Naver Enters Offline Market... Toss Focuses on Defending Lead, Kakao Keeps Its Distance

Naver Pay is set to launch its offline payment terminal, "Connect," later this month. A direct showdown is expected with Toss, which entered the market three years ago and has since established a strong foothold in the offline terminal sector. While competitor Kakao Pay has distanced itself from the offline terminal business, citing limited profitability, the competition among big tech companies in offline financial services is expected to intensify.

Sangjin Park, CEO of Naver Pay. Naver Pay

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According to the financial industry on November 6, Naver Pay plans to officially launch Connect, which began beta service in September, within this month. Connect offers features such as facial recognition payment "FaceSign," simple payment options like Samsung Pay, QR codes, and near-field communication (NFC).

The offline terminal market is currently dominated by Toss, which entered the sector first in 2022. As of the end of September, the number of affiliated merchants surpassed 200,000 (with approximately 200,000 installed terminals). The number of merchants grew from 19,000 at the end of 2023, to 85,000 at the end of last year, and to 200,000 by the end of September. The goal is to reach 1 million merchants by next year. Toss is expanding its market dominance by partnering with large corporations and franchises, such as signing a financial business agreement for simple payments with Shinsegae Duty Free at the end of last month.

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Notably, Naver's offline terminal business model is almost identical to that of Toss. Both companies offer marketing tools for merchants and support payment data analysis to help increase sales, with similar core strategies and slogans. The approach of linking facial recognition payments-FaceSign (Naver) and FacePay (Toss)-is also the same. Given these similarities, analysts predict that the competition will be determined by the ability to secure partnerships and marketing capabilities.

For Naver, the key to catching up with Toss will not just be increasing the number of installed terminals, but also how quickly it can expand partnerships with large offline enterprises and franchises. Lee Hyangcheol, Head of Pay Services at Naver Pay, stated, "We will enhance the service so that merchants using Connect can encourage customers to return."

Seunggun Lee, leader of Viva Republica. Viva Republica

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Collaboration with value-added network (VAN) operators and point-of-sale (POS) system companies is also expected to be a variable. On October 14, Toss Place and its subsidiary iShopCare were sued for a preliminary injunction regarding patent infringement by Korea Information & Communications, the nation's top credit card VAN operator. Korea Information & Communications filed the lawsuit with the Seoul Central District Court. Aware of such risks, Kakao Pay stated during its third-quarter earnings conference call on November 4, "If we follow the strategies of our competitors exactly, there is a risk of establishing a competitive, rather than cooperative, relationship with VAN and POS companies."

Both Toss and Naver have emphasized that "our strategic direction differs from Kakao's" and are focusing their capabilities on becoming the leading offline terminal provider.

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In particular, Seunggun Lee, leader of Viva Republica (the parent company of Toss Place), has reportedly been encouraging team members by stating that "becoming number one in offline finance is the top priority for the entire Toss community (group) this year." Choi Jaeho, CEO of Toss Place, is also fully committed to achieving the goal of securing 1 million affiliated merchants by next year.

At the press conference marking the 10th anniversary of the Toss app's launch at the end of February, Seunggun Lee said, "Our goal is to evolve beyond a financial super app to become a 'super app for everyday life.' Through the offline terminal and FacePay businesses, we aim to usher in an era where payments can be made without a wallet."

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