Despite Persistent Losses After Listing... Trading Volume Steadily Increasing
Profitability Up This Year Through Advertising and New Businesses
[Asia Economy Reporter Minwoo Lee] Since its listing in the fourth quarter of 2021, Kakao Pay has been unable to avoid losses, but this year it plans to make a full-scale performance improvement. While actively promoting the fact that payments are possible at all merchants in mainland China, it also plans to enhance its advertising business model to increase profitability.
Shin Won-geun, CEO of Kakao Pay, stated during the earnings conference call on the 7th that they expect to see tangible results in the overseas payment sector this year. He said, "Beyond Japan and Southeast Asian countries, where other competitors have been focusing, we will likely become the only platform capable of processing payments at all merchants in mainland China starting next month," adding, "We believe this will enable differentiation."
Additionally, Kakao Pay plans to actively explore new areas such as auto financing. Baek Seung-jun, Kakao Pay Business General Manager, said during the conference call, "In addition to our existing core credit loans, we will diversify our product portfolio to include auto-secured loans, asset loans, financial products for low-income groups, and personal rehabilitation loans," and added, "We plan to actively introduce new electronic document technologies to improve customer experience and increase loan execution rates."
Just as KakaoTalk significantly improved its profitability, Kakao Pay also aims to enhance its performance by focusing on the advertising business. The plan will be pursued in four main directions: ▲ Bizboard Display (DA) advertising ▲ Kakao Pay’s own DA advertising ▲ native advertising ▲ direct advertising for financial products.
Regarding Bizboard DA advertising, which began pilot operations in September last year, the company plans to increase advertisers and generate results this year. Kakao Pay will also strengthen its own DA advertising. CEO Shin explained, "Our strategy is to commercialize DA products by linking banners such as remittance completion banners or other areas closely related to Kakao Pay services with data assets," adding, "The pilot operation results in December last year were positive, and it has already surpassed Kakao Bizboard sales."
He was somewhat reserved about the third strategy, native advertising. Shin said, "It is still difficult to disclose specifics, but it is a model that utilizes Kakao Pay’s unique specialized traffic-building services as advertising products," and added, "We expect it to become a high value-added advertising business, with sales likely to start in earnest from the second quarter."
Direct advertising products for various financial products are also planned. This method assigns advertising areas for each financial service and commercializes them. Although some are currently in use, the company plans to systematize this further and turn it into a revenue business. In addition, mergers and acquisitions (M&A) will also be actively pursued.
Meanwhile, Kakao Pay announced that its preliminary consolidated results for the fourth quarter of last year showed sales of 122.9 billion KRW and an operating loss of 22.3 billion KRW. Sales decreased by 3.6% compared to the same period last year, and the operating loss shrank by 22.8%. Since its listing in November 2021, it has recorded losses for five consecutive quarters. However, financial income from the management of reserved cash increased, turning the net loss from the same period last year into a net profit of 34.1 billion KRW. As a result, the consolidated results for last year were sales of 521.7 billion KRW and an operating loss of 45.5 billion KRW. Sales increased by 13.7% year-on-year, but the deficit widened by 67.2%. Last year’s net profit was estimated at 27.5 billion KRW.
However, on a separate basis, the company recorded an operating profit of 23 million KRW in the fourth quarter of last year, turning profitable compared to the same period last year. With continuous quarterly profits on a separate basis, last year’s operating profit reached 33.2 billion KRW, achieving the first annual profit.
Key indicators such as transaction volume steadily increased. Last year’s annual transaction volume was 118 trillion KRW, up 19% from the previous year. The sales-contributing transaction volume was 34 trillion KRW, accounting for 29% of the total transaction volume, a 26% increase year-on-year. The fourth quarter transaction volume was 30.9 trillion KRW. Despite the fire at the Pangyo data center in October and November last year, it increased by 17% compared to the same period last year. Specifically, payments and finance each grew by 18%, and other services such as remittances grew by 17%.
Registered users and monthly active users (MAU) also showed an upward trend. As of the end of last year, registered users numbered 39.44 million, a 5% increase from the previous year. MAU increased by 7% during the same period to 23.02 million. The number of transactions per user rose by 7% year-on-year to 101 transactions. Monthly transaction volume per user was 447,000 KRW, growing 9.5% from the previous year. The proportion of users utilizing three or more services on Kakao Pay reached 77%.
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