Check (debit) cards are more popular than ever in Korea. Two of Korea’s major banks, Woori and Kookmin announced that they accumulated 4.65 million and 12.36 million check card holders respectively at the end of March 2010, compared to 4.48 million and 12.06 million at the end of last year.
A recent data from the Financial Supervisory Service shows rapid growth in the amount of money paid by check cards as well. In 2009, payments by check cards were 36.9 trillion KRW, 32% higher than a year earlier. The number of check card issuances reached 66.54 million at the end of 2009, up from 55.57 million in 2008.
Why Check Cards?
After looking at those surprising figures, people may wonder what is behind this phenomenon. Several reasons could’ve led to this trend.
1. Check cards bring a lot of benefits to customers. Check card users can get more tax refund than those paying by credit cards. For instance, a person who earns an annual salary of KRW 40 million can get a refund of about KRW 1 million when he or she spends KRW 10 million. But if he or she uses check cards to spend the same amount of money, this person would get a refund of about KRW 1.25 million. In other words, check cards give five more % points in terms of income tax refund than credit cards do.
2. Above all, users can enjoy a variety of additional services provided by check card issuing banks. These additional services are mostly focused on giving discounts to consumers when they make transactions in a variety of places such as restaurants, theaters, shopping malls and gas stations. Some check cards even offer discounted tuition for some private education institutes and flight tickets.
3. Most importantly, check cards are much easier to get than credit cards. Banks require less complicated procedures and apply less regulation when issuing the cards. Anyone over 18 years old and has a banking account is eligible to obtain check cards.
Check Cards Do Good to Everyone
Check cards’ rising popularity is seen as a positive sign for banks and customers. From the banks’ point of view, they would not profit from issuing only check cards. However, check cards could attract potential customers and improve their sales in other products such as bank savings.
For customers, using check cards would enable them to maintain a good habit of spending. Since check cards are linked with personal banking accounts, people only can spend money that they deposit on their accounts. In this regard, they cannot spend far beyond the limit they afford to pay. This is the stark difference between using check cards and paying by credit cards.
Various Kinds, Differentiated Benefits
Korean banks and card companies have introduced a variety of check cards to the customers for the past decade. Those cards look almost the same, but each gives different benefits for people to choose depending on their purposes. The followings are some of the check cards in the market today.
KEB’s Wingo is a big hit among the newly released check cards. Card holders for Wingo are mostly between 20~27 years old because this card is designed to attract university students by giving them education related benefits. Wingo users can get discounts when taking certified language tests such as TOEIC and JPT as well as taking foreign language classes at private institutions. Film fans with Wingo also get discounts at the designated theaters in the country. KEB says more than 100,000 people are now Wingo holders and can take advantage of its features.
Shinhan’s S-MORE offers unique benefits. S-MORE users can get three % mileage points from transactions made previous month, then the mileage points earned would be deposited back into personal account every month. Annually the mileage points people earned would later reach about 4.0 percent interest on average. The more transactions made by this card, the more money would be returned to user’s account.
BC Card’s Tong is targeting people who plan to go abroad. Tong users can use this card in over 700,000 designated stores in China’s major cities. This card also enables holders to use ATMs across China. This is very useful for travelers and students because they do not need to exchange their money into foreign currencies, just by using this check card throughout their stay.
Future of Check Cards
Check cards help customers spend money within their capability and create potential revenue for financial institutions. Experts expect this so called “check cards phenomenon” would last quite some time.
As for the new technology associated with the cards, mobile check cards are being talked about to be introduced in the market. But it faces some huddles of controversy over between banks and telecommunication companies and there is another problem of card commission that is relatively high. Currently banks and card companies impose almost the same commission on check card users as credit card holders.
As long as concerned parties continue to work together to develop mobile cards and lower the commission, the future of Korea’s consumption culture and financial community is very bright.
Lee Hoggie (email@example.com)