Successful Joint Venture Boosts Hyundai Card
By Kim Jae-kyoung
Staff Reporter
This is the fourth in a series of articles about the local card industry and credit card companies.
For most companies, the global economic crisis triggered by the U.S. subprime mortgage meltdown has been the biggest-ever challenge. However, some enterprises are tiding over the economic turmoil by turning a crisis into an opportunity.
Hyundai Card, the nation’s third-largest plastic issuer, is one of them. Despite the severe economic downturn, the plastic issuer earned record-high operational results and maintained sound asset quality in 2008. Its delinquency ratio was at 0.7 percent, well below the industry average of 3.43 percent.
It saw record-breaking revenue and operational income on the back of its proactive risk management. It also achieved the largest market share in its history. It posted 258 billion won in operating income in 2008, with sales volume of 42.74 trillion won.
Hyundai became the second largest credit card issuer in the market thanks to its brand and diversified marketing strategies. The number of its valid cardholders reached 7.62 million in 2008, up from 6.33 million in 2007 and 3.96 million in 2005. The number of HyundaiCard M members alone has surpassed the 6 million mark.
It has the healthiest asset portfolio in the industry and maintained solid financial structure with the scientific asset and liabilities management system.
Successful Joint Venture
The firm’s outstanding performance in 2008 is the result of forming a successful joint venture with GE Money. Hyundai and GE formed a strategic alliance in 2005 with GE investing 678.3 billion won in the firm. The strength of the two companies created great synergy. Hyundai got GE’s strong risk management, and GE got the Hyundai brand.
``Hyundai brought a respected brand in Korea, along with an in-depth understanding of the Korean consumer and a strong base of existing auto loan customers, providing an excellent opportunity for cross-selling. The company had the ability to make quick decisions and execute them rapidly and effectively,’’ Bernard van Bunnik, deputy CEO and senior executive vice president of Hyundai Card/Capital, said.
``On the other hand, GE brought its global reputation and recognition in the financial services industry based on its AAA rating, proven competency in risk management and corporate governance as well as sophisticated analytical tools to understand the consumer better,’’ he added.
Innovative Marketing
The joint venture has helped Hyundai Card set itself apart from its peers by bringing innovative marketing, funding ability and corporate governance.
First of all, its innovative marketing focuses on customers’ lifestyle, which is its unique positioning strategy in the market. The best examples of such marketing are ``Finance Shop’’ and ``Super Series.’’
The finance shop is the place that enables customers to enjoy all-in-one service by taking advantage of a number of financial products, getting consultation services, and taking in an ambience created by world-famous designers.
Through the finance shop, the company is trying to expose customers to its brand more easily and effectively. Its first finance shop opened for business in 2006 in Seoul and it has now doubled the size of the network to 12 shops nationwide.
In addition, the company has brought a paradigm shift to sports & culture marketing by hosting the Super Match and Super Concert series with big stars. For example, late last year, it featured musical stars Billy Joel ― in his first-ever Korean appearance ― and Placido Domingo in its Super Concert series. The two wowed fans under the Hyundai Card banner.
Secondly, the firm secured better funding ability with the diversification of funding, making it the first Asian card company to get an S&P rating. With superior credit ratings and a highly competent risk management system, it has compiled a diversified and balanced funding portfolio categorized by region, product and maturity.
In 2008, it successfully issued bonds in Malaysian ringgits, secured a $100 million credit line with Citi and borrowed $150 million from a major European bank. Its risk management techniques, scientific asset and liabilities management system, and conservative reserves policy proved their worth.
Thirdly, the venture’s corporate governance is known for its interesting mix of speed and rigor. Hyundai has fast execution, while GE has a very rigorous structure of matrix organization.
``Corporate governance is really the whole infrastructure to support sustainable growth. With the sustainable growth, we are targeting to achieve double digit growth year over year and about 20 percent ROE, not just for one or two years but constantly long term,’’ Bunnik said.
``So in order to get there you need to on one hand always think of new products, new channels, new customer segments, and on the other hand you need to have very strong risk management and risk expertise,’’ he added.
Future-Oriented Strategy
Hyundai Card set three initiatives to ensure sustainable growth and solidify its leading position in the local card industry. The three are strengthening stable asset structures, diversifying funding, and further upgrading risk management. Most importantly, it has sought to turn its long-term plans to advance overseas into a reality.
``Today, global economies are facing serious stagnation, but rather than being fearful of the choppy waves, we are setting course at high speed. This is the perfect moment for a company to test its form, its structure and its competitiveness,’’ Hyundai Card CEO Ted Chung said.
First, with strong funding and management expertise, it is solidifying its leadership and advance new business initiatives, while continuing to differentiate its marketing and strengthen funding structure to outperform its competitors. For continuous growth, it is trying to expand market share by increasing the number of new cardholders.
Second, it seeks to strengthen profitability even further by amplifying high-profit assets based on elaborate risk gauges and eliminating potential loss through scientific risk management.
Third, it is reinforcing creativity with differentiated marketing initiatives by continuing to propel Hyundai Card experience programs, such as ``Super Concert’’ and ``Super Match.’’
Fourth, it plans to further concentrate on corporate ethics as a global leader by bringing all of its services and operations up to international standards.
Finally, Hyundai is looking beyond the Korean market and preparing to go global in earnest. Hyundai Capital, its sister company, plans to enter the U.S., European and Chinese markets in coming years. In each market, Hyundai Card will also study the different lifestyles of customers to find business opportunities.