Toss gets 3rd internet bank license

Korea’s third internet-only bank, the first in two years, will be opening in July 2021.

The Financial Services Commission (FSC) on Monday said it has approved the application of Viva Republica, which operates the Toss payment app, to open Toss Bank.

Viva Republica proved its innovative capacity, demonstrated its willingness to contribute to innovation in the Korean financial industry and would support inclusiveness and stability, the FSC said.

While the previous approvals were granted to major IT companies - KT, Korea’s second-largest telecommunications company, and Kakao - Viva Republica is the first fintech start-up to open its own internet-only bank.

Toss Bank’s capital is set at 250 billion won ($213 million). It will have 11 shareholders, including KEB Hana Bank, Standard Chartered Bank Korea, Hanwha Investment and Securities and Altos Ventures, a venture capital company that has invested in leading Korean start-ups, including Baedal Minjok, which was recently acquired by Germany’s Delivery Hero for $4 billion.

Viva Republica will be the largest shareholder in the internet bank, with a 34 percent stake, while KEB Hana Bank and Hanwha will each own 10 percent.

The FSC said it did not approve the application of Soso Smart Bank, which is led by the Seoul Small Business Association and the Korea Fashion Industry Association, which proposed the creation an internet bank customized for small businesses. The shareholders of the bank were to be small businesses across the country.

The FSC said the Soso Smart Bank was unprepared to manage a bank.

This was the second attempt by Viva Republica, as it was turned down on its first try in May. The mobile payment service company again submitted its application in October.

Other than Soso Smart Bank, Familia Smart Bank also lodged an application. It withdrew its application Dec. 11, as it failed to prepare documentation needed for approval by the financial authority.

“In May, the evaluating committee pointed out two reasons for not approving Toss Bank - the inadequacy of the governing structure and the lack of stability in attracting investment,” said Yoon Chang-ho, FSC’s director-general for financial industry. “However, it received high points on innovation.”

Yoon added that in the previous application, Toss had too high a stake in the internet bank, and the stakes held by other venture capitalists, including Altos Ventures and Goodwater Capital, were too high.

“But in the new application, it moved to more stable institutional investors, including KEB Hana Bank, Standard Chartered Bank Korea and the Korea Federation of SMEs,” Yoon said.

If successfully established, Toss Bank will be the country’s third interest bank since K bank and Kakao Bank were opened in 2017.

Viva Republica on Monday said, as a challenger to the existing two internet banks and as an underdog, it will “build a friction-less and fair way to manage money, fulfilling the needs of individuals and small business customers, including those with thin files and mid-range credit scores.”

The fintech company said it processes $48 billion of transactions per year and has more than 16 million registered users.

“Toss has become the leading financial super app in Korea. With a digital bank license, we will be able to broaden our product offering so that we can accelerate our mission to innovate finance.” said Lee Seung-gun, CEO of Viva Republica.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]