Viva Republica, Rival to Kakao Pay... Unstoppable Growth Instinct

[Asia Economy Reporter Hyungsoo Park] As Kakao Pay is pushing for a relisting, interest in Viva Republica, the operator of the remittance application 'Toss,' is also growing. In the over-the-counter market, Kakao Pay's corporate value has exceeded 16 trillion won, surpassing the market capitalization of Hana Financial Group.

Viva Republica entered the financial industry in 2015 by launching the simple remittance service Toss app. Toss's simple remittance service allows users to send money to the recipient's account or contact without a public certificate by utilizing the bank's firm banking network. At the time of its launch, the app gained great popularity as it enabled remittance easily with just fingerprint or password, without the need for a public certificate, security card, or one-time password (OTP). The cumulative remittance amount exceeded 1 trillion won within 1 year and 6 months after the service launch, and surpassed 10 trillion won in December 2017.

As of August 2021, Toss's monthly remittance amount reached 6 trillion won, and the cumulative remittance amount exceeded 170 trillion won. According to the Bank of Korea, the daily average amount used for simple remittance services in 2020 was 356.6 billion won, a 52% increase compared to 2019. Last year, Toss's annual remittance amount was estimated at 58 trillion won, accounting for 45% of the total simple remittance amount. This year, the remittance amount is expected to exceed 70 trillion won. The domestic simple remittance market can be seen as virtually divided between Toss and Kakao Pay.

From a profit and loss perspective, remittance services are a business division with huge deficits. Last year, Toss's payment fees amounted to 87.1 billion won, accounting for 44% of operating expenses. Considering that remittance fees are free, the deficit scale is not small. However, remittance services form the foundation for Viva Republica to grow as a financial platform.

Jeon Bae-seung, a researcher at Ebest Investment & Securities, analyzed, "The value of a financial platform is determined by the quantity and quality of data (customers) it holds and its traffic," adding, "Toss's monthly active users (MAU) have reached 11 million, already surpassing the level of major bank holding companies." The researcher judged that Toss is realizing a financial 'super app' strategy based on a stable governance structure and efficient decision-making system.

With the number of Toss users exceeding 20 million, the company is expanding its business area by providing various financial services. Aiming to transform the supplier-oriented insurance market into a consumer-centered one, Toss established Toss Insurance, an insurance sales agency (GA), in November 2018. To strengthen its position in the simple payment market, it acquired LG Uplus's PG business division in 2020 and established Toss Payments. This year, Toss Securities was established and obtained a mobile securities company license. The internet-only bank Toss Bank, with the motto of 'inclusion and innovation,' has also opened. The business structure involves selling financial products to customers gathered through remittance services or leading them to financial subsidiaries such as securities and banking. Additionally, by providing real estate and lifestyle services, Toss is building an ecosystem where customers can sufficiently manage their financial lives with just the Toss app.

Researcher Koo Kyung-hoe of SK Securities explained, "Toss Securities and Toss Bank are cases where platform companies based on financial services operate real financial businesses," adding, "This is a different aspect from giant comprehensive platforms like Kakao and Naver entering the financial industry."

He continued, "In the financial market, the future of Toss is likely to be evaluated based on performance in real financial businesses such as banking and securities," adding, "The reason why it is traded at a high price in the recent over-the-counter market is due to expectations not only for the sales of various financial products but also for the long-term growth potential of Toss Securities and Toss Bank."

Toss Bank is the third internet-only bank launched after K Bank and Kakao Bank. Toss Bank's capital is 250 billion won, similar in scale to K Bank (250 billion won) and Kakao Bank (300 billion won) at their launch in 2017. Researcher Jung Joon-seop of NH Investment & Securities introduced, "Toss Bank is signaling an aggressive approach from the start," adding, "It offers 2% interest on demand deposit accounts regardless of deposit size, and the lowest credit loan interest rate is presented at 2.76%."

With the launch of Toss Bank's services, Viva Republica's position as a financial platform is expected to be further strengthened. Until last year, the Toss app mainly generated traffic through remittance services. Therefore, although the number of users was large, the quality of traffic was somewhat low. Since the launch of Toss Securities' stock trading service earlier this year, user usage time has increased. With the establishment of Toss Bank, accessibility for financial consumers has improved, securing a foundation to dramatically improve traffic quality.

Researcher Kim Hyun-ki of Hi Investment & Securities analyzed, "In the cases of Kakao Bank and K Bank, profitability turned positive when the won loan amount per employee reached about 13 to 15 billion won," adding, "Assuming Toss Bank's won loan amount reaches 500 billion won by the end of the year, the won loan amount per employee would be about 2.6 billion won."

He added, "Theoretically, Toss Bank's loan scale can increase to about 3 trillion won at the current capital level," adding, "Since the won loan amount per employee is about 12 billion won, additional paid-in capital increases and loan scale expansion are necessary for profitability."

This content was produced with the assistance of AI translation services.