Kdb and Korea Post Enters the Credit Card Business
The Korean Development Bank (KDB) and the Korea Post are now contenders in their country’s credit card market after they have announced that they would go into the business.
Market analysts stated that consumers would expected to have more benefits with more credit card companies in the market, despite various predictions of the KDB’s and the Korea Post’s performance in the credit card business.
A senior analyst of Daewoo Securities, Ku Yong-UK, stated that the arrival of these two companies means that consumers would have more choices and opportunities to choose from. Ku also added that because consumers would have plenty more services to enjoy from the credit card issuers, they would benefit from it since they have nothing much to lose.
A banking analyst from the Samsung Economic Research Institute (SERI), Kim Jae-woo, made similar statements regarding the growing benefits that consumers would enjoy from. Kim said that the struggle between contending credit card issuers for getting a large part of their market world result to a price competition that could lower credit card prices and fees if ever the competition grows fiercer. And this would result to more options for credit card users to choose from.
The KDB and the Korea Post made their announcement of entering the credit card business last month, when they saw that this market in their country is nearing saturation.
The state-owned KDB made the statement that their bank is internally studying and researching plans for their entering the business, but the institution has yet to begin consultations with the Korean government regarding the matter.
An official of the Korea Post stated that they plan to provide lower middle class citizens in various fishing and farming villages across the country financial benefits in the form of public service. The official also added that they plan to use the nationwide network to their advantage.
However, there have been growing concerns of the two firms entering the business about a repeat of the 2002 credit card crisis in which over 3 million credit card users have defaulted on their cards.
Fortunately, many economists stated that the chance that another credit card crisis to happen again is a small one.
Ku said that credit card companies had randomly issued their cards back in 2002, but the situation is different now because the firms are making use of solid and strong strategies for credit risk management.
An analyst of Daishin Securities, Choi Jung-wook, pointed out that the main problem back in 2002 was cash-advance services. The two firms that are about to be credit card issuers are expected to focus on their credit sales instead of the cash-advance services.
There are also growing speculations that some parent banks would spin off several of their credit card issuers because of the advantage in the credit card sector. KB Financial Group chairman Euh Yoon-dae has mentioned about separating the card issuer from their bank.
