Home' Trinidad and Tobago Guardian : November 14th 2013 Contents NOVEMBER 2013 • WEEK TWO www.guardian.co.tt BUSINESS GUARDIAN
THE ECONOMIST | BG27
South Korea is a notoriously competitive
society. How do those who play its fierce status
games know when they have won? Probably
when they are invited to apply for "the black,"
a credit card issued by Hyundai Card, a sub-
sidiary of Hyundai Motors.
Cast in "liquid metal," a trademarked alloy
suited to armor-piercing ammunition, the card
is heavy. It also is rare. Only about 2,000 have
been issued, and only 9,999 ever will be. To
qualify, a holder needs high social standing
as well as high net worth. The card charges
a stiff membership fee and offers a variety of
benefits: Members were, for example, invited
to a mock Christie s auction, featuring works
flown in from New York.
The main reason people want the black
card, though, is that it is so difficult to get.
That elusiveness is unusual in South Korea,
where credit cards are issued promiscuously.
The country has the equivalent of 4.4 cards
for every member of the labor force. Koreans
made 129.7 transactions per person in 2011,
according to the news agency Yonhap, more
than citizens of any other country. In com-
parison, Canadians made 89.6 transactions
and Americans only 77.9.
The popularity of plastic dates back to the
aftermath of the Asian financial crisis in 1997-
1998. By promoting cards the government
hoped to boost consumption and curb cash
payments, which are harder for the taxman
to track. It rewarded users with a tax break
and even entry into a lottery.
The progress of plastic was interrupted by
a wave of delinquencies and bankruptcies in
2003, but usage soon resumed its climb. Mer-
chants are obliged to accept card payments,
however small the purchase. South Koreans
fill their wallets with multiple cards to take
advantage of the endless promotions that card
Hyundai Card even has succeeded in making
cards cool and debt debonair. Unlike most
financial firms, it showcases the product itself,
not the company behind it. Its cards compete
on the image they convey, not the features
they offer. The company invests heavily in
design and marketing. It has invented its own
typeface, suited to both English and Korean.
One of its offerings had an orange rim to make
it stand out in a wallet full of cards.
Unfortunately a credit card s 86-by-54-
millimeter size offers a limited creative canvas.
The firm has thus allowed its designers to
indulge in a variety of sidelines, such as a
range of kitchenware and a CD cover. It also
"donates" their talents to struggling small
firms in need of a makeover. Beneficiaries
include a butcher s shop and a handmade-
tofu restaurant run by a North Korean defec-
tor.Hyundai Card now claims a 14-per cent
share of the market, but the market is not
what it was. The return on assets for the aver-
age card company has fallen from more than
5 percent before 2008 to only 2.5 percent in
the first half of this year, according to Heakyu
Chang of the ratings agency Fitch. Hyundai
Card managed less than 2 percent. In Sep-
tember the value of credit-card purchases fell
by 1.7 per cent compared with a year earli-
er.Returns have been hurt by tighter regula-
tions. In 2012 the government barred card
companies from extracting higher fees from
smaller merchants. It also is making it easier
for customers to compare interest rates across
products and harder for less-creditworthy
borrowers to spend beyond their means.
Its tax breaks now favor debit-card purchases
over those made by credit card. In 2010 debit-
card payments amounted to only 11 per cent
of the value of credit-card purchases. That
figure has now passed 15 percent.
The card companies efforts to seduce cus-
tomers with perfectly matched cards also have
reached their limits.
"People are overwhelmed with choices,"
says Kim Jung-in of Hyundai Card. "If you
maniac ... (There is a card for every catego-
People often carry four or five cards in their
wallets, he says, but use only one or two. They
may not even know what benefits their cards
offer. In July Hyundai Card streamlined its
products, offering customers a simpler choice
among more versatile cards.
Their cards may not fit each customer so
tightly, but at least their customers wallets
will fit in their pockets more snugly.
@2013 Economist Newspaper Ltd. (Distributed
by the New York Times Syndicate.)
Credit-card nation takes a swipe at profits
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