Tech titans clash over internet banks

Kakao launches mobile bank; KT’s K bank teams up with Naver

By Park Hyong-ki

In politics, Winston Churchill said, “There are no eternal friends or eternal enemies, only interests.”

This seems to be also clearly true in the tech world as the market here will once again see two former foes and friends ― KT and Kakao ― duke it out for dominance over mobile banking.

Kakao, which recently got itself listed on the KOSPI, will be launching its mobile Kakao Bank Thursday after seeking regulatory approval for more than a year.

Kakao Bank marks the second internet or mobile-only bank following KT’s K bank, which was launched in April.

Market observers are questioning whether Kakao Bank can steal K bank’s spotlight and become the true disruptive player because in the tech world, there is usually no prize for being second. Only the first that crosses the chasm with its unique positioning has historically been granted that title.

“Kakao may face an uphill battle to gain on the heels of other established players in mobile banking,” a tech industry source said.

Kakao’s key marketing strategy is providing the most convenient and fastest mobile banking within the palm of one’s hand.

It said it will only take seven minutes to open an account, which is less than half the time it takes to open one at a commercial bank or at K bank.

Besides Kakao’s fast account opening without the hassle of going through paperwork and personal authentication, it will offer ultra-cheap overseas transactions ― about one-tenth of the fee to wire money abroad via commercial banks.

For instance, if a customer wants to transfer $5,000 to her son’s account abroad for college tuition, the transaction fee would only cost 5,000 won via Kakao Bank, while it would cost about 55,000 won via a commercial bank.

Although Kakao Bank will only be able to offer limited transaction services compared to conventional banks, the mobile bank seeks to “shake and rattle” the money wire service. As a start, Kakao Bank can offer transactions to about 20 countries.

In other services such as deposits and loans, Kakao Bank offers low interest rates, which are not much different than those offered by K bank.

“The loan service is an area where Kakao Bank could see some momentum because there is still demand,” said a financial consultant in Seoul, noting K bank’s rapid increase in loans to salaried workers over the last three months.

K bank temporary halted its loan services to workers to cool down and manage risks. Since its inception, K bank’s customer deposits and loans amounted to 1.2 trillion won. It has over 400,000 subscribers.

To catch up and edge over K bank, Kakao Bank will maximize the network effect of Kakao Talk, which is used by almost all Koreans who have smartphones, or even the latest feature phones with 3G and LTE connections.

When Kakao Talk was introduced, KT and Kakao clashed, with the former criticizing the latter of being a “free rider” on the telecom giant’s capital-intensive wireless and landline infrastructure.

Kakao argued that KT was hindering innovation and undermining network neutrality.

As Kakao Talk became widespread, KT and Kakao partnered up, cross-promoting each other via apps such as Kakao Taxi.

Things have become different again for the two as Kakao advances into mobile banking.

As there is a saying ― the enemy of my enemy is my friend, KT’s K bank has teamed up with Naver, Korea’s biggest search portal and Daum’s rival. Kakao’s Daum is the second biggest search portal.

Although Naver’s Line messenger is offered here, it focuses on Asian markets outside Korea and China.

Line was first launched in Japan because Naver did not stand a chance against Kakao’s already dominant presence in Korea. This strategy has been highly effective.

Line is now one of three global messengers alongside Facebook’s WhatsApp and Tencent’s WeChat.

K bank and Naver said they will join forces to expand their mobile banking and payment services. K bank will use Naver’s Line characters to promote its service.

The two will also launch a Naver Pay check card compatible with each other’s mobile platforms soon.