Banking Convergence
With a growing number of global IT firms penetrating the banking industry, their differing goals are drawing a lot of attention.
IT giants like Facebook, Google, Amazon, and Alibaba, and Korea’s top messaging company Kakao are preparing to enter the banking industry or are already engaged . But each company has a different purpose. For example, they are aiming at expanding the purchase rate of their products, targeting the mobile ad market, strengthening their position in the market, or making full-scale expansion into the banking industry.
According to sources in the banking and IT industries on July 25, Facebook posted US$2.91 billion (2.9949 trillion won) in sales of mobile ads in the second quarter of this year, stronger than initially expected.
The Monthly Active Users (MAU) of Facebook amounted to 1.32 billion, and 1.07 billion people accessed the social networking platform via mobile devices. Thanks to this, the social media giant earned 62 percent of its advertising revenues from mobile ads.
To take advantage of the momentum, Facebook recently introduced a payment service aimed at strengthening the mobile ad business. The firm is testing a button that enables users to directly buy products on Facebook by clicking an ad, together with some US-based small and medium-sized enterprises. This method is being hailed as a win-win model by advertisers that can be profitable by lowering the rate of customer desertion.
Amazon also drew worldwide attention with its entry into the payment business last month. The world's largest e-commerce retailer launched a new payment service that results in online payments using credit card information stored on their Amazon account. Any member with an Amazon account can purchase goods on Amazon and its partner sites with the click of a “pay with Amazon” button.
Unlike Facebook or Amazon, Chinese IT firms such as Alibaba and Tencent are creating full-scale expansions into the banking industry by establishing banks and investing in financial instruments.
Foreign IT companies set up banks and introduce financial instruments to the market, but local firms find themselves in a disadvantageous situation. In particular, Kakao's Bank Wallet, which is scheduled to be showcased in September in partnership with 14 local banks, is expected to be involved only in a restricted banking business because of the local regulatory banking environment. The business model of KakaoTalk's mobile money transfer service reportedly allows users to send and withdraw money on the mobile messaging platform. People can charge up to 500,000 won (US$487.80) and transfer as much as 100,000 won (US$97.46) per day.
Kakao is a latecomer in entering the banking industry. The mobile messenger service provider has been making huge profits with its gaming platform, but it has been increasingly necessary for the firm to create a platform in a new area, due to intense competition between gaming platform providers. Kakao's latest move can be interpreted as its intention to dominate various types of businesses, going beyond just gaming, commerce, and music.
Many experts predict that it won't be easy for KakaoTalk's mobile money transfer system to exert huge leverage in the financial industry, owing to government regulations.