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| Financial Services Commission Chairman Shin Je-yoon bows during a press conference at the Korea Press Center in central Seoul, Wednesday, to apologize for consumer data leaks that occurred at three credit card firms. Behind Shin is Financial Supervisory Service Governor Choi Soo-hyun. / Yonhap |
By Kim Rahn
More than 1 trillion won in losses are forecast for three credit card companies where customer information was leaked, as they will have to reissue in excess of 80 million cards.
Not to mention public distrust in the companies, experts say the firms' losses from the leaks will be unpredictable when considering the time and effort spent on card reissuance; compensation to customers for financial or mental damages from possible financial scams; and potential operation suspension or other types of penalties to be slapped on them.
According to the Financial Supervisory Service, Wednesday, some 43.2 million customers' personal data was leaked from KB Kookmin Card, 17.6 million from Lotte Card and 21.6 million from NH NongHyup Card.
Those companies have received a flood of calls for card cancellations or reissuance.
To reissue one card, it costs 2,000-3,000 won to make the card plate with an IC chip. In mailing the new card to a customer, the post fee is some 4,000 won, larger than fees for normal mail as credit card mailing requires separate services.
The three firms also pledged to offer text messaging services for payment for free.
Considering all related expenses, the card firms predict they will have to spend around 10,000 won per client. It means Kookmin will see 432 billion won in losses, Lotte 176 billion won and NongHyup, 216 billion won.
"We may have to spend more money as we are considering offering some pay services without charge as an apology to customers," an official of one of the three companies said.
The huge expenses may cause deficits for those firms this year ― Kookmin posted 291 billion won in net earnings in 2012 and Lotte 162 billion won.
While the financial regulators say the prosecution prevented the stolen data from spreading further and there will not be financial scams from this leakage, CEOs of the companies also said they will compensate for any mental damages to customers ― another potential loss for the firms.
In 2006, a local court ordered Kookmin Bank to pay 200,000 won to each of 1,024 clients whose names, email addresses and resident registration numbers were stolen. Another information leakage ruling involving portal site Nate in 2011 also ordered 200,000 won in compensation to 2,882 victims.
The companies will also have to pay a considerable amount of fines as the authorities are pledging to take stern measures against them. If operation is suspended partially, the losses will get larger.
Besides those financial losses, they will suffer "invisible" damage as they have lost credibility, a key value for a financial company.
The number of their clients may decrease as many customers who canceled the cards of the firms can choose cards of other companies which did not sustain leaks.
Economist Koo Kyung-hwe at Hyundai Securities said people will continue to use credit cards and online transactions as these have become a must in the economic life, but may reduce the use of them.
"Credit card companies may see their total sales cut for the time being. It will take considerable time for the three firms to regain public credibility. Not only the three but also other financial companies will have to spend more money in upgrading cyber security systems," he said.
Kim Woo-jin, researcher at the Korea Institute of Finance, said despite short-term losses, the incident can be a chance for financial companies' development. "If they learn lessons from this case and expand investment in information protection, it will eventually become a turning point for sustainable growth," he said.
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