Overseas debit card spending by Hana Card and Shinhan Card, which rank first and second in domestic travel cards (overseas travel-focused debit cards), has increased. At the same time, foreign exchange transaction revenue, a "side income," also grew sharply. With the card industry in a slump, companies appear to be focusing on travel cards, a segment showing growth, to diversify revenue sources.
According to the Credit Finance Association on the 13th, Hana Card's personal overseas debit card spending came to a cumulative 1.8693 trillion won in January–August this year, up 15.6% from a year earlier. During the same period, Shinhan Card's personal overseas debit card spending was 1.3481 trillion won, a sharp increase of 35.4% year over year. As a share of the aggregates of the eight standalone card companies (Samsung, Shinhan, Hyundai, KB Kookmin, Hana, Woori, BC, Lotte), Hana Card ranked first at 44.9% and Shinhan Card second at 32.4%.
The two companies' foreign exchange transaction revenue is also rising. In the first half of this year, Hana Card posted 113.9 billion won in foreign exchange transaction revenue, more than doubling from 53 billion won a year earlier. During the same period, Shinhan Card recorded 384.4 billion won in foreign exchange transaction revenue, more than 12 times the 31.3 billion won a year earlier.
Foreign exchange transaction revenue refers to the gain that card companies earn from exchange rate differences when settling payments with merchants worldwide. Typically, when a domestic user pays at an overseas merchant and later repays the card bill, the exchange rate at the time of payment is not applied; instead, the rate at the time of settlement is used. If the won is weaker at settlement than at the time of payment, the card company, which settles the bill based on the foreign currency value, captures the exchange rate margin. As the issuance of travel cards increases, the number of users' overseas transactions also rises, boosting foreign exchange transaction revenue. It is a kind of side income.
With the card industry in a downturn, Hana Card and Shinhan Card appear to be increasing ancillary income through travel cards. According to the Financial Supervisory Service, the net profit of the eight standalone card companies in the first half of this year was 1.2251 trillion won, down 273.9 billion won (18.3%) from a year earlier. As authorities offered preferential fee rates to about 5 million small and midsize merchants under a regulatory measure, fee revenue plunged. With the third-stage debt service ratio (DSR) stress test implemented in Jul., it is expected to become difficult to expand card loan revenue, another main revenue source.
Hana Card launched the Travelog Check Card, an overseas travel-focused card, in Jul. 2022, right after COVID-19, seizing the domestic market. At the time, it targeted rapidly growing overseas travel demand with benefits such as free currency exchange and waivers on overseas merchant payment fees. Shinhan Card, which ranks first in domestic credit and debit card membership, also launched a travel-focused card last year and quickly succeeded in growing users.
An industry official said, "Overseas handled amounts are increasing with travel cards," and noted, "In a situation where the won is weak as it is now, foreign exchange transaction revenue is likely to increase further."