This article was published on June 11, 2025, at 10:32 a.m. on the ChosunBiz MoneyMove site.
NICE Information & Telecommunication, the leading offline value-added network (VAN) provider, is expected to absorb and merge the electronic payment service (PG) division and VAN business of its subsidiary, NICE Payments, becoming a comprehensive payment service provider again. Although they established Payments in 2016 to grow it as a specialized PG company, structural profitability limits and intensified competition have prevented them from achieving expected results.
VAN companies mainly provide payment approval and settlement intermediary services between card companies and merchants in the offline payment market. They also handle the provision of devices and installation, as well as merchant management. PG companies act as intermediaries for payments generated in online shopping malls and handle settlements.
According to the investment banking (IB) industry on the 11th, NICE Information & Telecommunication plans to spin off the PG and VAN sectors of its 100% subsidiary, NICE Payments, and then merge them through a small-scale merger on October 1. The partitioning successor company, Information & Telecommunication, will own all of the issued shares of the partitioned company, Payments, meaning this merger will proceed by a ratio of 1 to 0 without issuing new shares.
The company noted, "Information & Telecommunication aims to strengthen its capabilities in the payment service sector, while Payments seeks to concentrate its capabilities in investment-related activities, thereby enhancing competitiveness in specialized business areas." They explained that the purpose of this merger is to increase managerial efficiency and create synergy in the payment service sector to enhance corporate value and shareholder value.
Earlier, in 2016, it also split its business sector for similar reasons. At that time, Information & Telecommunication partitioned its own PG business sector and established the 100% subsidiary, Payments. Instead, Information & Telecommunication planned to focus on its core VAN business. This was due to intensified competition resulting from the introduction of fixed-rate commission systems and card fee reductions, which worsened business conditions. Consequently, in July 2017, in order to avoid business duplication with Payments, Information & Telecommunication canceled its PG license registered with the financial authorities. It then re-registered in August 2020, stating that the intention was to seek synergy with Payments.
Information & Telecommunication relies on its VAN business for most of its operating profit. As of 2024, 377 million won (approximately 94.5%) of the company's operating profit of 399 million won came from the VAN sector. The share of revenue was 30.0%.
The VAN business is struggling to regain vitality due to government regulations. Since the government drastically expanded the threshold for small merchant criteria from annual sales of 200 million won to below 3 billion won in 2018, Information & Telecommunication's separate standard gross profit margin has been on a downward trend. The government has further reduced commission rates three times in 2019, 2022, and 2025. The growth rate of the VAN market is merely 2% to 3% annually.
Concerns have been raised that the PG industry, into which Information & Telecommunication entered in 2016, initially had high growth potential but has since faced limits in profitability due to intensified competition. As of 2024, the PG business sector accounted for 64.1% of total revenue, surpassing that of the VAN sector by more than twice. Although revenue increased by 9.2% compared to the previous year, operating profit did not improve. The operating profit margin for Information & Telecommunication's PG business was only 0.3%.
Ultimately, it appears that Information & Telecommunication seeks to consolidate its payment businesses, including PG and VAN, in one place to reduce costs and create synergy effects.
Park Jun-kyu, a researcher at Samsung Securities, said, "The key to Information & Telecommunication's performance is improving profitability in new businesses," adding, "If profitability in the PG sector improves and financial performance appears, this company's results could improve significantly from the current level."
Recently, the payment service industry, including PG and VAN, has experienced conflicts due to the entry of BC Card into direct approval businesses and the emergence of the Korean won stablecoin. While PG and VAN companies have served as intermediaries between card companies and merchants, they claim survival is becoming difficult as direct approvals increase. Additionally, these industries suffered significant financial blows last year due to the T-MEP incident (TMON and WeMakePrice). Major PG companies like NHN KCP and KGINICIS all operate VAN businesses as well.