Card giants Visa and MasterCard are mulling over breakthrough measures in the wake of their dwindling impact on the Korean market.
According to the card industry on April 24, the two card behemoths, after years of success in Korea, are seeing drops in sales and local market share due to controversy over international brand commissions, as well as intensified competition from other foreign brand companies such as China’s UnionPay card and Japan’s JCB.
While it is hard to get exact data due to the non-disclosure policy of foreign brand companies, the industry estimates that the card companies’ local market shares have dropped considerably.
In fact, a high-ranking finance official says, “Visa Korea’s once predominant market share of 50 percent plummeted to 30 percent, causing internal woes.”
Another card associate puts it, “For international cards that can be used domestically and internationally, Visa and MasterCard once practically monopolized 100 percent of the local market. But that has changed a lot after the competition jumped in. Korea offers a pivotal market with excellent IT infrastructure as well as high card usage rates, as indicated by Koreans having four cards per capita, so the two companies will agonize over how to make up for lost sales.”
Their weakening position stems from other card companies from China and Japan that are beefing up their operations in the local market.
Korean businesspeople operating in China and Japan, and also Chinese and Japanese citizens residing in Korea, do not need Visa or MasterCard any more.
Another unfavorable factor comes from issues over international brand commissions that have been raised since the end of last year.
The jury is still out on the matter, but it evolves around how the commissions that the two card companies garner from the local market could violate the Korea-U.S. Free Trade Agreement (KORUS FTA).
Thus, the duo are now constructing high-end marketing strategies eyeing foreign tourists in Korea and Koreans engaged in direct overseas purchase via overseas electronic transactions.
The aim is to ride out the crisis by capitalizing on their supreme networks in and outside of Korea on the back of an overseas direct purchase boom.
A Visa Card associate says, “As more and more Koreans use online overseas electronic transactions, we are zeroing in on this area. We are also trying to offer better, more differentiated benefits to foreign tourists.” MasterCard also has plans to beat the crisis by offering various services targeting direct overseas buyers on the basis of their global transaction network, that has been proven to be safe.”