Coupang enters finance, where Naver is already active
Coupang and Naver, the two largest e-commerce marketplaces in Korea by sales, are now competing in loan services.
CFC Preparatory Corporation, a wholly owned subsidiary of Coupang Pay, was established in January. The company recently changed its name to Coupang Financial, and is getting ready to offer loan services. Coupang Pay is wholly owned by Delaware-incorporated Coupang.
Coupang registered with the Financial Supervisory Service (FSS) for a license to offer loans and financing services, according to local media reports earlier in the month.
It is expected that Coupang Financial will soon finalize registering as an installment loan business and to start offering loans to small merchants and businesses. Facility rental, installment loan and new technology businesses will all be registered after a month at the earliest if there are no issues during the process.
This is the first time that an e-commerce marketplace is directly offering loans. Loan services for small businesses and online shopping places were mostly from traditional financial companies, including banks and capital companies.
Coupang has been expanding its business portfolio by making direct investments. The company is leading the faster next-day delivery market, offered as Rocket Delivery on Coupang, by directly hiring riders instead of subcontracting them. Its Coupang Eats food delivery business and Coupang Play video streaming services have also been successful.
Coupang is expected to start its loan services by offering different loan products. It is expected to offer loans to its sellers and will be able to impose different loan limits and interest rates depending on the business. Risks related to the business include lenders not capable of paying the debt and sudden changes to loan regulations by financial authorities.
Naver Financial is another e-commerce company that has started providing loan services. The company started its financing service in 2020.
Unlike Coupang, the company works with associated finance companies to offer loan services.
Naver Financial worked with traditional finance companies, such as Mirae Asset Capital and Woori Bank, to offer a loan product for business owners at Naver’s smart store in 2020.
The eligibility of the borrower will be evaluated by Naver’s Alternative Credit Scoring System (ACSS) or by financial companies based on information provided by the smart stores. The actual loan will be provided by the associated financial company.
Naver was expected to go into loans since 2019, when the four Mirae Asset companies invested 800 billion won ($609 million) in Naver Financial for a 30 percent stake.
Naver, which has grown through its portal service and search engines, has expanded its business portfolio by partnering with other companies but did not directly jump into individual markets.
It worked with CJ Logistics for logistics and E-Mart for fresh food distribution. The company worked with Carrot Insurance for an insurance program that covers delivery costs when consumers return their purchases.
Naver Financial uses the sales information of merchants in smart stores to evaluate their credit scores, but it is the associated companies that actually manage everything else, including the risk of loan delinquency.
Naver Financial CEO Park Sang-jin also emphasized that "taking on the role of a financial platform, which listens to the needs of financial consumers and improves inconveniences, is more important than acquiring a financial license," at a press conference held last month.
In the long term, the competition between Coupang Financial and Naver Financial is expected to intensify in the loan market targeting small businesses. Competition with existing secondary financial institutions will occur as well.
Naver Financial started offering a Smart Place Business Loan product aimed at offline small business owners on June 28. Sellers registered on Naver’s Smart Store won’t be the only ones eligible for the loan. Those using Naver’s Smart Place — registering business information, such as operating hours and location information to show up on Naver’s map service — will also be eligible for the loans.
In the second half of the year, it will introduce a loan product with financial companies and various business operators, and launch a loan product comparison service.
“Whether an indirect loan business like Naver will be effective in recruiting business owners or a direct business entry like Coupang will be a better way is what we should focus on and watch in the future,” said Lee Jung-hee, an economics professor at Chung-Ang University.
Loans to the self-employed and small businesses are important sources of revenue for traditional financial institutions. This will particularly affect the secondary financial sector, such as savings banks and capital companies.
If the competition between Coupang and Naver intensifies, there is a possibility that traditional financial companies could be excluded from the existing market, leading to an uproar against fintech.
“If a huge fintech company such as Coupang enters the financial market, the secondary financial sector, which has taken over the loan market, is highly likely to protest over the fairness of regulations,” said Kim Dae-jong, a business professor at Sejong University.
BY YOUN SANG-UN [email@example.com]