Korea’s Lotte Card sees 1st profit in Vietnam since launch

Lotte Card Co., South Korea’s No. 5 credit card issuer, enjoyed its first profit in Vietnam by offering various financial products since its entry into the Southeast Asian country in 2018, targeting a turnaround this year.

Lotte Card, of which major Asian buyout firm MBK Partners Ltd. is the top shareholder, said on Tuesday that Lotte Finance Vietnam Co. reported a profit of 500 million won ($361,637) last month.

The South Korean company acquired Techcom Finance Co., a Vietnamese consumer finance service provider, and founded Lotte Finance Vietnam in 2018 to make inroads into the market.

The Vietnamese subsidiary, Lotte Card’s sole overseas unit, has been in the red since its establishment as Techcom only had a financial business license without actual operations, forcing Lotte Card to spend much money in the early stages. Lotte Finance Vietnam also suffered in the aftermath of COVID-19.

The investment started paying off last month as Lotte Card applied its own system and corporate culture to the Vietnamese unit over the six years.

“We set up all product processes on our own, making it easy to expand to various products,” said Lotte Finance Vietnam Chief Executive Officer Kong Sung Sik.

The company’s assets jumped by more than seven times to 270.7 billion won last year from 36.9 billion won in 2018. Its operating revenue skyrocketed by over 70 times to 49.3 billion won from 700 million won during the period.

Lotte Finance Vietnam is expected to report a net profit of 700 million won this year, swinging from a loss of 12.5 billion won in 2023.

MORE VARIOUS FINANCIAL PRODUCTS

Lotte Finance Vietnam offered more various financial products than local competitors, offering not only credit cards but also personal credit loans, auto loans and pay services.

The firm joined hands with local e-commerce platform operators in October 2023 for the buy now, pay later (BNPL) service, a type of short-term financing that allows customers to make purchases and pay for them at a future date.

The company developed its own credit ratings model and established a risk-based pricing system to offer customers in Vietnam interest rates tailored to their credit ratings.

Lotte Finance Vietnam checks more than 10 customer data including incomes, addresses, occupations, employment periods and loan records to decide interest rates for each customer, while its domestic rivals look at only some such as income and occupations.

The measures developed with Lotte Card headquarters in Seoul allowed the Vietnamese unit to provide loans with lower interest rates than those of rivals in the country. Credit loans to high-income office workers and civil servants made up more than half of Lotte Finance Vietnam’s total credit loans.

Lotte Finance Vietnam shifted its main sales channels to digital ones based on big data from offline networks to improve profitability as customers in their 20s and 30s, the largest groups in Vietnam’s population, are familiar with the internet and smartphones.

The company has been focusing on the mobile digital channel strategy based on big data such as occupations, incomes and loan demand since the first half of this year.

Write to Mi-Hyun Jo at mwise@hankyung.com
 
Jongwoo Cheon edited this article.