Kakao Bank, Three Years Without Competitors... This Year Is Different

Quietly Celebrating Recent 3rd Anniversary
Naver Appearance and K Bank Reorganization
Business Environment Expected to Be Challenging This Year

[Asia Economy Reporter Kim Min-young] KakaoBank has marked its 3rd anniversary since commencing operations. Over the past three years, it has solidified its position as the leading internet-only bank. However, with the emergence of another big tech company, Naver, and the full-scale operations of K Bank, there are also forecasts that the future business environment will be challenging.

According to the financial sector on the 3rd, KakaoBank, which started operations on July 27, 2017, recently celebrated its 3rd anniversary but ended with just a simple congratulation, unlike previous years. There was no typical CEO message or congratulatory speech, and the celebration was limited to distributing Kakao character goods (planned merchandise) to employees.

At the 1st anniversary, then-CEO Lee Yong-woo (currently a member of the National Assembly from the Democratic Party) and CEO Yoon Ho-young both attended a press conference. On the 2nd anniversary last year, coinciding with surpassing 10 million customers, they launched a deposit product with an annual interest rate of 5% (for 10 million KRW). This product attracted over 1 million customers and was sold out within one second.

KakaoBank plans to leverage its 10 million customers as a foundation to strengthen its position as the undisputed number one internet bank. In June, it changed its corporate name from Korea Kakao Bank to KakaoBank and is preparing for a stock market listing. It is expected that an initial public offering (IPO) will facilitate smoother fundraising, enabling expansion into areas such as mortgage loans and corporate loans, which it has not yet ventured into. The position left vacant by Lee, who became a member of the National Assembly after serving as co-CEO, has not been filled, consolidating leadership under CEO Yoon Ho-young’s sole management.

The financial sector believes that KakaoBank’s true capabilities will be determined within the next one to two years. This is because the competitive environment has changed compared to the past three years when there were virtually no competitors. On the 28th of last month, Naver’s financial subsidiary, Naver Financial, held its first press conference and declared its full-scale entry into the financial industry. Naver Financial plans to consecutively launch financial services including postpaid payments (credit cards), deposits (in collaboration with Mirae Asset Daewoo), loans (in collaboration with Mirae Asset Capital), and insurance (establishing NF Insurance Service as an insurance agency).

Additionally, K Bank, the first internet bank but previously unable to operate properly due to insufficient capital, has reorganized after a capital increase. It is building a 100% non-face-to-face refinancing loan system and is preparing for apartment mortgage loans in the future. Viva Republica, which gathered 17 million users with its simple remittance application ‘Toss,’ is also recruiting talent to launch the internet bank ‘Toss Bank’ in the second half of next year. Hong Min-taek, a former Samsung executive and CEO of the Toss Bank preparation corporation, is reportedly leading the effort.

A financial industry insider said, “Competition between financial companies and big tech is fierce, but innovation competition among big tech companies is also one of the key points to watch in the second half of the year.”