Card firms reap record profit

By Kwaak Je-yup

The country’s credit card companies are enjoying record-breaking revenue from differentiated business areas, industry figures show. This suggests that consumers are reluctant to refuse reward points, discounts and other perks provided by card companies to bait them into buying affiliated products.

According to the Credit Finance Association (CREFIA) Tuesday, ``side’’ operations of card companies, which include insurance sales, travel agency services and electronic commerce, raked in a net income of 1.85 trillion won last year, up 31.8 percent from 1.42 trillion won in 2009.

This is a more than fivefold increase over the last decade, as in 2000, the figure was 343.9 billion won.

Given the government pressure and the hostile public sentiment toward them, card companies are finding themselves looking toward these sources of income as potential future generators of growth. Profits are projected to grow, easily surpassing 2 trillion won this year.

Last year, the firms earned 1.1 trillion won from insurance sales, 422.7 billion won from travel-related services and an additional 415.1 billion won from online retail.

These activities are not limited to related chaebol subsidiaries. Samsung Card sells insurance by Chartis, AIA and Dongbu Fire Insurance in addition to those offered by Samsung Fire & Marine Insurance and Samsung Life Insurance.

Meanwhile, as for travel-related services, these companies are taking away traditional agencies’ customers by offering discounts and interest-free financing plans. The nation’s No. 1 Shinhan Card offers 10 percent discounts for hotel stays when a customer books an international flight through its agency. Hana SK Card provides a 7-percent discount on international flights.

For shopping, HyundaiCard has been competing with conventional e-commerce players like Auction and Gmarket, both eBay subsidiaries, putting up a selection of products that range from furniture to sporting goods. Hana SK Card benefits from its sister relationship with SK Telecom’s 11th Street, the country’s No. 3 online auction and retail site that trails eBay.

According to the industry insiders, these side businesses bring in only 1/7 of the total profits for card companies, but their importance, and the firms’ dependence on them, should increase with impending cuts in commission.