Three-way rivalry heats up for internet-only bank leadership

Pictured is the headquarters of K bank in Seoul. The internet-only lender seeks a revival as BC Card is set to become a new major shareholder of the cash-strapped bank. Yonhap

By Lee Min-hyung

A three-way rivalry is heating up in the competition to become Korea's leading internet-only bank, with two emerging players ― K bank and Toss ― set to take on market leader Kakao Bank in the latter half of this year.

Kakao Bank has been dominating the internet-only bank market since its launch in 2017, increasing its user base to more than 12.54 million as of June this year. Another first-generation internet-only lender, K bank, which also started the same year, ended up trailing behind the Kakao subsidiary, suffering financial difficulties.

K bank started its business amid hopes the internet-only lender, along with Kakao Bank, could bring about a paradigm shift in the conventional banking industry. But the lender faced funding problems as the Fair Trade Commission prevented its parent company, KT, from providing capital to K bank because of the telecom firm's violation of the nation's Fair Trade Act.

But with BC Card, another KT subsidiary, becoming a new savior to the cash-strapped lender, expectations are K bank will be able to regain its momentum for business normalization possibly in the second half of 2020.

The card issuer will become a major shareholder of K bank once the former's suggested plan to acquire a 34 percent stake in K bank is approved by financial authorities on July 22.

For now, it appears it will be tough for the lender to rival others in the market as the number of K Bank users falls far short of that of Kakao Bank. As of the end of 2019, K bank has 1.2 million users.

But another powerful mobile money transfer platform, Toss, is coming to the forefront as a visible threat to Kakao Bank, as the number of Toss subscribers already surpassed that of the market leader. As of the end of May, Toss subscribers topped 17 million. The banking app has particularly drawn attention from young customers for its easy-to-use platform.

Viva Republica, a fintech startup operating Toss, plans to launch its internet-only bank, Toss Bank, sometime early next year after receiving a preliminary license to operate the nation's third internet-only bank in December 2019.

Continued additions in terms of users would be a huge plus for Toss. However, market analysts say it is too early for emerging players to win the competition against Kakao Bank in a short period of time due to the latter's business agility and current dominant status in the market.

Thoughts are that Kakao Bank is expected to become larger and more influential in the local banking industry after its planned initial public offering in the latter half of this year.

“An estimated market capitalization after the lender goes public will top 8.9 trillion won,” SK Securities analyst Koo Kyung-hoi said. Outlook for Kakao Bank's additional leap-forward remains promising as it's been increasing its spending in infrastructure and accelerating efforts to diversify business portfolios encompassing medium-rate loans to credit loans, according to the analyst.