[Song Seungseop's Financial Light] What's the Difference Between KakaoBank and KakaoPay?

Kakao Bank is a Bank, Kakao Pay is Fintech
Similar Remittance and Card Functions but Different Operating Principles
Common Goal of Kakao-Based 'Comprehensive Financial Platform'

Finance is difficult. It is filled with confusing terms and complex backstories intertwined. Sometimes, you need to learn dozens of concepts just to understand a single word. Yet, finance is important. To understand the philosophy of fund management and consistently follow the flow of money, a foundation of financial knowledge is essential. Accordingly, Asia Economy selects one financial term each week and explains it in very simple language. Even those who know nothing about finance can immediately understand these 'light' stories that illuminate the 'light' of finance.

On the 6th, KakaoBank stock price in the early market session

[Asia Economy Reporter Song Seung-seop] On the 6th, KakaoBank was listed on the KOSPI market. Although it failed to achieve a 'ttasang' (opening price formed at twice the IPO price followed by hitting the upper limit), it closed trading at 69,800 won, up 29.98% from the opening price of 53,700 won, recording the number one financial company by market capitalization. KakaoPay is also scheduled to be listed in the fourth quarter of this year. It was supposed to be listed this month, but the Financial Supervisory Service requested a revision of the securities registration statement, delaying the schedule.

But exactly how are KakaoBank and KakaoPay different? What distinguishes these two companies aiming to be innovative financial platforms? Searching for KakaoBank often brings up KakaoPay, and vice versa, causing much confusion. However, although they seem similar, the two companies belong to distinctly different industries.

First, KakaoBank is a 'bank.' It received a banking license from financial authorities in 2017. Unlike other commercial banks, it is an internet-only bank without physical branches, but its nature is the same. On the other hand, KakaoPay is a 'TechFin' company. TechFin is a compound of technology and finance, referring to technology companies innovating finance. KakaoPay is not a bank but an IT company. It belongs to the electronic financial industry, like simple payment companies such as SSG Pay or KuPay.

Therefore, you can open an account at KakaoBank. You can subscribe to deposit products, and you can get credit loans or mortgage loans. Of course, deposits are protected up to 50 million won like other banks. But since KakaoPay is not a bank, you cannot deposit or borrow money there. Instead, it provides various functions in areas such as remittance, payment, and investment for convenient financial services. A representative example is that online and offline payments are possible without physical cards or joint certificates.

Both Pay and Bank offer remittance and cards, but methods differ

You can also charge money to KakaoPay. You can load money into KakaoMoney and use it for remittance and payments. However, this is fundamentally different from deposits and savings where money is entrusted to a bank. Banks pay interest in return for deposits. They also lend money to other customers using the deposited funds. But KakaoMoney mainly holds small amounts temporarily for convenient financial services. Naturally, it cannot be used for loans. The amount you can charge is also limited to 2 million won.

Do you feel there is no difference because you can remit money both at KakaoBank and KakaoPay? Although the remittance is the same, if you look closely, they go through distinctly different processes. Remittance at KakaoBank moves money from a KakaoBank account to another bank account. KakaoPay does not just move money within its own account. It connects multiple bank accounts to enable convenient remittance. You do not have to enter the bank application. You do not need to know the account number, and you can easily settle group expenses with KakaoTalk friends.

KakaoBank cards and KakaoPay cards also differ. KakaoBank's Friends Check Card is naturally linked to a KakaoBank account. When you pay with a KakaoBank check card, the balance in your KakaoBank account decreases. KakaoPay cards are prepaid cards that you charge money onto in advance. Charging can be done by linking all partnered bank accounts, including KakaoBank. You can put money in your preferred bank and use the KakaoPay card.

There are also commonalities between the two companies. Both aim to be a 'comprehensive financial platform' based on the Kakao messenger. Although they currently belong to different industries and have different main businesses, there are prospects that some business areas may overlap in the future. In fact, when selecting corporate values, both companies simultaneously chose Brazil's 'PagSeguro' as a comparison target.