KT Moves to Match SK Telecom’s Credit Card Aspirations

By Kim Tong-hyung
Staff Reporter

Koreans will soon be able to leave their wallets at home, with telecommunications operators and credit card companies teaming up to offer new ways of paying for goods using mobile devices.

KT, the country's biggest telephone company and No. 2 wireless carrier, confirmed its interest in acquiring BC Card Friday, matching a move by its industry rival, SK Telecom, which is collaborating with the Hana Financial Group for an entry into the credit card business.

BC Card, established in 1982 on a joint investment by local banks, currently manages the credit cards issued by its 11 member banks. The 11 institutions combine for less than 40 percent of the credit card market in revenue.

KT said it had recently inked a memorandum of understanding (MOU) with Shinhan Card to purchase its 14.9 percent stake in BC Card. Should the deal go through, KT will become the third-largest shareholder in BC Card, following Woori Bank, which has a 27.7 percent share, and Vogo Fund, a buyout entity that holds a 24.6 percent stake.

BC Card is considered an ideal acquisition target for KT, as it member banks combine for about 39 million credit card customers and a massive sales network consisting of around 2.5 million shops.

``It would be premature to talk about when we will be able to provide credit card services or what business models we will pursue should we be able to acquire BC Card. We will first have to see whether we can agree with Shinhan Card over a price for their stake,'' said a KT spokesman.

Emergence of Mobile Wallet

In technology-obsessed Korea, the mobile phone is already the digital version of the Swiss army knife, masquerading as handheld televisions and computers to complement its traditional role for voice communications. The trend of alliance between wireless operators and credit card companies indicate that these multifunctional handsets will soon be picking up a new trick in plastic payment.

KT and SK Telecom, who combine for around 80 percent of the country's mobile telephony users, are both hoping that their massive subscriber pools will allow them to hit the gold trail in credit card services. The more tech-savvy mobile users are already using their micro-chip embedded handsets to wire money to banks or pay for public transportation, and adding credit card functions is expected to be the last and most important piece of the mobile wallet puzzle.

The interest seems to be mutual between telecommunications operators and financial service firms. Shinhan Card, which is also the country's biggest credit card issuer, had said earlier that it could consider providing some form of mobile service as a mobile virtual network operator (MVNO).

MVNOs buy traffic, or wholesale minutes, text and data, from network operators like KT and SK Telecom and resell it to their customers under their own brand.

Should it acquire Shinhan Card's stake, KT will likely find itself competing for shares with the Vogo Fund, which appears to be attempting to take a commanding hold in BC Card.

``The convergence between telecommunications and financial services is somewhat of a natural evolution that will have a widespread influence across industries,'' said Hong Jin-ho, an analyst from IBK Securities.

``By collaborating with credit card companies, the wireless operators will be able to develop a more sophisticated form of credit card services than the traditional plastic business, such as providing users with real-time shopping and service information through mobile devices.''

SK Telecom, the country's biggest mobile telephony operator with a 50 percent-plus market share, recently inked a deal worth around 400 billion won (about $346 million) with the Hana Financial Group to acquire a 49 percent stake in Hana Card.

Hana Card has been struggling to stay relevant in the credit card market, where it commands a share of less than 7.4 percent, but tapping into SK Telecom's 24 million customers and massive sales network may allow it to pack a larger punch.

thkim@koreatimes.co.kr