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| Financial Services Commission Chairman Shin Je-yoon looks at his computer at a Cabinet meeting in the government complex in Seoul, Tuesday. Shin said he will take responsibility for the consumer data theft case that hit the local financial industry. / Yonhap |
Credit card industry shakeup may reverberate into financial sector
By Kim Rahn
The massive personal information leaks that hit three credit card companies may reshape the whole card industry, as their market shares are likely to fall amid public distrust.
Such a shakeup in the credit card industry may also impact the affected firms' parent financial groups and sister banking units.
According to the three companies in question, KB Kookmin Card, Lotte Card and NH NongHyup Card, more than 1.1 million customers have requested cancellation or reissuance of their credit cards in the last two days through Tuesday.
More than 6.1 million people have checked whether their information was stolen at the companies' websites, so the number of cards cancelled or reissued is likely to increase.
The whole card industry's dynamics now depend on the next steps to be taken by customers who canceled their credit cards with the three firms ― card firms' market shares can be changed according to what other card companies the clients choose.
Shinhan Card and Samsung Card may benefit from the crisis, as it was reported that the data thief, an employee of the Korea Credit Bureau, a credit information service provider, attempted to steal the information at Shinhan and Samsung as well but failed due to their strong encoding systems.
Shinhan, which was the top player with a market share of 20.8 percent as of September, may maintain its No. 1 title. KB Kookmin Card, which was second with a market share of 14.6 percent, may be overtaken by the third player, Samsung, which had a 12.2-percent market share.
"The card market has been an oligopoly one, with a small number of big players sharing the market. But Kookmin Card, one of the major players, was hit hard by the information-leak scandal. That may be beneficial to other players," Shin Bo-sung, a researcher at the Korea Capital Market Institute, said.
Hyundai Securities analyst Koo Kyung-hwe said the incident may decrease the use of credit cards in general.
"Many people have multiple numbers of credit cards, although they use only one or two. With this case as momentum, people may decide to have only a minimum number of cards. Some may prefer cash, so the total amount of card payment can be cut," he said.
Koo said the incident will be unfavorable to the three companies in many ways, with potential future lawsuits from customers and reputation damage.
Shin said the information leaks may not directly affect the banking sector. "It is relatively easy to cancel or change a credit card. But with a bank, customers usually have various transactions including deposits, funds and loans, so it is not easy for them to change bank transactions to other banks."
Researcher Kim Woo-jin at the Korea Institute of Finance said Korean financial firms did not pay much attention to compliance or internal control systems. "Executives of financial companies these days have greater focus on the issue than before, but they have not actually spent enough money to improve these systems," he said.
About KB Financial Group's case, where customer information of not only KB Kookmin Card but also Kookmin Bank was stolen, Kim said holding companies of financial groups in Korea have failed to play the role of control towers in information-sharing among affiliates.
"They should see the affiliates as a whole entity, grasp the flow of information and protect the information from going out of the entity."
