Announcement of Offline Terminal Business Strategy
at Q3 Earnings Conference Call
Appears to Target Competitors and VAN Patent Dispute
On November 4, Kakao Pay announced that it does not plan to actively enter the offline terminal business, considering the high risks involved. The company pointed out that its competitors are building competitive relationships with value-added network (VAN) and point-of-sale (POS) companies, rather than cooperating with them. This statement is interpreted as a reference to Toss, which has been sued by Korea Information & Communications, the country's largest credit card VAN company, for a preliminary injunction related to patent infringement.
Park Jungho, Head of Kakao Pay Services, addressed this during the third-quarter earnings conference call held that day. When asked about the strategic direction for the offline payment terminal business, he stated, "There are two risks involved."
Park explained, "The offline terminal expansion by competitors such as Toss and Naver Pay is a strategy that entails high capital expenditure (CAPEX) costs, and I see two issues with this approach."
He further noted, "First, offline terminals are spreading mainly among long-tail (niche market) stores, which makes it difficult to target large franchise chains. It is also challenging to generate revenue from transaction fees."
He added, "If we follow our competitors' strategy, there is a risk of establishing a competitive, rather than cooperative, relationship with VAN and POS companies. Kakao Pay will focus on digital channels without hardware (terminals) to create and accelerate differentiated user value."
He continued, "To increase both the number of users and the number of transactions, we will go beyond simply providing merchants with a payment method and launch marketing tools that actually help boost their sales."
Industry insiders interpreted Kakao Pay's remarks as being aimed at Toss.
An industry official stated, "Since Toss Place has experienced conflicts with VAN and POS companies while developing its terminal business, Kakao Pay's comments during the conference call should be seen as targeting Toss."
Korea Information & Communications announced that it plans to take legal action against Viva Republica's subsidiary Toss Place and iShopCare, among others, for infringing on the company's payment infrastructure-related patents. The company filed for a preliminary injunction to prohibit patent infringement at the Seoul Central District Court on October 14.
A representative from Korea Information & Communications claimed, "Toss Place infringed on patents related to anti-static technology and card information encryption technology in the process of distributing IC terminals." In response, a Toss representative said, "We have not yet received the complaint, so nothing has been confirmed."
Meanwhile, on the same day, Kakao Pay announced that it recorded a consolidated operating profit of 15.8 billion won in the third quarter, surpassing 10 billion won in quarterly operating profit for the first time. This marks a turnaround from a loss in the same period last year and a 69.4% increase compared to the previous quarter. The operating margin was 6.6%.
Consolidated revenue for the third quarter also rose to 238.4 billion won, up 28% year-on-year. Financial and platform services drove this revenue growth.
Shin Wonkeun, CEO of Kakao Pay, stated, "The expansion of our data-driven and platform businesses, which are our core strategies for this year, has led to tangible results, and we believe this will serve as a foundation for planning our direction for next year."
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