Competition in Korean card industry intensifies

Woori Financial will spin off its credit-card unit.

Company officials believe the major reorganization could be completed by March.

The Financial Services Commission is widely expected to approve the plan when it reviews it next Monday.

However, some observers are concerned that the market is overheating at the wrong time when unemployment, stagnant income and spiraling debt is clobbering the consumer economy.

Worries over destructive market competition and erosion of consumer finance forced Woori to assure regulators that its new credit company will focus predominantly on safe markets like debit cards and be less aggressive in personal loans.

Hana Financial Group and mobile-phone giant SK Telecom offered the authorities a similar vow of restraint when they launched their credit card joint venture, Hana-SK Card, a couple of years ago, as did the KB Financial

Group when it spun off its own credit card unit. But the market has seen in a bloodbath ever since the two companies waded in.

Authorities are worried that many of them are now locked in a vicious cycle of elevating borrowing costs as their bad finances force them to increasingly rely on non-bank loans with higher interest rates.

There are currently seven credit card companies in the market: Shinhan Card, KB Kookmin Card, Samsung Card, Hana-SK Card, Hyundai Card, Lotte Card and BC Card, when excluding banks that operate in-house card businesses.

NH Financial Group is looking to spin off its credit card business, aiming to leverage its massive pool of 10 million customers in banking and insurance.

``Considering the market size and state of the economy, having less than five independent credit card players seems to be right. The competition is way passed the level of being healthy,’’ said one credit card official.

For more.