By Kim Tong-hyung
Staff Reporter
Korean wireless users will be able to pay with their phones instead of their wallets, or that is the intention of SK Telecom, the country’s biggest mobile telephony carrier.
SK Telecom, which controls more than half of the country’s mobile-phone subscribers, is about to ink a deal worth more than 400 billion won (about $346 million) with the Hana Financial Group for collaboration with the credit card business.
On receiving approval from its board of directors, who are scheduled to meet on Monday, the telecommunications giant will own 49 percent of a renewed Hana Card.
Although the Hana Financial Group gets the fatter side of the ``50 plus one’’ deal, the legacy of the partnership is surely to be defined as SK Telecom’s long-awaited entry into the financial service market.
Hana Card has been struggling to be recognized in the credit card market, garnering just 5.5 million customers for a share of 7.4 percent. However, SK Telecom’s involvement may force the industry to rewrite its template.
SK Telecom has about 24 million mobile telephony subscribers, compared to the 14 million customers of Shinhan Card, the country’s biggest credit card issuer, while its 2,000 phone shops across the nation could easily double as credit card sales offices.
Count in the 30 million subscribers for SK Group’s "OK CashBag’’ cards, a loyalty cash-back program that enables users to collect points at a wide-range of affiliated shops, Hana Card suddenly finds itself with a much stronger foundation to build on.
Riding the back of SK Telecom, Hana Card plans to acquire 10 million customers by 2014, which will be good for a 12 percent market share and a top-three position in the credit card industry.
The deal is also a crucial part of SK Telecom’s strategies to keep growth alive in a country with more handsets than heads.
The company, desperate to find growth engines beyond the saturated voice market, has been drooling over the credit card market for years, evidenced by its failed attempt to acquire the credit card unit of Jeonbuk Bank in 2002.
SK Telecom is obviously in a better position to exploit the financial services market now, with a large number of wireless users already using their microchip-embedded third-generation (3G) handsets to wire money to banks or pay for public transportation fees.
Adding credit card functions will be the most important part of the puzzle. The plan by SK Telecom and Hana Card is to enable users to pay with their phones and also receive location-based information on shopping venues, restaurants and other businesses, which could be possible sometime next year.
Apparently, the idea is to allow users to leave their wallets, increasingly bulging with bills, coins, receipts, IDs and credit cards, at home.
"Technology has been able to realize the mobile wallet for some time. Now, we are beginning to witness the formation of a service base,’’ said Stan Jung, an analyst from Woori Investment and Securities.
"The possibility of synergy is obvious for telecommunications and financial services companies, as both industries are based on managing databases. And consumers will always welcome greater convenience.’’
SK Telecom’s credit card moves are likely to motivate its bitter industry rival, KT, which has its own aspirations for the mobile wallet.
KT, the country’s biggest telephone company and No. 2 wireless provider, has no intentions of shying away from going toe-to-toe with SK Telecom in the credit card business, as it considers acquiring BC Card through its investment arm, KT Capital.
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 by revenue.
BC Card was considered an ideal acquisition target for KT, as its member banks combine for about 39 million credit card customers while also providing a massive sales network.
And BC Card has been showing strong interest in telecommunications, recently revealing that it is considering a possible mobile virtual network operator (MVNO) business, thus providing its own type of wireless services by borrowing the networks of telecommunications companies like KT and SK Telecom.
KT is also talking with Shinhan Card over providing a mobile credit card service, although Shinhan may go down the MVNO route as well.