Banking & Finance
Korea’s Lotte Card sees 1st profit in Vietnam since launch
Lotte Finance Vietnam focuses on a digital channel strategy based on big data including occupation, income, loan demand checks
By Jul 16, 2024 (Gmt+09:00)
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![(Captured from Lotte Finance Vietnam website)](https://www.kedglobal.com/data/ked/image/2024/07/16/ked202407160040.700x.0.png)
Lotte Card Co., South Korea’s No. 5 credit card issuer, is enjoying its first monthly profit in Vietnam after 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 actually operating, forcing Lotte Card to spend heavily in its early stages of operations. Lotte Finance Vietnam also suffered in the aftermath of COVID-19.
The investment started paying off last month as Lotte Card has 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.
VARIETY OF FINANCIAL PRODUCTS
Lotte Finance Vietnam offered a greater variety of financial products than local competitors, offering not only credit cards but also personal credit loans, auto loans and payment 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 determine interest rates for each customer, while its domestic rivals check into only some areas, such as income and occupation.
The measures developed with Lotte Card headquarters in Seoul allowed the Vietnamese unit to provide loans with lower interest rates than those of its 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 demographic 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 occupation, income and loan demand information since the first half of this year.
Write to Mi-Hyun Jo at mwise@hankyung.com
Jongwoo Cheon edited this article.
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