Payments Industry Event Last Week—Kakao Pay, a South Korean payment platform, has gone public in South Korea

Shares in Kakao Pay, South Korea’s leading mobile payment App, more than doubled on their first day of trading, Bloomberg reported. Kakao Pay’s launch has been delayed several times in the past due to regulatory scrutiny.

Kakao Pay, South Korea’s largest e-wallet, was issued at 90,000 won ($76.97) per share, doubled to more than 180,000 won per share at opening, and received a market cap of more than 24 trillion won ($20.3 billion).

Despite regulatory uncertainties, the South Korean payment giant Kakao Pay has managed to go public.

The Kakao Pay IPO is also important for South Korea’s digital payments industry after the government stepped up regulation of payment platforms, undermining the confidence of some investors. Kakao Pay had to delay its IPO for more than two months after lowering its initial target size in August. That was because the Government ordered it to revise its prospectus, and again a little more than a month later to amend its filing to comply with the new rules.

IPO volumes in South Korea have hit a record high this year, according to data. But enthusiasm for investment in the South Korean market has now cooled after authorities stepped up scrutiny.

Copying the Alipay model completely leads the daily digital life of Koreans

Kakao Pay is the mobile payment and digital wallet service launched by Kakao Group, a typical South Korean internet giant. In addition to financial payments, the group’s business includes instant messaging, games, cultural content, mobile travel, and many other areas.

Kakao Group officially launched Kakao Pay in 2014 and built it into Kakao Talk, an instant messaging service that has more than 50 million users and is one of the most popular social apps in South Korea.

South Korea is as receptive to mobile payments as China and India, although in absolute terms it is hard to compare with the two most populous countries.

Although 98% of the population has access to traditional banking services in South Korea, Asia’s fourth-largest economy, fintech has also shown high user adoption thanks to 97% Internet penetration.

By the third quarter of 2021, South Korean users were spending five hours a day on their phones, just behind Indians and Brazilians, according to mobile data analytics firm App Annie.

As of the end of July, the total population of South Korea was 51.67 million, and the economically active population (generally including the employed and unemployed, the population aged 15 and over with the ability to work and the intention to work) was 28.56 million. Kakao Pay already covers most of South Korea’s population, with six users for every 10 Koreans.

Unlike emerging markets, Japan and South Korea have long formed a social payment system based on cash and credit cards, and acceptance of new payment methods is generally low. Now it seems to be accelerating in mobile payments and digital finance.

In February 2017, Ant Group, an affiliate of China’s Alibaba, announced a strategic partnership with South Korea’s Kakao Group to invest in Kakao Pay, a mobile finance subsidiary of Kakao, in which Ant holds a 45% stake. Kakao Pay was spun off from Kakao Group.

With the help of Alipay technology, Kakao Pay has rapidly introduced QR code payments in South Korea through Kakao Talk, the country’s largest chat app.

As of August 2018, businesses in South Korea that can scan Kakao Pay offline by opening Kakao Talk have rapidly expanded, with more than 80,000 applications for QR code kits for small business owners alone, which translates to more than 80,000 retail stores in the country eager to access Kakao Pay’s QR code payment system.

The reason for this increase is that Kakao Pay does not charge fees from affiliate merchants and because Kakao Pay local youth are interested in paying in large quantities with QR codes.

Unlike cash-loving Japan, South Korea is a credit-card powerhouse.

In 2013, the Bank of Korea released statistics showing that the country has the highest number of credit cards per capita in the world, five times as many as the population. Even before the outbreak, cash was no longer endemic in South Korea. In South Korea, more than half of 1,600 bank branches no longer accept cash deposits or withdrawals. South Korea has also passed the world’s first comprehensive cryptocurrency law.

As Asia’s fourth largest economy, South Korea has a mature financial industry, with 98 percent of the population having access to banking services. The developed credit card market, with close to 100% coverage of traditional finance, makes it difficult for mobile payment entrepreneurs in South Korea to get the same market opportunities as in mainland China.

However, the COVID-19 pandemic has accelerated the transition from offline to online, and the Korean people’s reliance on digital financial services has significantly increased.

According to Anvie, a global mobile APP analytics firm, South Koreans use the country’s top five fintech apps, such as Kakao Pay and Kakao Bank, 225 times a month, or an average of seven times a day. In contrast, South Korea’s use of apps from the country’s major traditional banking institutions, such as Woori Bank and Hana Bank, is only one-ninth of that figure, a gap rarely seen in global markets.

In contrast, offline duty-free shops in South Korea were hit hard by the epidemic. In 2020, the total amount of credit card swiped in duty-free shops nationwide reached 555.4 billion won, a record drop of 74.7% year-on-year.

The already well-established Internet infrastructure is the cornerstone of South Korea’s rapid offline transformation.

As mentioned above, From 2017 to 2019, Kakao Pay has been integrated into the daily digital life of South Koreans with the help of Alipay, laying a solid foundation for the Korean version of Alipay before the COVID-19 crisis.

Similarly, Ant is the largest shareholder of The Indian version of Alipay Paytm, which will be listed in India on Nov 18, 2021, with a stake of nearly 30%.

In 2021, Kakao Pay founder Kim Beom-soo became South Korea’s richest man, surpassing Samsung Heir Lee Jae-yong, the country’s most powerful family, with a net worth of $13.5 billion.

As Kakao Group companies go public, a battle for wealth between the new aristocracy and the old family is about to begin.