Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Toss lags behind Kakao in securities business
KakaoPay CEO Ryu Yong-joon, top left, and Viva Republica CEO Lee Seung-gun / Courtesy of each company
By Park Jae-hyuk
Stock trading to be available on KakaoTalk
By Park Jae-hyuk
Viva Republica, the operator of the Toss mobile money transfer app, has fallen behind Kakao in the race to start a securities business as KakaoPay is about to get approval from the financial regulator for its takeover of Baro Investment & Securities, according to analysts, Tuesday.
The Securities and Futures Commission (SFC) under the Financial Services Commission (FSC) concluded in its meeting Wednesday that Kakao's mobile payment unit is eligible to acquire the medium-sized brokerage house.
The FSC is highly likely to give KakaoPay the green light in a forthcoming meeting, Feb. 5.
KakaoPay signed an agreement with Baro in October 2018 to acquire a 60 percent stake in the brokerage firm for 40 billion won ($33 million).
At the time, the mobile payment firm said it will allow its users to trade and invest in stocks, funds and real estate using the KakaoTalk mobile messenger app.
It submitted its application to the FSC for approval of the acquisition in April 2019.
The court hearing on Kakao Chairman Kim Beom-su's alleged violation of the antitrust law, however, suspended the SFC's screening over KakaoPay's acquisition of Baro.
The SFC resumed the screening as Kim was acquitted of the charges in his appellate trial in November.
KakaoPay said it is waiting for the FSC's final decision next month.
Analysts expect KakaoPay will take advantage of the large number of KakaoTalk users in moving to compete with the mobile trading systems (MTS) of conventional securities firms.
“KakaoPay has already been prepared to launch its trading system connected with Baro's cash management accounts,” eBest Investment & Securities analyst Sung Jong-hwa said. “It can immediately launch the system, if it gets a brokerage license through the acquisition of Baro.”
Eugene Investment & Securities analyst Joo Young-hoon said financial services based on big data analysis will be Kakao's new income source as the company is set to become the nation's first IT firm providing the four major financial services ― banking, payment, insurance and brokerage.
In contrast, Viva has been suffering due to delayed approval from the financial authorities for its securities business.
The fintech firm applied for a brokerage license in May 2019.
In September that year, its CEO Lee Seung-gun complained about the financial authorities, saying his company might give up on the license due to excessive regulations.
As his remarks drew public attention, Viva immediately issued a press release saying it would try its best to satisfy the requirements for getting the license.
In response to the SFC's recent decision on KakaoPay, Viva reiterated its previous stance.
The Toss app operator is also struggling with Kakao's first-mover advantage in the banking business.
When the FSC gave a preliminary approval to the Toss Bank consortium for the third internet-only bank, analysts said Toss Bank will find it difficult to outperform KakaoBank.
“Kakao has 1.8 trillion won ($1.5 billion) in capital, far surpassing Toss Bank's 250 billion won, so a capital increase is a prerequisite for Toss Bank to run its business smoothly,” KB Securities analyst Lee Dong-ryun said.
“Based on its popularity in Korea, Kakao has rapidly increased its market share. It is probable it will maintain a competitive edge as its messenger, payment and remittance services can create a synergy effect.”