Credit card companies have reduced interest-free benefits, aiming to expand their installment fee revenue. The reduction in merchant fees, a major source of revenue, has impacted overall revenue, which has also decreased in the first half of this year. Additionally, with the implementation of the three-stage debt service ratio (DSR), it is projected that credit loan revenue will decline starting in the third quarter, prompting credit card companies to focus on diversifying their revenue.
According to NICE Investors Service, revenue from installment fees for the seven major credit card companies (Woori, KB, Lotte, Samsung, Shinhan, Hana, and Hyundai) in the first quarter of this year amounted to 882.5 billion won, an increase of 3.8% compared to the same period last year. The share of this revenue in the total card revenue (4.6551 trillion won) is 19%, a slight increase from 18.8% in the previous year. For the first quarter, the proportion of installment fees in the overall revenue of the seven companies is the third highest, following credit loans (28.4%) and merchant fees (27.4%).
This is because credit card companies have scaled back interest-free installment benefits due to worsening market conditions. Since the end of last year, Woori and BC Card have stopped offering up to six months of interest-free installment benefits and have reduced it to three to five months. This trend has continued recently. Starting this month, Samsung Card, Shinhan Card, and Hyundai Card have reduced the interest-free installment period for online shopping mall payments from a maximum of five months to three months, while Woori and BC Card have cut their interest-free installment benefits from six months to five months.
The focus of credit card companies on expanding installment fee revenue is due to the decline in revenue during the first half of this year. Shinhan Card's net income for the first half of this year was 246.6 billion won, a decrease of 35% compared to the previous year. During the same period, KB Kookmin Card's net income (181.3 billion won) dropped by 29.1%, and Samsung Card's net income (335.6 billion won) also decreased by 7.5% from the previous year.
The reduction in merchant fees, a primary revenue source, has made changes to the revenue structure inevitable for credit card companies. In the first quarter, the revenue from merchant fees for the seven major credit card companies was 1.2741 trillion won, a decline of 7.1% compared to the same period last year (1.3713 trillion won). This is due to regulatory measures requiring preferential fee rates for around 5 million small and medium-sized merchants.
With the implementation of the three-stage stress DSR this month, expanding credit loan revenue is expected to become more difficult. Under the three-stage DSR, a stress rate of 1.5% is applied immediately upon new processing of credit loans, regardless of the amount. As the lending limits shrink, the number of consumers utilizing credit loans is projected to decrease significantly.
A source in the credit card industry noted, "Currently, the trend is toward lower borrowing costs, which helps credit card companies improve profitability as they receive steady installment payments every month."