Kakao Pay Finding a Way "Achieving 10 Billion Annual Transactions with AI and Data"

AI·Data-Driven 'Financial Secretary in Your Hand' Platformization
Hesitant Profit Turnaround... Subsidiary Underperformance
Differentiation Amid Intense Pay Competition

Shin Won-geun, CEO of Kakao Pay, is holding a press conference on the 15th in Yeouido, Yeongdeungpo-gu, Seoul, explaining the business direction for this year. (Photo by Kakao Pay)

Kakao Pay has decided to increase its annual transaction volume to 10 billion transactions, three times last year's level. The strategy is to clearly identify individual financial needs through artificial intelligence (AI) technology and data, and provide customized services to create a 'life-close financial ecosystem.' This move is interpreted as an effort to resolve the difficulty of achieving stable profitability amid sluggish performance of subsidiaries such as securities and digital non-life insurance.

Financial Assistant in Your Hand with AI and Data

On the morning of the 15th, Kakao Pay held a press conference in Yeouido, Yeongdeungpo-gu, Seoul, to announce its business direction for this year. Shin Won-geun, CEO of Kakao Pay, said, "Last year, the annual number of users reached 30 million, the annual transaction amount was 118 trillion won, and the annual number of transactions approached 3.2 billion." He emphasized, "Within three years, Kakao Pay aims to achieve 10 billion annual transactions and become a platform where every citizen aged 15 and older resolves their financial needs on Kakao Pay at least once a day." The strategy is to accurately analyze the financial needs of individual users based on the ecosystem built so far and provide tailored solutions.

First, Kakao Pay will strengthen 'customized benefits' that allow users to receive the most needed benefits at frequently used locations by analyzing users' locations and consumption tendencies. For example, after paying at a restaurant, the 'Nearby' service provides coupons for nearby cafes, or after paying for public transportation, it offers smart mobility transfer discounts.

They also plan to focus on overseas expansion. In addition to Japan, China, Macau, Singapore, and France where they have already entered, they are conducting integration and demonstration work for payment technology without currency exchange in Italy, Germany, the UK, Australia, Malaysia, and the Philippines. They are working on linking with major Asian simple payment providers such as China's Alipay and Vietnam's ZaloPay so that foreign tourists can use their home country's simple payment methods at Kakao Pay merchants.

In the areas of loans, investment (securities), and insurance, Kakao Pay announced plans to secure platform competitiveness by maximizing the use of proprietary data and MyData (personal credit information management) financial information. They will introduce data-based personalized stock recommendations, link payment data with investment products, and actively expand loan and insurance comparison recommendation services. Ultimately, they aspire to become a 'financial assistant in your hand' using AI. For example, when asking the financial assistant AI whether insurance coverage applies in case of an accident, it will identify insurances that cover the incident and the expected insurance payout, explaining it in everyday language.

CEO Shin said, "The essence of Kakao Pay's business is to coexist with partners such as merchants centered on users and connect finance through differentiated technology and services." He added, "Based on overwhelming data and advanced AI technology, we will evolve to solve all financial needs in daily life."

Difficulty Turning Profitable... Seeking a Way Out

The background for Kakao Pay's grand business plan is interpreted as the difficulty in turning profitable. Although it returned to an annual net profit of 27.5 billion won on a consolidated basis last year, this was influenced by financial income from operating reserved cash. The annual operating loss increased by 67.3% year-on-year to 45.5 billion won.

The first quarter results this year also faltered. On a consolidated basis, it recorded an operating loss of 13 billion won in Q1. The deficit widened more than tenfold from 1.1 billion won in the same period last year. This is far below the securities market consensus forecast of an operating loss of 2.8 billion won. Sales increased by 14.7% year-on-year to 141.5 billion won, but net income turned from a 3.8 billion won profit in Q1 last year to a 2.4 billion won loss this year.

On a separate basis, operating profit was 8.4 billion won, which is a 41.1% decrease compared to the same period last year. The poor performance of subsidiaries is even more painful. Considering the consolidated operating loss of 13 billion won, subsidiaries such as Kakao Pay Securities and Kakao Pay Non-life Insurance incurred operating losses of about 21.4 billion won.

Although the sales and transaction volume of the core business, simple payments, are on the rise, this cannot be taken for granted. With the arrival of Apple Pay, contactless near-field communication (NFC)-based payments along with Samsung Pay are becoming mainstream, which could affect the growth of Kakao Pay's simple payment service. There is a possibility that users may perceive Kakao Pay's offline payment method, which is expanding through QR code payments, as inconvenient.