Toss, Kakao Pay expand their horizons

With a firm user base in mobile payment services, the country’s leading fintech companies Toss and Kakao Pay are now looking to move beyond their core business into selling financial products, including investment and insurance.

The approach is not unique to the Korean players as global peers such as Ali Pay and Pay Pal have also reoriented their strategic focus since payment and money transfer services offered for free or low prices typically generate losses rather than boost revenues.

To carve out their own niches from established financial institutions, Toss and Kakao Pay are focusing on investment and insurance policies that could start with a relatively small amount of money or a monthly payment.

The shift became more pronounced when, Kakao Pay, an affiliate of internet company Kakao, acquired insurance platform start-up Inbyu earlier this month.

The unit said that the start-up will help it sell different types of insurance products from major insurers.

“Inbyu will act as a general agency for Kakao Pay and play a critical role in running our insurance services,” said a spokesperson at Kakao Pay.

The so-called general agencies refer to independent agents that sell products from several different local insurers.

Founded in 2017, Inbyu operates a platform that lists small-sized damage insurance products.

The company also started a new venture into investment with the acquisition of Baro Investment & Securities, a local brokerage last year.

The payment service provider with 28 million users started offering peer to peer (P2P) investment products on its platform after purchasing it from Shinan, a local real estate developer.

But once the financial authorities fully approve the acquisition, its offering will be widened to funds and equity investment.

“On top of the P2P products that come with mid-risk and mid-return, we will diversify our investment products into funds, securities and bonds [through the acquisition],” the spokesperson said.

Since the launch of investment services in November, Kakao Pay has attracted 40 billion won ($34 million) as of April. Young people in their 20s and 30s accounted for 76 percent of the entire investors.

The large proportion of young customers may be because 59 percent of investment sold could start with less than 100,000 won.

The result is in line with Kakao Pay CEO’s strategy.

“We mainly list investments that require relatively small amounts of money,” said Kakao Pay CEO Ryu Young-joon in an April press briefing. “For younger people, investments could come off as expensive and reserved for people with high net wealth, but our offerings will help them feel more comfortable [with investing].”

The new services will also allow users to register their credit cards on Kakao Pay to process transactions, much like Samsung Pay or Apple Pay. So far, users could only link debit cards or bank accounts to the service.

In a similar move, Toss, the popular financial app run by Viva Republica, filed an application with the Financial Services Commission to directly run its own securities business in May rather than bring in other companies’ P2P products and funds.

Toss saw its users surpass the 13 million mark last week and now boasts an accumulated 700 billion won in investments.

Entering this year, the financial app also jumped into insurance by partnering with major insurers like Samsung Fire & Marine Insurance and Hanwha Life Insurance.

Within six months of launching its insurance service, a total of 45,000 insurance policies were sold, according to Toss.

“We are focused on displaying products that can cover damages in daily life and require smaller monthly contributions,” said a spokesperson at Toss. “Users can browse a list of insurance products and register on the app.”

Presently, 10 insurance products exist on the platform.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]