Card companies get in on O2O
O2O refers to services such as cab hailing and food delivery that are facilitated through web or mobile apps.
At the end of June, KB Kookmin Card became the first card company to partner with O2O services. Woori, Lotte, Shinhan and Samsung followed suit this month.
Through the partnerships, card companies promote the O2O service providers’ apps to their customer base. Each company has around eight to 19 O2O partners, and the services offered are diverse, ranging from dry cleaning and car washing to food delivery.
Share@, a mobile app that gives users the most popular menu items at restaurants, partnered with KB Kookmin Card to market itself to card users. Before, the app put up promotional stickers at restaurants to attract customers, but now KB sends text messages to its customers to promote the Share@ app.
“The biggest challenge for O2O start-ups is the considerable cost required to attract customers early on,” said Um Chan-yong of Nuvent, which operates Share@. “Working with a card company that has 18 million users is a great boost for us in attracting customers.”
Kim Young-jin of the app Whatshoe, which has partnerships with Shinhan and KB, said the greatest advantage of partnering with card companies is the increase in trust and number of customers. Whatshoe allows users to request shoe repair services through their mobile phones. Users in Seoul and Gyeonggi can have their shoes collected and delivered after the repair is done.
“When we inform our customers that our own employees will visit their homes to collect their shoes, many of them feel uneasy if they’re living alone,” Kim said. “But by partnering with a large financial company, customers trust our services more.”
The card companies, though, do not earn substantial profits from their customers using the O2O services. In fact, they incur costs when they send out text messages advertising their O2O service partners.
But card companies believe this new market has potential and want to get more people accustomed to O2O services. They believe that once customers are used to such services, the number of mobile payments will increase rapidly, which will benefit card companies. According to KT’s research center Digieco, the domestic O2O market was worth 15 trillion won ($13 billion) in 2014 but has the potential to be worth 300 trillion won in the future.
“There are new fintech [financial technology] payment options emerging constantly, so unless card companies move quickly to help customers become accustomed to the platforms the companies are offering, they could lose the O2O market,” a Lotte Card associate said. “Almost all O2O service providers are looking for the lock-in effect, whereby customers become so used to the mobile apps that they choose not to change the provider.”
The card companies are looking to expand their partnerships and improve O2O services.
“We are currently working to have automatic login for all O2O services when users open the Samsung Card app on their phones,” a Samsung Card associate said. “Because as of now, automatic login only works for some of the services.”
BY HAN AE-RAN [email@example.com]
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