Woori Card CEO Jung Won-jae: “We’ll Become the Industry Standard with ‘Card Basics'”

[Money Today reporter Ju Myung-ho] [[Money Today Guest Seat] "We'll boost financial profit by securing issuance volume... create synergy through ties with Woori Bank"]

Money Today Guest Seat: Interview with Woori Card CEO Jung Won-jae

"Hello, I'm Jung Won-jae of 'Card Basics.'"

This is how Woori Card CEO Jung Won-jae introduces himself when meeting people for the first time. 'Card Basics' is the new product he rolled out just three months after taking office. The point-earning version has launched so far, with a discount version and others to follow in the series.

The product is named 'Basics' for staying true to the fundamentals of a card, but its content is anything but basic — it's bold. The base point-earning rate is a high 0.8%, and paying with simple-pay services in certain categories earns up to 6% of the amount spent, the best in the industry. The design is bold too: using the work of young Korean painter Kim Hyun Jung gives it a visual distinctiveness clearly different from existing cards.

CEO Jung's ambition this year is to sell 2 million units of 'Card Basics.' Building on that, his plan is to raise Woori Card's market share from the current 9% into the 10% range. We met with CEO Jung, who has put the card industry on edge with his bold target, to hear about his business strategy and plans.

— How have sales of 'Card Basics' been so far?

▷ They say a card is a success if it issues 100,000 units in its first month; we passed 100,000 in under a month. Especially encouraging is the high share of new members. We've declared we'll issue 2 million units of 'Card Basics' alone this year, and since we're printing nearly 10,000 a day, I think that's fully achievable. Bank branches also say the product sells easily because the benefits cover more ground than existing credit cards and the point-earning rate is high.

— There's a concern that the benefits are too generous, making this a loss-making card.

▷ Right now, virtually every card is in the red if you look only at fee income. As merchant fee rates keep falling, the credit-sales segment can be considered to have turned to a loss. But if we issue a lot of cards and people use them a lot, financial usage — card loans, cash advances, and so on — increases, generating profit on the financial side. Even if the share of customers who use financial services is low, a large issuance volume expands the absolute number of financial customers, increasing profit. For example, if 5% of 1 million customers use financial services, that's 50,000 people; if customers grow to 2 million, the same 5% becomes 100,000. That's why securing a certain customer base by growing market share matters.

— Is that why you emphasize a 10%-plus market share?

▷ A card company needs at least a 10% market share to survive independently. Below that, you'd have to fold back into the bank. You need at least 10% to scrape together enough profit to be self-sufficient even on thin margins, and to be able to collaborate with other industries. For instance, even for something like a point-exchange partnership, if your card issuance is too small, you can't negotiate. A card company with more customers naturally has bigger collaboration synergy too, doesn't it?

— Financial authorities are watching closely for excessive competition among card companies.

▷ It's true that the authorities are reining in excessive marketing spend. Since the merchant fee cuts already mean no profit can be made in the credit-sales segment, expanding marketing spend just leads to a war of attrition. But Woori Card only looks like it's spending a lot on marketing because 'Card Basics' has become a talking point — we're actually not spending more on marketing than other card companies. If anything, I feel we've been too passive about marketing until now.

— What's your top focus for increasing card issuance?

▷ My very first priority upon taking office was strengthening our relationship with Woori Bank. Woori Bank is Woori Card's most important sales channel, but my assessment is that we hadn't been using it properly. Even I, when I worked in sales at Woori Bank, didn't think much about cross-selling cards. So I'm telling our executives to go out and communicate with the bank's sales divisions regardless of their own job function. I've asked each executive to take charge of five Woori Bank sales headquarters. Half of Woori Card's executives are from Woori Bank. We can explain and ask them to sell well, given these strengths Woori Card has. Banks, too, are focused these days on growing non-interest income, and securing new card members is a great way to earn it. Cards are also one of the most important products for making a bank customer's primary bank. I've stressed this so much that now, when I go to the bank and ask, "What's the basics of sales?" they answer right back, "Selling cards."

— That sounds like fairly aggressive sales.

▷ I dislike the phrase "aggressive sales." It's not aggressive, it's strategic. I can't accept growing sales at the expense of profit or loosening risk management. You have to manage profitability and risk tightly while thinking strategically about how to sell more. We need a strategic approach to finding ways to create synergy with the bank, ways for Woori Card to spread by word of mouth. Some say our target of a 10%-plus market share is too high, but our share was already 8.1% this past January and has already climbed to about 9% now. I think it's an achievable goal without overreaching if we're just a bit more thorough about the basics.

— What do you mean by "thorough about the basics"?

▷ First, the card products have to be good, and every employee has to carry out their work strictly from the customer's perspective. Renaming the screening department to the issuance-support department in our recent reorganization was also meant to raise the customer-service mindset in card-issuance work. Through this, our goal is to establish a sales-oriented corporate culture and build a company where the company and employees grow together.

— What's your profit target for this year?

▷ Given the expanded scope of small and medium merchants from last August and the fee cut for small-transaction, high-volume merchants coming this July, it's fair to say this year's net profit should decline from last year's. Even so, we've set a target of increasing net profit by about 16 billion won year over year. This is my first time in the card business. People say fees keep falling and it's tough, but I say I don't know about the past — here and now is a fresh start for me. Since this is the beginning, it's natural to plan for growth looking ahead. Besides, Woori Card barely does auto installment financing or leasing, so the scale is tiny, but even doing a little bit there has huge growth potential, leaving room to increase profit.

— But competition in auto installment financing and leasing is fierce too.

▷ We're not even at a competitive scale yet — we're just trying to grow our small operation a bit and turn some profit. We currently only do new-car auto financing, but we're preparing to enter the used-car market too. As a specialized card company marking its fifth year since spinoff, building a diverse profit portfolio is important from a long-term perspective, so we always keep new-market entry in mind.

— Other card companies must be on edge.

▷ Woori Card's situation is different from the top-tier card companies. With credit sales having turned to a loss due to merchant fee cuts, if Woori Card can't expand its customer base and grow profit even on thin margins, the only option left is workforce cuts. Cutting staff makes it harder to respond to digital technology, further shrinks our sales capability, drops market share even more, and profit falls further — a vicious cycle. For Woori Card to survive, we have to stake everything on expanding our customer base and growing profit. Only once you have a certain customer base can you offer financial services, do auto installment financing or leasing, and attach other businesses to generate profit.

— You've also entered Myanmar with a microfinance business.

▷ We expect the Myanmar business to break even starting this year. Whether or not it succeeds, we see overseas expansion as a way to build experience. That said, it wouldn't be wise for a small company like Woori Card to charge into unfamiliar, unproven markets and fail. Woori Bank has already expanded significantly across Southeast Asia, so if the bank asks, we go in together and try our hand at the card business. Right now we're doing card business through Woori Bank, which has obtained a banking license in Vietnam. In Asia, we judge Vietnam, Myanmar, and Cambodia — plus India — to be promising places for the card business. Woori Bank has a presence in the Philippines, and we currently have staff there on a roughly five-month assignment investigating whether the card business is viable.

— "Card Basics" is also making waves as the first card to use a piece of Korean painting.

▷ I have a strong interest in design. I believe that when the content is good, the form carrying that content should also be elegant and refined. I wanted to make a card that catches your eye whenever you pull it out of your wallet, and it occurred to me that we'd never tried using Korean imagery on a card before. My office looks out over an old palace, and the idea came to me from seeing people in hanbok there. That's how I came to be introduced to artist Kim Hyun Jung. Going forward, we plan to keep using Kim Hyun Jung's work across the entire 'Card Basics' series for visual consistency.

Reporter Ju Myung-ho, serene84@mt.co.kr

Written by — Reporter Joo Myeong-ho (serene84@mt.co.kr)