SEOUL, Jan. 5 (Korea Bizwire) – The ubiquitous use of ‘plastic’ among consumers will set a milestone in credit card payment volumes this year.
According to KB Financial Group, Korean credit card spending is on pace to exceed 700 trillion won (US$634 billion) in 2015, for the first time ever since 1967 when the first credit card type product, the Shinsegae Card, was introduced in South Korea.
While a stream of alternative payment methods is emerging, including digital wallet services like Apple Pay, NFC-based mobile payment services, or Bitcoin, credit cards still command a lion’s share of payment volumes, accounting for about 65.5 percent of transaction volume in Korea. The ratio of credit card use to the nation’s GDP is said to outstrip any nation in the world.
Of note, the percentage of small sum payments made with credit cards – transactions less than 10,000 won – has witnessed a notable surge, from 4 percent in 2000 to 42 percent in 2014. Most South Koreans use more than two credit cards, which has contributed to greater private spending in the past few years.
Following the financial crisis in late 1997, the Kim Dae-jung government encouraged credit card spending as a way of boosting domestic demand. This led to the universal usage of credit cards among consumers of all stripes, but introduced serious side effect including credit card default, and situations where cardholders were “robbing Peter in order to pay Paul” in a bid to cover their monthly bills.
By Lina Jang (email@example.com)