The credit card industry is likely to undergo another period of heated competition in the saturated market, as Hana Financial Group plans to launch a merged entity between Hana SK Card and Korea Exchange Bank’s credit services unit next year.

KEB, one of the two major commercial banks of Hana Financial Group, said in a statement Tuesday that it has decided to spin off its credit card business.

According to group executives, KEB Card will later be absorbed into Hana SK Card. “After going through financial authorities’ approval process, the merged company could debut as early as the third quarter of 2014,” said a spokesman.

Before the planned merger, he added, KEB Card will operate its temporary business as a stand-alone unit of the financial group.

A KEB executive predicted that the planned merger would bring help KEB Card to regain its formerly solid competitiveness as well as create synergy with Hana SK Card.

While Hana SK Card and KEB Card hold 4.5 and 3.1 percent of the market, respectively, their combined market share of 7.6 percent could bring powerful competition to the market.

Hyundai Card, KB Kookmin Card and Lotte Card are in close competition with respective shares of 13.1 percent, 12.7 percent and 10 percent.

Woori Card, which was spun off from Woori Bank earlier this year, has already fueled the cutthroat card competition as a stand-alone unit of the nation’s largest financial company, Woori Financial Group.

“Amid mid- and low-income households’ worsening financial status, their movement and endorsement of spin-offs by financial regulators are inviting tough criticism,” said a banking research analyst.

He noted that Korea saw household debt reach an all-time high of about 1 quadrillion won ($920 billion), which could be linked to the mass number of credit delinquents.

Further, other financial firms such as NH Financial Group and KDB Financial Group are also reportedly seeking to spin off their card businesses.

By Kim Yon-se (kys@heraldcorp.com)