Toss Bank questioned over profitable growth

Promotional image of Toss / Courtesy of Toss

By Anna J. Park

Will Toss Bank, the country's third internet-only bank, achieve a huge success just like its older competitors KakaoBank and K bank? While Toss Bank is widely anticipated to find its own niche market, including credit loans, some still raise concerns over its profitability.

Toss Bank is currently operating a pilot service for its own 160 staff members before the bank's official September launch. Company officials said the pilot program is aimed at checking the stability of banking services before their official release.

The internet-only bank's easy-access interface features are receiving some positive feedback. It also offers credit loan products with the lowest interest rates among major banks, reaching as low as 2.5 percent a year, with a maximum loan amount of 270 million won ($231,000).

Toss Bank logo

Some view that such low interest rates might give Toss Bank difficulty securing stable profits. The online bank will take longer to reach its break-even point in annual profits, they said. Given that there are already two other internet-only banks, it will be burdened by additional cost for promotional campaigns.

KakaoBank, even having a strong partnership with the country's largest mobile messenger service Kakao Talk, took two years to record its first annual net profit. It took four years for K bank to swing into the black, early this year.

The government's strengthened grip on banks' loan products will also make it harder for the bank to offer such low interest rates going forward.

Despite some doubt, however, in terms of attracting new customers, some analysts expect Toss Bank to garner around 3.5 million customers, as Toss Securities succeeded at securing that many customers in just half a year since opening earlier this year. Since Toss uses a single mobile application providing various functions of banking, brokerage and money transfer, the new bank is expected to meet the 3.5 million user mark within a short period of time.

Toss Bank also plans to differentiate itself by attracting 2 million foreign customers. Foreign residents here have to visit a local bank branch in person to start an account, but Toss Bank is expected to enable opening up of bank accounts with online-only procedures for the first time in the country. The bank is expected to use certificates of alien registration as a required ID verification document.