Non-bank credit card companies Lotte Card and BC Card are actively entering the travel card (overseas travel specialized check card) business this year. For non-bank credit card companies, the travel card has been considered a 'remote area' that has been difficult to penetrate. This is due to their lower competitiveness compared to bank credit card companies in terms of currency exchange fee benefits. However, as major revenue sources like merchant fees decrease, it seems they are expanding into the travel card market as a breakthrough for diversifying revenue structures.
On the 5th, according to the card industry, Lotte Card launched a credit card called 'Travel Wallet Hybrid Lotte Card' that can be used like a travel card overseas earlier this month. Users can load foreign currency using the fintech service Travel Wallet application (app), and when the balance is exhausted, it converts to a credit card.
BC Card applied its travel card service, which offers a 2% discount benefit without conditions for previous month's performance and discount limits when used at overseas merchants, to its app 'Paybook' in March this year. BC Card is the first non-bank credit card company to launch a related service.
There are evaluations that it is unusual for a non-bank credit card company to launch travel card-related services. The travel card market is essentially monopolized by bank credit card companies. According to the Korea Credit Finance Association, as of the first half of this year, Hana Card had the highest percentage of overseas check card transactions at 41.9%, followed by Shinhan Card (30%), KB Kookmin Card (11.6%), Woori Card (9.1%), and NH Nonghyup Card (5.6%). The five bank credit card companies account for 98.2% of the overseas check card market.
In contrast, the combined market shares of non-bank credit companies BC Card (1.3%), Hyundai Card (0.3%), Lotte Card (0.1%), and Samsung Card (0.1%) was only 1.8%. This figure is a decrease compared to the same period last year (2.6%).
Typically, bank credit card companies provide a 100% preferential exchange rate benefit in conjunction with banks. This means that users can purchase foreign currency at the price specified in the standard exchange rate without additional fees. Users are naturally drawn to bank credit card companies due to the lower expense burden when exchanging currency. Conversely, non-bank credit card companies find it difficult to provide similar levels of benefits due to challenges in collaborating with banks.
Given the competitive difficulty with bank credit card companies, non-bank credit card companies have not been proactive in the travel card business. Currently, Samsung Card and Hyundai Card do not separately issue travel cards but offer overseas payment services with check cards to a limited number of customers in collaboration with domestic banks. BC Card and Lotte Card also did not separately launch travel cards until last year.
However, the travel card market is gradually being recognized as an indispensable revenue source for non-bank credit card companies. In the first half of this year, the overseas check card transaction amount of the major nine credit companies (Lotte, BC, Samsung, Shinhan, Woori, Hana, Hyundai, KB, NH) reached 3.3454 trillion won, a 33.1% increase compared to the same period last year.
Merchant fees, which are a major source of revenue for credit card companies, are gradually decreasing. In the first quarter of this year, the merchant fee revenue of seven major credit card companies (Woori, KB, Lotte, Samsung, Shinhan, Hana, Hyundai) was 1.2741 trillion won, a 7.1% decrease compared to the same period last year (1.3713 trillion won). This is due to regulatory measures requiring preferential fee rates for approximately 5 million small and medium merchants.
A credit card industry official noted, "As major revenue sources like merchant fees are decreasing, non-bank credit card companies find themselves in a situation where they cannot easily give up the growing overseas check card market, even if their competitiveness is somewhat diminished."