Kakao Pay Securities targets younger investors

Kakao Pay CEO Kim Dae-hong gives a presentation to reporters at a hotel in Yeouido, western Seoul, on Wednesday. [Kakao Pay Securities]

Kakao Pay Securities, an online-only brokerage house that launched just four months ago in Korea, is hoping to wipe out the old notion that stock investment is complicated and should be done by experts.

The brokerage house is targeting younger investors and people with a lack of financial knowledge, neither of which have been major clients for existing firms.

“There are a lot of people in Korea who do not try investing in financial products because they find it hard and uninteresting,” said Kim Dae-hong, CEO of Kakao Pay Securities, at its first press conference held Wednesday at a hotel in Yeouido, western Seoul.

“Our goal is to commercialize financial investing and come up with products close to our everyday life. To achieve our goal, the products need to be accessible, fun and small-cap,”

Kakao Pay Securities is an online-only brokerage house and a subsidiary of Kakao Pay. It acquired Baro Investment & Securities, a wholesale-only brokerage house in September of 2018, and started business in February, after a year-long wait to receive approval from financial regulators.

To achieve its goal, the brokerage firm said it simplified processes. It let users invest with one account from Kakao Pay, instead of using a mobile trading system common in traditional brokerage firms.

The company said the number of securities accounts opened more than doubled from March to June, from 600,000 to 1.4 million.

Its micro-scale investments were particularly well received. For two of its investment products where users can put the leftover change from transactions on Kakao Pay to global equity funds, 320,000 people signed up in the past two months.

The company plans to continue adding small-scale investment options. It launched two new bond funds Wednesday, with the minimum investment set at the lowest 10,000 won ($8.30).

While account numbers are rapidly growing, users of the brokerage firm still heavily depend on a younger demographic, aged between 20 to 39. The company said 62.1 percent of users are in that age group. The second largest user group is those aged between 40 to 59, accounting for 33.4 percent.

It also plans to use big data acquired from parent companies Kakao and Kakao Pay as it develops new investment products. Its long term goal is to create an artificial intelligence-based asset management service.

Kakao Pay Securities isn't the only company looking to digitize. Traditional securities firms are trying to strengthen their online services and partnering with platform companies like Naver and Kakao to use their network and accessibility.

“Digitization is a global trend in the finance industry," said Kim Chang-kwean, an analyst from Mirae Asset Daewoo.

"We are seeing big brokerage firms partnering with platform companies, like Korea Investment & Securities with Kakao Bank. In a decade or so we may see online fintech companies completely absorbing financial institutions and transactions.”

While digitization has made financial investments more approachable than ever, it also increases risks for investors, a concern analysts say online securities firms like Kakao Pay Securities should address.

“Lots of products offered from brokerage firms are high-risk investments compared to savings accounts from banks. [On mobile platforms] there are people who are lured by the suggested return of the products, not even knowing what it is,” said Kim Min-ki, a researcher at the Korea Capital Market Institute.

“People need to be aware of the risks that exist in investments made available on mobile-only platforms. Securities companies should think of how they can communicate the details of products to investors.”

BY KANG JAE-EUN [kang.jaeeun@joongang.co.kr]