[Asia Exclusive] CEO Ryu Young-jun: "The Electronic Financial Transactions Act is a Blueprint for Future Finance, Not a Special Privilege for Fintech Industry"

Interview with Ryu Young-jun, CEO of Kakao Pay

"Laws made during the feature phone era need change
Digital insurance company launching this year
Preparing to apply for innovative financial services"

[Asia Economy Reporter Kiho Sung] "When the Electronic Financial Transactions Act (EFTA) was revised in the early 2000s, the concept of mobile or non-face-to-face finance did not even exist. The law was created during the feature phone era of smartphones and is still being operated under those conditions. The EFTA is not a privilege for the industry but a blueprint for the future."

Kakao Pay, which launched as a simple payment service in 2014, has rapidly grown into an integrated platform offering a full range of financial services including loans, investments, and insurance. To meet diverse customer demands, it acquired a securities company last year, and this year it plans to launch a digital non-life insurance company and introduce mid-interest loan products. Starting from simple payments and remittances, it is evolving into a complete 'financial platform' covering investments, insurance, and loans.

These achievements were made by CEO Youngjun Ryu, who entered the financial industry by separating the fintech business division in 2017 and becoming the CEO of the independent corporation Kakao Pay. As the CEO of Kakao Pay, he has recently devoted much time to representing the industry's stance on the passage of the EFTA, which has become the top priority since he took office as chairman of the Korea Fintech Industry Association in March last year.

Meeting CEO Ryu at the headquarters in Pangyo, Gyeonggi Province, he emphasized, "Ultimately, the playing field needs to expand for us to operate, so the EFTA is necessary," adding, "We must not forget that the regulatory easing of the fintech sector means easing for the entire financial industry, not just us."

"The emergence of the fintech sector has not worsened the financial industry in any way"

- What is Kakao Pay's goal for this year?

△ Kakao Pay's identity is that of a financial company. Until last year, it was in the stage of setting up financial businesses centered on payment and settlement, but this year marks the stage of full-scale expansion. Kakao Pay's three pillars of finance are investment, loans, and insurance. Last year, there was synergy from acquiring a securities company and launching 'My Loan Limit,' designated as an innovative financial service. Regarding insurance, a digital non-life insurance company application was submitted at the end of last year, and the insurance company is scheduled to launch this year. With these three pillars completed, this year will be a year of full-scale growth.

- What financial environment has Kakao Pay changed?

△ Kakao Pay first appeared in September 2014. It has been around longer than expected. Looking back, non-face-to-face finance did not exist at that time, and payments required going through 18 screens and signing with a public certificate. Kakao Pay made it possible to pay with six passwords. It has been less than three years since such changes occurred.

The most noticeable change recently is in loans. Previously, customers had to gather documents, take leave, and visit banks one by one to borrow money. Customers were always in a subordinate position. Now, multiple financial companies directly inform customers via mobile how much they can borrow. From the financial institutions' perspective, losing their dominant position is understandably unwelcome. This is truly a paradigm shift in finance.

- The existing financial sector is also increasing its checks and balances.

△ From the incumbents' perspective, there are two ways to check latecomers: either outperform them or prevent competitors from operating. Currently, the financial sector seems to lean more toward the latter. However, from the customer's standpoint, the focus should be on who provides better service benefits.

For example, in the case of voice phishing, the existing financial sector showed little interest in post-incident handling. Only after fintech and other sectors stepped forward to take responsibility for incidents did the traditional financial sector begin to pay attention and act. We need to see whether services are provided from the customer's and financially vulnerable's perspective. The emergence of the fintech sector has not worsened the financial industry in any way. On the contrary, we have helped lift many regulations existing in the financial sector.

"In the mid-interest loan battle, credit evaluation is the most important"

- The mid-interest loan competition is expected in the second half of the year. How is the preparation going?

△ The most important factor is credit evaluation. To distinguish customers who can move from high-interest to mid-interest loans, comprehensive data is needed. The entity with the most data will likely perform best. Kakao Pay has the Kakao community. With customers' consent, we can utilize data from Kakao accounts. This provides an opportunity to analyze various data more comprehensively, such as taxi rides, comic reading, and shopping, all through Kakao accounts. Since many financial transactions occur through Kakao Pay, credit evaluation should become feasible.

- What are the differences between Kakao Pay's securities and insurance offerings?

△ After launching its subsidiary Kakao Pay Securities, we showed a different direction from traditional finance in investments. Instead of requiring large sums, we wanted to show that investments can happen naturally in daily life, gradually increasing assets. Thus, we introduced 'Al Gathering' (investment through payment rewards), 'Coin Gathering' (investment with leftover change after payments), and 'Auto Investment.' Based on this approach, we are preparing to launch stock services this year. Insurance will follow a similar perspective. Instead of "Sign up for life insurance costing 200,000 to 300,000 KRW per month," we aim to lower the hurdle and increase familiarity with insurance.

- How is the preparation for this year's initial public offering (IPO)?

△ We have completed the selection of underwriters (Samsung Securities, Goldman Sachs, JP Morgan) and are discussing the IPO promotion. Preparing for an IPO requires many physical preparations. While we are considering timing within this year, the exact timing will be decided based on market conditions.

- What is the goal you want to achieve this year?

△ Kakao Pay, along with its subsidiary Kakao Pay Securities, is striving to create a new culture where anyone can consistently invest small amounts. Especially in stock trading, enabling fractional share trading will foster a healthier investment culture. Accordingly, Kakao Pay Securities is preparing to apply for innovative financial service designation for fractional trading of overseas stocks. The authorities are also reviewing fractional trading positively, and since fractional trading of overseas stocks has already been designated as an innovative financial service in some cases, we hope for a swift review to introduce new service models together with Kakao Pay Securities.

Interview by=Asia Economy Financial Chief Reporter Chohui Lee, Summary by=Asia Economy Reporter Kiho Sung kihoyeyo@