay [Financial Upheaval]④

Samsung Achieves Overwhelming Victory in Both Profitability and Soundness
Apple Pay as a Game Changer... Hyundai Card Emerges as a Dark Horse
Domestic Slump and Fee Burdens... "This Year Will Be Difficult as Well"

Editor's NoteAs 1% low growth becomes entrenched, the survival competition among domestic financial companies, which have grown mainly in the domestic market, is intensifying. To survive the severe domestic slump, innovation is being triggered across the entire financial sector including banks, insurance, and cards, with fierce ranking competition emerging in the process. Asia Economy is focusing on companies causing tectonic shifts through innovation in major financial sectors and running a series to consider what strategies financial companies should establish in the low-growth era.

In the card industry, Samsung Card ignited the race for the top spot by taking first place from Shinhan Card for the first time in 10 years. Hyundai Card, which led the introduction of Apple Pay and shows strength in credit card sales (new sales), the 'core business' of card companies, has emerged as a dark horse. As economic recession increases management uncertainty, card companies are developing artificial intelligence (AI) services and strengthening sales of key products such as premium cards.

Kim Itaek, President of Samsung Card. Provided by Samsung Card

Samsung Leads in Both Profitability and Soundness

According to each company's investor relations (IR) materials on the 4th, Samsung Card's net profit last year was 664.6 billion KRW, surpassing Shinhan Card's 572.1 billion KRW, reclaiming the top spot after 10 years. Although the top net profit position changed once due to one-off factors such as the sale of Samsung Card shares in 2014, Shinhan Card had maintained an 'absolute number one' system otherwise. This time, Samsung Card achieved a landslide victory in both performance and soundness indicators. It is the first time in five years since 2019 that Shinhan Card's annual net profit fell below the 600 billion KRW mark.

While Samsung Card's net profit increased by 9.1% in one year, Shinhan Card's decreased by 7.8%. New sales performance also rose for Samsung but declined for Shinhan. According to the new sales performance for January announced by the Credit Finance Association on the 21st of last month, Samsung Card recorded 12.7383 trillion KRW, a 4.4% increase compared to the same month last year (12.1965 trillion KRW), whereas Shinhan Card recorded 14.0067 trillion KRW, a 1.4% decrease compared to the same month last year (14.2034 trillion KRW). Regarding delinquency rates, Samsung Card's rate fell by 0.19 percentage points from 1.27% in Q4 2023 to 1.08% in Q4 last year, while Shinhan Card's rate rose by 0.06 percentage points from 1.45% to 1.51%.

Industry insiders evaluate that Shinhan Card's poor business performance influenced the ranking change. It faced difficulties in managing sales and administrative expenses, causing both profitability and soundness indicators to decline. Shinhan Card spent 81.97 billion KRW on selling and administrative expenses last year, a 10.2% increase from 74.42 billion KRW the previous year. This contrasts with Samsung Card, which managed to keep the increase rate of selling and administrative expenses at 0.3%, spending 192.4 billion KRW.

Samsung Card focused on improving cost efficiency rather than aggressively expanding its business scale. Thanks to this, it created a virtuous cycle of improved cost efficiency → reduced bad debt expenses → lowered delinquency rates. In Shinhan Card's case, the increase in costs due to offering voluntary retirement to 62 employees born between 1968 and 1974 in December last year also negatively affected performance. Samsung Card did not implement voluntary retirement.

Hyundai, Apple Pay Introduction Dark Horse in New Sales... Delinquency Rate in '0%' Range

Yonhap News

Hyundai Card has emerged as a dark horse chasing Samsung and Shinhan in terms of business portfolio and new sales performance. After introducing Apple Pay in 2023, Hyundai Card stood out in new sales performance. Hyundai Card recorded 14.3171 trillion KRW in new sales in January, ranking first. The year-on-year growth rate was 5.2%, higher than Samsung Card's 4.4%.

Its ability to manage soundness also stood out. The proportion of long-term card loans (card loans), which is a factor in delinquency rate increases, is the smallest among card companies. According to the Financial Supervisory Service's Financial Statistics Information System, Hyundai Card's delinquency rate in Q3 last year was 0.7%. It is the only card company recording delinquency rates in the 0% range every quarter.

The proportion of card loan income to total income was 18.6%, lower than Samsung (21.2%), Shinhan (21.4%), and KB Kookmin Card (21.7%). The smaller the proportion of the card loan business, the lower the risk of delinquency rate increases.

High Uncertainty but... Strengthening Premium Cards and AI

As management uncertainty grows recently, card companies are implementing strategies to increase growth engines by strengthening premium card lineups and AI services. This is due to variables such as the Financial Services Commission's reduction of merchant fee rates and big tech companies like Apple, Samsung, Naver, Kakao, and Toss expanding their offline market share strategies. The prolonged economic recession is also a burden.

Last month, Shinhan Card launched a new premium card product, 'The BEST-X,' for the first time in six years. It is a product where customers choose between 'My Shinhan Points' that accumulate up to 2% points on usage and 'Skypass' that accumulates Korean Air mileage. The annual fee reaches up to 320,000 KRW. KB Kookmin Card also launched the Heritage Classic last December, with an annual fee up to 157,000 KRW. Premium cards are products that strengthen benefits for flights, accommodation, and travel to secure high-quality customers. Generally, cards with annual fees over 100,000 KRW are called premium cards.

New business discovery through AI is also in full swing. Beyond using AI as a financial accident prevention tool, it is being applied to customer curation and product search services. Shinhan Card applies the generative AI system 'Isola' throughout the entire customer service process. Based on internal consultation data, AI provides solutions to customers. Hyundai Card exported its AI platform 'Universe,' in which it invested about 1 trillion KRW, to Japan's Mitsui Sumitomo Card last year. It plans to expand exports to North America, Europe, and the Middle East.

The card industry believes that it is difficult to survive without steadily improving profitability through innovation. Park Chang-hoon, CEO of Shinhan Card and an expert in big data and payments, emphasized in his New Year's message, "With population decline, stagnant market growth rates, and competitors armed with digital technology companies, competitive strategies are becoming sharper," adding, "The only key is to try many attempts solely to create something that shakes the market."