Card payments in South Korea are set to grow at a compound annual growth rate (CAGR) of 4.9% between 2022 and 2026 to reach KRW1,346.5 trillion ($1.1 trillion) in 2026, forecasts GlobalData, a leading data and analytics company.

South Korea is among the few nations that effectively handled the COVID-19 pandemic compared to other developed markets such as the US and the UK. Despite this, according to GlobalData’s Payment Cards Analytics, the market registered a subdued growth of 0.3% in 2020 due to reduced consumer spending.

With a gradual recovery in the economy, card payments rebounded strongly with a 9.3% growth to reach KRW1,001.7 trillion ($841.4 billion) in 2021. With improving economic conditions, card payments are expected to witness 10.8% growth in 2022.

Ravi Sharma, Lead Banking and Payments Analyst at GlobalData, comments: “South Korea’s payment card market is highly developed with most consumers preferring to use a credit card for payments. The average frequency of credit card usage in the country stands at 137.5 times in 2022, which is much higher than even developed markets like France, Canada, the US, and the UK.”

Credit card was the preferred card type in South Korea in 2021, accounting for 78.7% of card payments value, mainly driven by reward benefits such as discounts and cashback associated with credit cards. Debit cards account for the remaining 21.3%. GlobalData forecasts the credit card payment value to grow at 11.6% in 2022, whereas the debit card payment value will grow at 7.9%.

As the country recovers from the COVID-19 pandemic, the government has been taking steps to promote the use of card payments. In October 2021, the Ministry of Strategy and Finance launched the Win-Win Consumption Subsidy program. The program enabled card holders to receive 10% cashback on the 15th of the following month if their monthly credit/debit card usage is 3% higher than their average monthly usage in the second quarter (April to June 2021). Reportedly, close to 1.4 million card holders applied to this program within 17 days of the launch.

Earlier in January 2021, the government announced new tax benefits on credit card spending, allowing customers to claim additional tax deductions of up to KRW1.0m ($840) on taxable income if they increase their credit card spending by 5% in 2021 compared to the previous year.

Sharma concludes: “While the COVID-19 pandemic has affected the growth of the card payments market in South Korea in the short-run, it is now on the path of recovery, supported by economic revival and government incentives.”