Card firms on edge as young consumers shift to cardless payments
A customer makes a payment using facial recognition software developed by Toss at a GS25 convenience store in Seoul, Feb. 12. Courtesy of GS Retail
Kim, a 20-something office worker at a telecommunications company in Seoul, recently began using a payment service powered by facial recognition technology.
She said that although the registration process was a bit lengthy, once completed, it was very convenient since she could make payments simply by showing her face, without needing a wallet or smartphone.
“I was surprised by how fast it was. It was so quick that I even doubted whether the payment had actually gone through,” she said.
The trend of making payments without physical cards is rapidly gaining momentum as younger consumers like Kim increasingly move away from traditional card payments, driven by the growing adoption of facial recognition systems such as Toss Face Pay and simple payment services like Kakao Pay.
This shift has raised concerns within the credit card industry about losing younger customers, who are viewed as key drivers of future consumption.
Data from the Financial Supervisory Service shows that the total card spending by eight major issuers — Shinhan, Samsung, Hyundai, KB Kookmin, Lotte, Hana, Woori and BC — reached 441.3 trillion won ($303 billion) in the first half of this year, exceeding half of last year’s total of 871 trillion won. However, spending by consumers aged 29 and under totaled just 46.9 trillion won, only 47.7 percent of last year’s 98.3 trillion won.
Card spending among people in their 20s climbed 7.2 percent from 92.5 trillion won in 2021 to 99.1 trillion won in 2022, but slipped 0.6 percent to 98.6 trillion won in 2023. The figure fell again by 0.3 percent to 98.3 trillion won this year, extending the downward trend.
A sign says Kakao Pay is available / Courtesy of Kakao Pay
As younger consumers reduce their card usage, credit card companies are also seeing their profitability decline.
The combined net profit of six major issuers — Samsung, Shinhan, KB Kookmin, Hyundai, Hana and Woori — totaled 1.69 trillion won in the first three quarters of this year, down 16 percent from 2.02 trillion won a year earlier.
Except for Hyundai Card, which reported a 6.2 percent increase, most companies saw negative growth. Shinhan Card suffered the steepest drop, with its cumulative net profit for the third quarter plunging 31 percent year-on-year.
Industry officials attribute the decline in card spending largely to changing payment habits among younger consumers, as fintech firms rapidly reshape the payment landscape with a range of appealing benefits and services.
Toss, for instance, launched its facial recognition payment service, Toss Face Pay, in March for pilot testing and rolled it out officially in September. The service has since quickly expanded to everyday settings such as cafes, cinemas and hospitals.
During the pilot phase, the number of users surpassed 400,000, with a reuse rate of 60 percent. Toss plans to increase the number of affiliated payment terminals to 300,000 by the end of this year and 1 million by the end of next year.
A recent survey by the Bank of Korea found that people in their 20s value convenience most when selecting a payment method, a clear contrast to older generations who place greater importance on security.
“The growing variety of alternative payment options, following the expansion of simple and facial recognition payment services, is steadily eroding the position of traditional card companies,” an industry insider said. “We are also paying close attention to how these digital assets could reshape the market, as the size of such transactions in Korea remains largely untracked.”