[The Catfish Effect on KakaoBank]① Internet Banks Expand the 'Board'... KeBank and ToBank Grow Alongside

Record High Performance for 7 Consecutive Years Threatens Regional Banks' Results
Overwhelming Customer Base Driven by Platform Growth
Low Funding Costs and Accessibility, Differentiated Competitiveness

KakaoBank, which has been setting record-breaking performance for seven consecutive years, is solidifying its position as a momentum of innovation in the retail market dominated by major commercial banks. It attracts customers by offering low-interest loan services with differentiated accessibility and lower interest rates compared to commercial banks, as well as unique new products. At the same time, it is evaluated as playing the so-called ‘catfish’ role, boosting not only internet-only banks such as K Bank and Toss Bank but also the potential of existing financial institutions sensing a crisis.

According to the financial sector on the 8th, the three internet banks (KakaoBank, K Bank, Toss Bank) have seen their net profits explode compared to when each was launched. In particular, KakaoBank has earned the highest net profit. All three were in the red at the time of their launch. KakaoBank, launched in the third quarter of 2017, recorded a net loss of 66.8 billion KRW at that time. K Bank and Toss Bank (launched in the second quarter of 2017 and the fourth quarter of 2021, respectively) recorded losses of 40.5 billion KRW and 80.6 billion KRW, respectively.

However, in the third quarter of last year, KakaoBank posted a net profit of 279.3 billion KRW. This means it increased its profit by 346.1 billion KRW in six years. K Bank also earned a net profit of 38.2 billion KRW. Toss Bank is still in the red (29.9 billion KRW) but has reduced the deficit.

Not only profits but also operational scale have grown. KakaoBank’s total deposits increased from 3.3312 trillion KRW to 45.689 trillion KRW. Total loans also rose from 2.6595 trillion KRW to 37.0618 trillion KRW. During a similar period, K Bank’s total deposits increased from 6.043 trillion KRW to 17.2361 trillion KRW. Total loans increased from 600.3 billion KRW to 12.8083 trillion KRW. Toss Bank also saw increases in both total deposits (13.7907 trillion KRW → 22.6863 trillion KRW) and total loans (531.5 billion KRW → 11.1877 trillion KRW).

KakaoBank’s explosive performance is even eyeing the results of regional banks. Last year, it recorded an operating profit of 478.5 billion KRW and a net profit of 354.9 billion KRW. It has set record-high performance every year since its launch. In terms of net profit, it exceeds some of the five regional banks nationwide (Gyeongnam Bank 247.6 billion KRW, Gwangju Bank 240.7 billion KRW, Jeonbuk Bank 204.5 billion KRW). The difference with Busan Bank (379.1 billion KRW) and Daegu Bank (363.9 billion KRW) is only 24.2 billion KRW and 9 billion KRW, respectively.

The number of customers, which indicates the competitiveness of internet banks, is overwhelmingly led by KakaoBank. Last year, the number of customers using KakaoBank was 22.84 million. After its launch in July 2017, it secured 4.93 million customers by the end of the same year and surpassed 10 million customers by July 2019, two years later. K Bank exceeded 9.53 million customers as of the end of last year. Considering the launch year, Toss Bank’s growth is remarkable. Toss Bank reached 9 million customers in January this year. It attracted 3 million customers in just one year (6.07 million in the first quarter of last year). By age group, KakaoBank has the highest proportions in teenagers (8%) and those aged 50 and above (24%). Toss Bank and K Bank have 5% and 23%, and 2% and 21%, respectively. KakaoBank stated, “Thanks to the youth customer-exclusive service mini, expansion of the loan platform service, and the popularity of group accounts, the inflow of teenage and middle-aged and older customers over 40 has increased.”

KakaoBank’s ability to attract customers lies in offering competitively priced loan products and continuously launching new services. Internet banks have lower funding costs compared to commercial banks. In particular, KakaoBank’s low-cost deposits (with interest rates around 0.1% per annum) accounted for 55.3% in the fourth quarter of last year, about 17 percentage points higher than the banking sector average of 38.7%. When there are many deposits paying low interest to customers, the interest rate spread between deposits and loans widens, allowing the bank to earn more interest. The larger this proportion, the better the profitability, enabling the provision of loan services at lower interest rates.

This is why KakaoBank was able to offer low-interest products in the mortgage refinancing service launched last month. The ‘One Month Savings’ product also steadily attracts customers, surpassing 1 million subscribers in just 25 days, continuously introducing low-interest new products. Additionally, customers feel familiarity and satisfaction with ease of use through KakaoTalk, known as the ‘national messenger,’ and related characters.