Card firms’ earnings plummet as fees are cutKorean credit card companies saw their first-quarter earnings plunge nearly 43 percent due mainly to a cut in their fee rates on member stores, data showed Thursday.
The combined net income of five major card issuers stood at 387.1 billion won ($360 million) in the January-March period, down 42.9 percent from a year earlier, according to data compiled by industry sources.
The nosedive was attributed largely to the fee-rate cut in August. The card issuers lowered their rates by between 0.5 percentage points and 0.7 percentage points to ease the financial burden of smaller member merchants.
Market sources estimated the fee reduction would save the fee burden of smaller merchants by around 350 billion won over a one-year period. Another negative factor was the February reduction in the legal maximum interest rate, which was lowered to 24 percent from the previous 27.9 percent.
Woori Card was the only firm that enjoyed an on-year earnings gain in the first quarter, with its net surging slightly over 34 percent to 39.3 billion won.
Shinhan Card’s net income tumbled 65.4 percent to 139.1 billion won, and KEB Hana Card saw its bottom line plunging 49 percent to 25.5 billion won. Kookmin Card’s net profit fell 13.9 percent to 71.7 billion won, with that of Samsung Card dipping 1.3 percent to 111.5 billion won.
Samsung Card posted the first net loss for the first quarter for the first time since 2013. Hyundai Card has yet to disclose its first-quarter earnings, but the company is known to have suffered an on-year drop in its net profit.
Market watchers warned the credit card industry faces a gloomy outlook for the remainder of the year as fees imposed on merchants with a lot of micropayments are slated to drop by an average 0.3 percentage points, starting in July.