Card companies say they’re not going anywhere despite the advancesDoes the popularity of mobile payment services spell doom for the conventional card industry?
Card companies say “not so fast,” arguing that they will survive by boosting their own mobile payment offerings and continuing to provide attractive membership benefits that utilize their existing affiliation networks.
Shinhan Card, the No. 1 player in the local card industry, last week rebranded its existing mobile payment app as F’AN Pay to better compete against the well-known “pay” services like Samsung Pay, Naver Pay and Kakao Pay.
While companies like Samsung Electronics, Naver and Kakao have been shoring up market share by targeting their smartphone or mobile messenger users, Shinhan is focused on offering more attractive membership benefits to cardholders by further strengthening partnerships with affiliated retail shops.
It reached an agreement on Wednesday called the Mobile Platform Alliance with 18 companies in different industries ranging from car sharing and quick delivery services to insurance and private academies for kids.
“In the new mobile era, we would like to build a new mobile-based business environment that helps not only us, but also our affiliated shops, survive,” Shinhan Card CEO Wi Sung-ho said at an event Wednesday to launch the alliance.
“We renamed the app F’AN, hoping that it will be a new mega-platform that changes the paradigm of financial life in Korea by connecting more businesses with our cards.”
The app had more than 10 million users as of the end of March, of which more than 60 percent are in their 20s and 30s. Purchases made via the app hit 1.2 trillion won ($1 billion) in just the first three months of the year, according to Shinhan.
Other card companies are also strengthening their mobile payment services by making the payment process as short, convenient and safe as possible.
Just as Naver and Kakao rolled out a plastic card version of their mobile payment app last month, KB Kookmin Card plans to launch a plastic-card version of its mobile app, K-Motion, that works offline within the first half of the year. Through the card dubbed K-Motion Plus, users can link multiple cards from KB or its affiliates, and can cycle through those cards and pay at different retailers as needed.
KEB Hana Card said it added a fingerprint scanning function to its app Mobi Pay. It is the first Korean mobile payment service that verifies through a biometric technology.
Hyundai Card also launched an easy-pay service called PayShot, which only requires a cardholder input their Hyundai membership ID and password during their very first purchase on certain online malls. Afterwards, that information is remembered and doesn’t have to be re-added. The service is affiliated with major online retailers, ranging from 11st, Auction and Gmarket to the online shops of offline retailers like CJ, Lotte and Shinsegae.
Analysts say that fierce competition between information technology and card companies in the mobile payment market helps the overall payment industry by boosting benefits for consumers, but it may still threaten conventional card companies.
“Card companies are already suffering from falling profitability, even if the success of fintech-oriented IT companies’ payment services is not considered,” said Yoon Jong-moon, a researcher from the Korea Credit Finance Association Research Institute.
“Excessive expansion of membership benefits to customers may worsen the card firms’ profitability.”
The current trend in the card industry, where an individual firm develops its own mobile payment platform, is inefficient because building basic network infrastructure requires too much investment relative to the size of each firm’s customers who benefit from the app, Yoon said.
He explained that the attempts by individual card companies to beat out IT giants will ultimately be fruitless because the IT giants have massive mobile platforms that embrace users of all cards - and are even expanding collaboration with those very card companies.
“Card companies should cut costs in infrastructure and information security investment by building one joint mobile payment platform, and then compete with each other in their specialized services,” Yoon said.
BY KIM JI-YOON [email@example.com]