Transforming into General Financial Service Platform
Kakao Pay Corp., a mobile finance unit of South Korean mobile messaging giant Kakao Corp., is expanding its business from simple payment and remittance services to investment services. The company will also expand its offline “QR code” simple payment service to Japan and China. This is part of its strategy to establish a platform that allows users of its messenger service Kakao Talk to use all financial services.
Kakao Pay CEO Ryu Young-joon announced the company’s business plans for the future during a press conference held at the Plaza Hotel in Jung-gu, Seoul, on Nov. 19.
Kakao Pay will first launch a new “Kakao Investment” service by opening a separate option menu on the Kakao Pay service in Kakao Talk. The service will become available from Nov. 20. Users do not have to install a new app or open up a new bank account. They simply can use their Kakao Pay accounts. A minimum amount of investment money is 10,000 won (US$8.87) and a target rate of return is around 10 percent. The initial financial products on Kakao Pay include bonds secured on real estate or corporate sales and crowdfunding and will be expanded to general bonds, stocks and funds.
To be sure, Kakao Pay creates profits by charging broker’s fees to investors. Oh Yong-taek, senior manager of investment management at Kakao Pay, said, “Unlike existing investment products, we internally set a new standard to prevent risks as much as possible. So, investors will be able to protect their principal and interest as much as possible.” After the acquisition of local midsized brokerage firm Baro Investment & Securities Co. last month, Kakao Pay has been preparing to release financial investment product brokerage services.
In addition, Kakao Pay is also planning to launch a global cross border mobile payment service for overseas payment that enable users to pay money without cash or credit cards by scanning a QR code via their smartphones soon. The new service will begin in Japan in the first quarter of next year, aiming for the 2020 Tokyo Olympics, and extend to China and elsewhere. Kakao Pay has already secured a considerable amount of affiliated stores in Japan and China through the partnership with Alipay, the largest fintech operator in the world. Ant Financial Services Group, formerly known as Alipay, is currently Kakao Pay’s major shareholder after investing US$200 million (230 billion won) in the Kakao subsidiary in February last year.
With the investment by Ant Financial, Kakao Pay was spun off from Kakao Corp. into a separate entity in April last year. The company secured 25 million members as of the end of October this year and posted 2.3 trillion won (US$2.04 billion) in monthly transactions. Ryu said, “We are aiming to become a mobile financial platform that practically leads the national economy by making transactions of 100 trillion won (US$88.69 billion) a year via Kakao Pay within the next five years.”