Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Will BC Card's move to launch 'stock loan' biz reap fruit?
By Lee Min-hyung
By Lee Min-hyung
BC Card's plan to launch a so-called “stock loan” business here is drawing attention from the card industry amid a prolonged structural slowdown.
The payment processing firm is set to start the business upon receiving approval from regulators. The company is known to have recently started recruiting staff to handle the tasks.
A stock loan business offers loans to individuals using their stock as security. The interest rate for the loan is around 4 percent to 6 percent. This is the first time that BC Card has started a loan business targeting individuals.
The move is seen as part of the firm's efforts to find new growth engines at a crucial time when its earnings have been declining over the past few quarters. The company said it would turn the business into a stable source of income from the mid- to long-term perspective.
“We are going to diversify our portfolio by operating this business and continuing to fulfill our primary role as a financial player,” a spokesman at the company said.
The stock loan sector has been primarily handled by capital leasing firms and savings banks. But with regulators escalating regulations on their debt-service ratio, these traditional players have started scaling down the business.
BC Card aims to fill the void in a rare move by a card company; but it did not share a specific timeline over the launch of the business.
“We are still running an internal review to fine-tune details before starting the business, but we will launch it soon if regulators give us the license to do so,” the official said.
It remains to be seen whether the new business will serve as a savior for BC Card, reducing its falling revenue. The company reported an operating profit of 67.1 billion won in the first half of the year, down 20.2 percent from a year ago. Its net profit also declined to 52 billion won from 63.9 billion won during the same period.
“Our major revenue source comes from commissions in handling card payment processing,” the company official said.
Even if the business is considered a stable income source, the company needs to aggressively find new growth engines amid growing market uncertainties stemming from the COVID-19 pandemic and structural slowdown in the industry, he added.
Other card firms are paying close attention to whether BC Card will be able to offset its declining revenue by operating the loan business.
Most major card firms here have succeeded in achieving unexpectedly decent earnings, as the pandemic effect prompted more contactless consumption. Five firms, including Samsung Card and Shinhan Card, reported a combined net profit of 464 billion won in the third quarter, up 21.8 percent from the previous year due to the coronavirus effect. But they are also looking for their next potential growth engines, as the virus-induced earnings growth could be a seasonal factor.