Credit card firms in marketing war

Korean credit card issuers are entering a new marketing war to grab a bigger share of domestic consumption, stirring concerns about their bottom line. 

New entries to the scene are heating up competition, prompting card issuers to come up with more generous deals ranging from interest-free installment options to up to 50 percent discounts on card purchases. 

Financial companies are conducting major management changes including spin-offs of their card units, to cope with tightened government supervision. 

“Separating credit card arms from banks would be an option to increase their profit as slimmer management can give faster orders,” Hwang Seok-kyu, an analyst at Kyobo Securities told The Korea Herald. 

“The independence would also free credit card firms from conservative capitalrequirement rules at banks, which card issuers cannot shoulder if they push ahead with aggressive marketing activities,” Hwang said. 

KB Financial Group is rearranging the governance of its affiliates under its new chairman Euk Yoon-dae. The group said on July 30 that it will spin off KB Card, the credit card arm of its affiliate Kookmin Bank, into a separate company by February 2011. 

Hana Financial Group spun off the Hana SK Card last November and launched new marketing activities in partnerships with various SK Group affiliates. Woori Financial Group CEO Lee Pal-seung said earlier this year that its card unit may be spun off in the latter part of this year. 

“These groups may expect the spin-off to enhance sales as independent governance would give heavier responsibilities to management,” Hwang added. 

Hana SK Card recently came up with a new deal for new customers, offering up to three months of interest-free installment payments for card purchases made at all of its affiliates. Unlike conventional deals, which offer interest-free installment options by industries only, such as on gas, movies or department stores, the Hana-SK CJ Titanium Card removed the restriction on the offer. 

“Hana SK has been very aggressive to make up for the lagging performance behind its peers over the first two quarters this year,” a person familiar with the company said. The spin-off of Hana Financial earned 918.7 billion won for the first half of this year, a 6.3 percent decline from a year ago, according to the Financial Supervisory Commission.