South Korea’s Hyundai Card Co. may become the first in the credit card segment - hit hard by stagnant consumption, a government-led cut in commission fees and higher wages - to cut its payroll in an effort to save costs and improve its balance sheet.
Hyundai Card, the industry’s third largest in terms of 2017 transactions, underwent consulting in the first half and was advised to cut its labor force by a big scale, an official said, declining to be named due to the sensitivity of the matter.
Hyundai Card has been prescribed to lose 200 jobs and its units Hyundai Capital and Hyundai Commercial 100 each.
The combined layoffs of 400 would be a loss of 10 percent of the current payroll.
Losses have been snowballing in the credit card industry.
Hyundai Card`s net profit in the first six months of this year plunged 40.9 percent from a year ago to 77.3 billion won ($69 million). The performance of the country’s eight major card brands was equally dismal, with their combined net profit sliding 31.9 percent on year to 966.9 billion won over the same period.
Reduced commissions, a major revenue source for credit card companies, were largely to blame. As part of a government campaign to help small businesses, credit card companies have been pressured to lower their commissions charged to vendors. In July 2017, local laws were changed to expand the scope of small and midsize businesses benefiting from low commissions of 0.8 percent and 1.3 percent. In general, vendors are charged fees of up to 2.5 percent.
Credit card companies fear their bottom line could take a further hit as the government wants to make fees completely free of charge to help the small business sector struggling from a slowing economy and higher wages.
By Kim Gang-rae and Kim Hyo-jin
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]