In the wake of last year's "Homeplus Co. incident," card issuers' revenue from purchasing-only cards, a "corporate charge card" for trade credit, fell by about 4 billion won. This is the first time since 2020 that revenue from purchasing-only cards at card companies has turned downward. As the risks of purchasing-only cards came to light due to the fallout from the Homeplus Co. incident, the industry appears to have focused on soundness management.
According to Financial Supervisory Service statistics on Apr. 8, revenue from purchasing-only cards at the five stand-alone card issuers (Lotte Card, Samsung Card, Shinhan Card, Hyundai Card, Hana Card) was 69.3 billion won as of the end of last year, down 5.4% from 73.3 billion won at the end of the previous year. The largest drop was at Samsung Card, down 10.5%, followed by Shinhan Card (10%) and Lotte Card (4.4%). Among card issuers, only Hana Card increased year over year, up 12.2%.
A purchasing-only card is a credit/debit card issued for purchasing corporations to pay for purchases. The card issuer pays the purchase price that the purchasing corporation charged to the card in cash to the vendor, and the purchasing corporation later deposits the amount plus a fee with the card issuer at maturity. It is, in effect, a type of trade credit via card.
From the card issuers' standpoint, the fees are not large, so it does not help profitability much, but it can expand transaction asset scale. However, the Homeplus Co. incident, which was engulfed in controversy over poor management last year, exposed the risks of purchasing-only cards. Since early 2020, Homeplus Co. signed purchasing-only card use agreements with major credit card issuers such as Hyundai Card, Lotte Card, and Shinhan Card and has paid for goods for some partner vendors.
But as Homeplus Co., mired in management difficulties, failed to pay its card bills, losses of 430 billion won occurred. Afterward, Hyundai Card and Shinhan Card, among others, scaled back purchasing-only card operations for some corporations.
Weaker corporate spending power also appears to have affected the decline in purchasing-only card revenue. According to the Bank of Korea, the corporate business survey index (CBSI) for all industries in Dec. last year was tallied at 93.7. The CBSI is a sentiment indicator calculated using key indices (five for manufacturing, four for non-manufacturing) from the business survey index (BSI). A reading above 100 indicates optimism compared with the long-term average, and below 100 indicates pessimism.
Although purchasing-only cards are not a major revenue source for card issuers, profitability declines when the scale of payment transactions shrinks. According to the Financial Supervisory Service (FSS), net income at stand-alone card issuers totaled 2.3602 trillion won last year, down 230.8 billion won (8.9%) from a year earlier.