Three major credit card businesses are expected to see a sharp drop in earnings this year due largely to a recent massive data breach that involved up to 20 million of their customers nationwide, according to market insiders.
The net profit of the three involved credit card firms ― KB Kookmin, NH NongHyup and Lotte Card ― will be hurt “significantly” as they face a drop in customers as well as disciplinary actions from regulators, the sources said.
Analysts now predict that the companies’ combined net profit will fall by 40 percent to 250 billion won ($233 million) this year, down from some 410 billion won in 2013.
One of the biggest reasons for the fall in profit is the cost incurred in issuing new credit cards. So far, more than 3.8 million credit cards holders have signed up for new cards in the aftermath of the massive data leak, costing the three companies up to 38 billion won.
The nation’s financial watchdog, which has already handed down disciplinary actions, could issue further penalties.
The Financial Supervisory Service has given the credit card companies three-month business suspensions, which will kick off next week. The ban will prevent the card companies from attracting new clients or offering fresh card loans.
The suspension comes as the card firms are already seeing slowing growth in the numbers of card transactions and customers since before the data breach.
Credit card spending climbed 4.7 percent in 2013 from a year earlier, according to the Credit Finance Association. The 2013 tally marks the slowest growth since 2005 when the association began to compile related data and a sharp turn from the previous year’s 13.5 percent expansion.
Another major concern for the card firms is the compensation that they will have to offer their customers. Some 2,800 customers are currently seeking compensation for the leakage of their personal information.
It is difficult to predict how much the firms need to settle the class action lawsuits, though some reports estimate they may have to cough up at least 170 billion won.
By Oh Kyu-wook (
596story@heraldcorp.com)
