As the outlook for an economic downturn causes consumer spending to shrink, credit card companies are also tightening their belts. Internally, they are seeking management revitalization by replacing leadership and reducing personnel costs through voluntary retirement, while externally they are reducing consumer benefits.
According to the credit card industry on the 14th, six out of the nine major credit card companies this year (Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, BC, Woori, NH Nonghyup) have replaced their chief executive officers. Only three companies, including Hyundai Card, Lotte Card, and BC Card, did not replace their leadership.
The newly appointed CEOs emphasized change and innovation in common. Park Chang-hoon, the new representative of Shinhan Card, noted during his inaugural speech, "There hasn't been a time like now to feel crisis signals, except for the IMF and financial crises," adding, "In that sense, the key words 'change' and 'core' are truly necessary for us."
Kim Jae-gwan, president of KB Kookmin Card, also said, "Although the situation is difficult internally and externally, let's turn the crisis into an opportunity and change quickly and dynamically to provide the best value to customers." Similarly, Kim Yi-tae, president of Samsung Card, remarked, "We must overcome challenging environments and prepare for a new future to create a continuously growing company."
Credit card companies are also implementing voluntary retirement to reduce personnel costs internally. Hana Card has been accepting voluntary retirement applications from employees born in 1969 since the 6th. Last year, Hana Card had ten employees who took voluntary retirement. Shinhan Card also received applications for voluntary retirement from a total of 62 employees born between 1968 and 1974 last December. KB Kookmin Card recently conducted voluntary retirement for the first time in over three years. Woori Card is currently reviewing voluntary retirement.
Moreover, externally some credit cards are being discontinued, and consumer benefits are being reduced. Currently, there are no full-time credit card companies offering six-month interest-free installments. This is in contrast to last December, when Woori Card, BC Card, Shinhan Card, and Samsung Card offered installment benefits depending on the industry.
The background to this situation points to a decline in revenue in the credit card industry. The credit card sector is experiencing revenue deterioration in its core business of credit sales. Since the introduction of the appropriate cost revaluation system in 2012, the merchant commission rate for card companies has been lowered four times in a row. As a result, last year in the third quarter, the only sector in the entire financial industry to see a decline in net income was credit cards, which decreased by 4.6%. Furthermore, the government announced that to stimulate domestic demand, it will lower the merchant commission rate by an additional 0.1 percentage points on the 14th of next month, further worsening the outlook for credit sale revenue.
A credit card industry official noted, "Each year there are discussions about the difficulties faced by the credit card sector, but this year we are seriously monitoring the situation," and he added, "While there are concerns about the commission rate issue, more significantly, domestic stagnation has greatly reduced credit card transactions, which is a major concern."