The appointment of Kim Young-woo, a former KT executive, as the new CEO of BC Card signals a strategic shift for the South Korean payment processor, as its parent company, KT, seeks to revitalize profitability and identify new growth areas. The move comes as BC Card’s financial performance has stagnated, with net profits falling from 147.2 billion won in 2017 to 63.2 billion won in 2023 and dividends dwindling from 84 billion won in 2018 to a complete suspension in 2023.
BC Card’s previous CEO, Choi Won-seok, had a background in the financial sector, having served as CEO of F&Asset Evaluation and a full-time researcher at the Financial Engineering Research Institute. The appointment of Kim, whose experience lies primarily in the telecommunications industry, reflects KT’s desire to leverage its strengths in artificial intelligence (AI) and digital infrastructure to boost BC Card’s performance. However, BC Card’s internal governance report acknowledged Kim’s lack of prior experience in finance, accounting, or financial roles during his time as a non-executive director.
KT, increasingly viewed as a growth stock due to its focus on AI infrastructure, is under pressure to improve the financial performance of its subsidiaries. Kt Milly’s Bookstore, another KT subsidiary, recently initiated its first-ever cash dividend following a 31% increase in operating profit last year. BC Card’s declining dividend payouts – falling from an 88% payout ratio in 2018 to 9.1% in 2023 – have contributed to the urgency for change.
BC Card has been attempting to diversify its revenue streams by increasing the proportion of transactions processed through its own branded cards, such as the ‘BC Baro Card.’ However, these efforts have yielded limited results, with the share of such transactions increasing by only around 2%.
The timing of this leadership change coincides with discussions surrounding the potential legalization of stablecoins as a new payment method in South Korea. BC Card, lacking a substantial customer base of its own, faces potential disruption in the evolving payments landscape. BC Card has been exploring stablecoin integration, recently signing a memorandum of understanding with Coinbase to test domestic payments using the USDC stablecoin and a QR code payment system, as reported in September 2023. The company also previously filed patents related to stablecoin payments, and even explored issuing its own stablecoin before the focus shifted towards providing infrastructure.
Analysts point to BC Card’s reliance on processing fees as a key vulnerability. The loss of exclusive processing agreements with major card issuers, such as Woori Card’s move to establish its own exclusive merchant system, poses a significant threat to BC Card’s revenue base. According to a report by Korea Corporate Research, Woori Card’s independent merchant system could negatively impact BC Card’s long-term profitability. The report also highlights the need for careful monitoring of asset quality and potential increases in external borrowing as BC Card expands its lending business.
The success of BC Card’s turnaround strategy will likely depend on close collaboration between the new CEO, Kim Young-woo, and Park Yoon-young, the recently appointed CEO of KT. Leveraging KT’s advanced alternative credit scoring models could potentially enhance BC Card’s lending profitability, but the integration of these technologies remains to be seen.
