New services let tenants pay rent via card
Card issuers are collaborating with real estate agencies and state-backed housing developers to offer residents the option of paying their rent via credit or debit card. Previously, card companies mostly focused on services that facilitate payment of smaller monthly maintenance fees.
“In a saturated market, card companies need to find a kind of transaction that is not frequently paid with card but in cash,” said Lee jin-woong, a spokesperson for Shinhan Card. “Monthly rent is one of the few remaining areas in that regard.”
Shinhan Card, the largest card company in Korea, signed a partnership with the Korea Land and Housing Corporation, a state-owned housing developer, to provide a rental payment service to some 810,000 households living in apartments built by the corporation. The service is set to begin sometime this month.
To attract more users in the beginning, the company plans to waive extra transaction fees for paying rent via card and introduce reward programs for those who register for the service.
KEB Hana Card is taking a different approach, signing an agreement with real estate app Dabang on Monday to take advantage of the app’s more than five million users.
Dabang is the country’s second-most popular apartment hunting app that connects landlords with tenants. The app plans to launch a payment service platform called Dabang Pay that allows users to pay rent.
In return, the card company will offer different points benefits and discounts from partner companies including convenience store chain GS25 and discount retailer Daiso.
KEB Hana declined to reveal how much it would charge in transaction fees but said it would be keep rates low to help grow the sector.
“The transaction fees are set after discussing them with payment service providers,” a spokesperson said. “We’ve decided to charge lower transaction fees than those charged on other transactions to bring in more users willing to pay rent with our cards.”
The reason for the big push toward rent payment services is the potential for larger transactions that can translate to more revenue from fees.
Industry sources estimate annual monthly rent to be around 6 trillion won ($5.3 billion). Average monthly rent, according to the Korea Appraisal Board, is 558,000 won. This is more than twice the average monthly apartment maintenance fee for a 105-square-meter (1,130-square-foot) apartment at 219,030 won, which is how card companies have been making money from housing-related transactions thus far. Many card companies are branching out from maintenance fee payment services to include rent payment.
KB Kookmin Card entered a partnership with the Korea Association of Residential Properties Management earlier this year to offer a card payment option to residents of the association’s member constructors. The service is set to launch in December.
Woori Card rolled out a new card brand exclusively devoted to rent payment. Customers are entitled to a discount on rent if they continually pay off their bills on time.
Lotte Card will offer a rent payment option to 1,800 households living in apartments under the government’s New Stay housing program. The service will be available by 2018.
Industry insiders believe such services offered by card companies are still in a nascent stage and require more partnerships with landlords and real estate agencies to be successful.
“Now, the services are in a trial phase,” said a source in the card industry. “But for the service to generate meaningful revenue, the companies should grow the number of partners to expand their user base.”
BY PARK EUN-JEE [firstname.lastname@example.org]
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