Kakao Pay through its IPO aims to become a one-stop platform for digital financial services

By Leandra Monteiro

Kakao Pay is going public on November 3 to accelerate its transition into all-encompassing mobile financial service platform.

“Kakao Pay is fundamentally a financial platform, and we seek to maintain symbiotic relationships of mutual growth with other financial institutions,” said Alex Ryu, CEO of Kakao Pay at the online press conference. “Since the digital convergence is accelerated in all areas including online payment and financial services, we expect to increase our market share significantly through unrivalled number of users and the wide ecosystem of cooperative companies supported by our superior technology.”

The company is offering a total of 17 million shares with plans to raise up to 1.530 trillion KRW in the IPO. Through the bookbuilding process of the institutional investors conducted from October 13 to 21, the offering price has been fixed at 90,000 KRW, the upper limit of the price band. Kakao Pay will make its debut on KOSPI on November 3 after receiving subscriptions from retail investors from October 25 to 26. The main underwriters for the deal are Samsung Securities, JP Morgan, and Goldman Sachs, with joint bookrunner Daishin Securities. Korea Investment & Securities and Shinhan Investment will be joining as co-managers.

Starting off as Korea’s first Digital Payment service, it has grown into one of the leading mobile financial platforms in Korea. The total transaction volume of Kakao Pay is showing fast growth as well. The company recorded a total transaction volume of 85 trillion KRW for twelve months from the second half of last year, and the revenue has surpassed 102% over the past 2 years.

After acquiring an immense user base through easy pay and money transfer services that are effective traffic builders, Kakao Pay locks-in these users into the its platform by providing essential daily life services such as bill payment, membership, e-document, and authentication, the company explained. It is providing a wide suite of financial and wealth management services with its subsidiaries including loans, investments, and insurance to these acquired users.

To successfully penetrate Kakao Pay’s Total Addressable Market (TAM), the company is preparing to launch diverse new services and functions. To begin with, Kakao Pay is going to establish a digital non-life insurance subsidiary and provide new innovative insurance products for the digital economy. Also, Kakao Pay Securities will soon launch the Mobile Trading System. For loan service, Kakao Pay aims to offer a value-added credit scoring model for those with insufficient financial records and diversify its loan brokerage portfolios such as credit-card loan and secured loan. Preparations for Korea’s first prepayment-deferred payment combined mobile transportation card designated as Innovative Financial Service by Financial Services Commission is under way as well.

The IPO proceeds will be used based on the growth strategies mentioned above. “Funds raised for acquisition of securities of other corporation will be used to expand the securities retail business and capital of digital non-life insurance company, build partnerships and equity investments in e-commerce, and M&A of promising fintech companies,” said an official of Kakao Pay. “Working funds will be used to expand offline payment infrastructure and operating Buy Now Pay Later (BNPL) service.”