Card Companies Going Overseas
According to credit card industry sources on March 19, South Korea’s card issuers are tapping into global markets as a way to solve worsening business environments including lower commission rates of affiliated stores. Lotte Card Co. is entering the Vietnamese market by the middle of this month, while KB Kookmin Card Co. is seeking to push in the U.S. market.
In particular, domestic card companies are mainly targeting the market of countries that have a high cash consumption rate in where consumers don’t deposit money in banks and mostly spend cash, such as Vietnam, Laos and Thailand.
There are largely two ways for card firms to go abroad. One is entering the market with banks and the other is making fee incomes through card slip processing business and improving awareness. The industry thinks that both additional services and credit card business are considered a new growth engine so they are ineffective at the moment but they will play a role as a bridgehead for overseas business in the future.
Since domestic card issuers are going abroad to seek out local needs rather than planting a flag, they have a higher chance of success than other financial institutions like banks and insurance companies. An official from the industry said, “Southeast Asian countries that domestic card companies want to tap into are seeking to expand business in cooperation with domestic card firms based on strong IT technology since there are no local card companies capable of.”
In addition to Lotte Card and KB Kookmin Card, other card issuers are carefully considering overseas expansion. An official from a card company said, “We are monitoring and searching for markets to enter because it will help with overseas growth in the long run.”
However, critics say that card companies are pushing into the global markets like a relay to just show off. They can barely succeed in only one in ten markets but they put too much meaning to going abroad itself.
An official from the financial industry said, “The chronic herd effect in the domestic financial industry is shown as an overseas expansion in the card industry. Tell me a successful case of card companies in the global markets.”
Another official in the financial industry said, “Recently, card firms are entering the global markets by focusing more on capital or loans than their main credit card business. What’s the point of running business other than their main business in the global markets?”
In this regard, the card industry says it takes at least three years to improve investment costs for overseas expansion and brand awareness and normalize business. An official from a card firm said, “Domestic card issuers usually go abroad based on technology. Since we have technical skill, our profits from the global markets will go up when our brand awareness are improved.”