By Nam Hyun-woo
The Financial Services Commission (FSC) granted a banking license to Kakao Bank, Wednesday, allowing it to become Korea's second online-only bank.
The move is expected to trigger fierce competition with rival K bank and existing conventional banks.
Kakao Bank is led by Kakao, the provider of the country's dominant instant messaging service Kakao Talk. It was designated as one of two internet-only banks in November 2015 along with K bank, which started operations this week.
"With the launch of Kakao Bank, stiff competition is expected between internet-only and existing banks in the second half of the year," FSC Chairman Yim Jong-yong said. "The government will also continue to revise relevant laws so that info-tech companies can take a leading role in operating internet-only banks."
Yun Ho-young, the bank's co-head, said one of Kakao Bank's distinctive offerings was overseas remittance. K bank is currently unable to send money to overseas accounts. Yun said the bank will provide an overseas remittance service for a fee which is 10 percent that of existing banks.
Another strength Yun stressed is the bank's link with Kakao Talk, which has about 40 million users. He said Kakao Bank's quick remittance service will be run based on Kakao Talk's friend list, so clients can transact by selecting which Kakao Talk friend they want to send money to, without typing in lengthy and complex account numbers. But he said the bank will not place Kakao Bank features into Kakao Talk because it could annoy users.
Yun said the bank's loans will be based on medium level interest rates through an analysis of loan seekers' credit score with big data held by its shareholders.
Kakao Bank has garnered 300 billion won in capital and its shareholders include Korea Investment Holdings with 58 percent, KB Kookmin Bank with 10 percent and other firms including Netmarble, Seoul Guarantee Insurance Corp., Tencent and eBay with 4 percent each. Kakao holds a 10 percent stake in the bank, but its voting rights remains at 4 percent due to regulations.
Lee Yong-woo, the other co-head, said the bank seeks to have 500 billion won ($444.3 million) in assets within this year. "We expect that the bank will surpass the break-even point in three years, and its assets will likely reach 20 trillion won within a decade."
The hitch is that Kakao is not allowed to inject additional capital into the bank and being the largest stakeholder of it due to the country's Banking Act, which stipulates a strict 4 percent cap on industrial capital's stake in a bank.
"Given the expected growth in our loan business, the company anticipates that a capital injection of 400 billion won will be required at the end of next year," Lee said. "We are looking for ways for this within the boundary of the current law, but it will be important that the law is revised so that we will be able to more freely engage in business."
"Info-tech companies are good at reflecting customer demand in their products promptly," Yun said. "Under our goal of being radically different from conventional finance, we will focus on delivering the value of simplicity, ease and promptness."
The Financial Services Commission (FSC) granted a banking license to Kakao Bank, Wednesday, allowing it to become Korea's second online-only bank.
The move is expected to trigger fierce competition with rival K bank and existing conventional banks.
Kakao Bank is led by Kakao, the provider of the country's dominant instant messaging service Kakao Talk. It was designated as one of two internet-only banks in November 2015 along with K bank, which started operations this week.
"With the launch of Kakao Bank, stiff competition is expected between internet-only and existing banks in the second half of the year," FSC Chairman Yim Jong-yong said. "The government will also continue to revise relevant laws so that info-tech companies can take a leading role in operating internet-only banks."
Yun Ho-young, the bank's co-head, said one of Kakao Bank's distinctive offerings was overseas remittance. K bank is currently unable to send money to overseas accounts. Yun said the bank will provide an overseas remittance service for a fee which is 10 percent that of existing banks.
Another strength Yun stressed is the bank's link with Kakao Talk, which has about 40 million users. He said Kakao Bank's quick remittance service will be run based on Kakao Talk's friend list, so clients can transact by selecting which Kakao Talk friend they want to send money to, without typing in lengthy and complex account numbers. But he said the bank will not place Kakao Bank features into Kakao Talk because it could annoy users.
Yun said the bank's loans will be based on medium level interest rates through an analysis of loan seekers' credit score with big data held by its shareholders.
Kakao Bank has garnered 300 billion won in capital and its shareholders include Korea Investment Holdings with 58 percent, KB Kookmin Bank with 10 percent and other firms including Netmarble, Seoul Guarantee Insurance Corp., Tencent and eBay with 4 percent each. Kakao holds a 10 percent stake in the bank, but its voting rights remains at 4 percent due to regulations.
Lee Yong-woo, the other co-head, said the bank seeks to have 500 billion won ($444.3 million) in assets within this year. "We expect that the bank will surpass the break-even point in three years, and its assets will likely reach 20 trillion won within a decade."
The hitch is that Kakao is not allowed to inject additional capital into the bank and being the largest stakeholder of it due to the country's Banking Act, which stipulates a strict 4 percent cap on industrial capital's stake in a bank.
"Given the expected growth in our loan business, the company anticipates that a capital injection of 400 billion won will be required at the end of next year," Lee said. "We are looking for ways for this within the boundary of the current law, but it will be important that the law is revised so that we will be able to more freely engage in business."
"Info-tech companies are good at reflecting customer demand in their products promptly," Yun said. "Under our goal of being radically different from conventional finance, we will focus on delivering the value of simplicity, ease and promptness."
