Kakao Talk, the most popular and widely used messenger app in South Korea just received clearance to have its own online-only banking service, which is expected to change the banking industry in this East Asian country.
Second company offering online-only bank
Kakao Talk’s entry into the digital banking service follows on the heels of K Bank, which is owned by Korea Telecom.
The two companies will grant their customers the privilege of using their smartphones to open accounts and do other banking service features, including loan applications. There will be no onsite bank branches for these two digital banks. Customers have the option to visit ATMs to withdraw cash.
Quick acceptance of Kakao Talk
K Bank was launched on April 3 this year and in the first two days, it has already received more than 60,000 sign-ups. It is backed by several well-known business groups, including Ant Financial which is owned by Alibaba, KT Corp, GS Retail, Hanwha Life Insurance and Woori Bank.
Kakao Bank might enjoy the same reception, considering that it claims to have a user base for its Kakao Talk messenger app of more than 42 million. Kakao Bank is also backed by several big companies, such as Tencent of China, owners of WeChat, Kakao Talk’s counterpart in their neighboring country. Kakao Bank is expected to launch in early May.
Local media reported that other companies behind Kakao Bank include eBay, National Bank and nine other shareholding companies. Its initial capitalization is reportedly worth US$250 million (300 billion won equivalent).
This early, it seems that these two digital banks will be fierce competitors. Kakao Talk has millions of users, and the response to K Bank was encouraging. South Korea’s population is 51.5 million and it is estimated that about 70.4% of the country’s population are smartphone users, so the market potential is huge.
K Bank is new to digital banking. Kakao Talk on the other hand already has experience in online financial services. It has Kakao Pay. The service allows users to link their debit or credit card to an account to enable them to transfer money or pay bills through Kakao Talk. Kakao Pay was launched in September 2014 and its Q3 2016 data showed that it has 13 million subscribers. During that same period, the system processed transactions worth $833.3 million (SKW 1 trillion equivalent).
Kakao Bank hopes to make use of data from their affiliate and sister companies, such as Kakao Taxi to check the credit scores of their expected users.
Kakao Bank’s headquarters will be at Pangyo, in the province of Gyeonggi. About 210 employees will be managing this digital banking venture of Kakao Talk.
Other parts of the world are coming up with digital banks, such as Ally (U.S.), Fidor (Germany), Atom (UK), Digibank in India (DBS-Singapore) and China’s WeBank by Tencent and MYBank by Alibaba.