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(Yonhap Feature) Korean credit card companies get personal

By Mike Weisbart
Contributing writer
SEOUL, Dec. 12 (Yonhap) -- In Korea, if the only reward you receive from your credit card is air mileage, then you are seriously behind the times. The card market here is replete with some of the most idiosyncratic cards imaginable, and consumers of all stripes are benefiting.

   For example, a family preparing to welcome a new addition might just be enticed by the With Baby card from Hana SK Card. It gives discounts on a range of all things baby-related and the company has developed a series of partnerships with hospitals and online shopping malls that cater specifically to new parents.

   Or perhaps spas are high on a consumer's list. They could try the NH M Castle Leisure Card, or even the more specific Spas Valley Card, both of which give discounts and points at various amusement facilities and designated restaurants nearby.

   The long list continues. Do you have a pet? There's a card for that (Hana SK Puppy Card). Make a habit of making social contributions? There are many cards for that (BC My Home Love card, Shinhan Beautiful Card and the NH Love Tree Card, to name a few).

   There's even a card that promotes environmentally sustainable living (BC Green Card). It is supported by the Ministry of Environment and gives credits to people who use it to take the bus. The credits can be used to lower utility bills or just to get some cash back.

Hana SK Card allows users to choose from three different types of a credit card, depending on their spending pattern, to accrue points for additional benefits. (Yonhap file photo)

With a population of 52 million, Korea enjoys what has to be one of the most complex and competitive credit card markets in the world. Including department store cards, there are 13 different card companies supplying consumers with credit products that are aligned with local banks and three different companies handling settlements, including the familiar Visa and MasterCard, and the homegrown BC Card.

   And the pie for those firms is growing. According to Bank of Korea statistics, card usage for payments (including credit and debit cards, known as check cards in Korea) was up by 18.6 percent as of the end of June this year. The total amount of money spent saw an increase of 13.6 percent. All told, there are 122 million cards in the country, translating to about 4.8 cards per worker or 2.5 per all citizens. It's a 9.3 percent increase from the previous year.

   For differentiation, card companies are constantly introducing new products with a variety of point schemes from various companies and membership card combinations. If that wasn't complex enough, all three of Korea's mobile telecommunications firms have membership cards that give their respective clientele extra discounts at stores, and they usually partner with credit card firms on various deals at different times and on different promotions.

   It sounds great, but for some consumers, it can be bewildering trying to figure out which combinations give them the best bang for their buck. For others, it's a source of fun.

   Chang Ye-chun, a 34-year-old mother of two, has what they call here "card mania," meaning that she not only collects the cards and the memberships, but she also knows how to get the most from the system.

   "My friends often contact me when they are out to get advice about which combinations to use at the restaurant where they're at," she said. Indeed, many of the family restaurants will proudly display helpful infographics at the cash register mapping out the various card combinations and partnerships that patrons can use to get the best deal.

   The system can be so complex, a small cottage industry has grown up to provide information about it. Card-Gorilla.com styles itself as a portal site providing news and information about card choices so that consumers can make informed choices. The site features monthly rankings and events, and doubles as a marketing platform for the card firms.

   Reflective of the dynamism, Card-Gorilla was set up by a just-turned-30 entrepreneur, Ko Seung-hun, who had experience in the card industry and saw demand for a portal.

   "Compared to other countries, Korean consumer preferences change fast," said Ko. "Card companies are constantly moving to read the trends and introduce new card products that are very specific, including all of the partnerships for various stores that sign on with points or discounts."

   Ko sees the trend toward mobile card services that utilize what's called Near Field Communications, or NFC. "In the market today, about 30 percent of all cards have a mobile banking chip installed and when the payment infrastructure is in place, the card companies will flock to provide NFC services. They are all preparing for it now," Ko said.

   It's an eventuality that industry players are anxious to see transpire.

Ko Seung-hun, head of Card-Gorilla.com (Courtesy of Mike Weisbart)

James Dixon has spent nearly 20 years in various postings in Asia before arriving to head up Visa's Korea office.
"Korea is definitely moving quickly and the electronics payment industry here is particularly sophisticated," he said. "Much of Korea's success in this area can be attributed to government investments in the infrastructure behind the scenes, but also innovative use of technology and how quickly Koreans accept new technology into their daily lives." Dixon cites statistics showing that Korea's ratio of credit card spending to total private consumption in 2010 was 56.1 percent, higher than Australia (50.5%), China (32.60) and Singapore (26.1%).

   "Korea is definitely now a mature market in terms of electronic payments. We're playing our own role by introducing new technologies and providing great access to our global networks, but it really is fun to be working in this field in this dynamic market right now," he said.

   Of course, there are critics. It's only been about a decade since credit card use took off in the country. As Korea was recovering from the 1997 financial crisis, policymakers saw cards as a means to boost consumption and wean the economy off its export dependence. It offered tax breaks for card usage, and companies could be found handing them out to just about anyone on the street without much risk assessment.

   The result was a massive bubble of consumer credit that took years to pay off.

   The market may have come full circle, as the recent card statistics above seem to suggest, and the financial regulator is concerned. Armed with June's numbers, the Financial Supervisory Service began sounding the alarm, warning the card companies against excessive competition, perhaps with good reason as South Korean households have racked up some serious debt. As of halfway through this year, household debt exceeded 800 trillion won or 160 percent of disposable income.