Coupang Signals Entry into Financial Industry... Can It Escape Deficit with Interest Income?

Urgent Need for Profitability Improvement: Possibility of Direct Capital Business Expansion

Coupang is expanding beyond shopping into finance. Following its easy payment and post-payment services, it is reportedly exploring entry into the specialized credit finance business, leading industry insiders to cautiously predict that Coupang may choose financial services as an exit strategy to overcome its deficits.

Is Coupang Financial Coming?

According to distribution and finance industry sources on the 13th, Coupang recently established a financial company called ‘CFC Preparation Corporation.’ The business purposes registered for CFC Preparation Corporation include management consulting, other investment businesses, and real estate leasing. While the company remains tight-lipped about specific business directions, the industry consensus is that Coupang will develop a capital business through this newly established entity. Notably, the industry views the assembly of an elite team for financial service licensing as significant. Although establishing a capital company is a registration system, developing financial business requires substantial coordination with the Financial Services Commission and the Financial Supervisory Service. The CEO of CFC Preparation Corporation is Shin Won, Vice President of Coupang CPLB (a Coupang brand specialized subsidiary). Vice President Shin is a former director at the Financial Supervisory Service. It is also reported that former Deputy Governor of the Financial Supervisory Service Lee Seok-geun has joined. Coupang also completed trademark registration for Coupang Financial in 2019.

The capital business Coupang plans to develop is expected to have a structure similar to Naver Financial. It is a ‘virtuous cycle’ system that helps small and medium-sized merchants overcome funding difficulties and expand their businesses, thereby growing the overall market. Currently, Naver Financial supports online business loans and consulting for small and medium-sized merchants operating on Naver’s Smart Store. However, there is a difference between direct entry and alliance structures. Naver does not provide loans directly but collaborates with Mirae Asset Capital, Woori Bank, and others. An industry insider said, "Considering Coupang’s business style so far, it is highly likely they will directly develop the capital business," adding, "High risk, high return is Coupang’s style."

Strategy to Escape Deficits

It is a natural step for Coupang to diversify its business into Coupay (Coupang Pay), capital, and other areas by leveraging its shopping services, similar to Naver. Moreover, although sales are growing, Coupang remains in a continuous deficit, making it urgent to devise strategies to improve profitability. Last year, Coupang recorded sales of $18.4637 billion (approximately 22.2256 trillion KRW) but had an operating loss of $1.54259 billion (approximately 1.8626 trillion KRW). In the first quarter of this year, operating losses decreased by 23% compared to the same period last year but still amounted to $205.7 million (approximately 262.1 billion KRW).

However, there is criticism that Coupang’s entry into finance may create regulatory blind spots where financial authorities’ oversight is limited. For example, unlike Naver, Coupang’s post-payment service is not subject to the 300,000 KRW monthly limit set by financial authorities. A Financial Supervisory Service official stated, "We do not supervise general commercial credit." Although the services appear similar, unlike Naver and Toss, which act as intermediaries, Coupang’s post-payment involves Coupang directly purchasing products and selling them, meaning customers essentially extend ‘credit’ to Coupang. However, there are frequent cases of abuse such as ‘pay-kkang,’ where customers use Coupang’s post-payment function to proxy purchase items online and then resell them to others for cash. Some view that to escape deficits, Coupang might seek to generate profits by applying interest rates comparable to those of secondary financial institutions. Professor Wi Jeong-hyun of Chung-Ang University’s Business Administration Department said, "Since it is unlikely to operate a deficit business while in a large-scale deficit, finance is likely to become a profitable business."