There is perhaps no other digital bank anywhere in the world like kakaobank. Many pure-play digital banks seem to have an in-built ceiling: at a specific point, organizational flaws appear, they cease adding new customers and start to appear more dysfunctional than disruptor.
Not so with kakaobank. Yes, its market value fell steadily following its 2021 initial public offering (for a brief period in August of that year it was the nation’s largest financial institution by market cap), although its share price has since stabilized around the W25,000 ($19.15) mark.
Its numbers continue to surprise for the right reasons. Kakaobank had 20.42 million customers at the end of 2022, up 14% year on year, of which 16.4 million use its banking services on at least a monthly basis. Total deposits rose 10% last year, to W33.1 trillion, with the bank’s cost-to-income ratio down 2.5 percentage points, at 42.6%.
The bank posted a return on assets of 0.67% in the fourth quarter of 2022, up slightly from 0.65% a year earlier. It had a non-performing loan ratio of 0.36% at the end of last year (although the bank is still very young and delinquency ratios will at some point surely rise). It posted net profit of W60.6 billion in the final three months of 2022, up 67.4% on an annualized basis, on revenues of W484.7 billion. Consider also that more than 70% of the country’s working population bank with a lender that didn’t exist a decade ago.
Kakaobank started as a snappy disruptor, great at convincing teens and 20-somethings to eschew Korea’s traditional banks in favour of a digital upstart they already knew and trusted. (Kakao Corp, the bank’s largest shareholder, was founded in 2010 and created a hugely successful mobile messaging app and then an equally popular mobile payments service and digital wallet.)
Chief executive Daniel Yun puts success down to reinterpreting what a good banking experience should be: “Kakaobank provides 100% non-face-to-face banking services customers can use anytime, anywhere. Breaking from convention, our technology and innovation created financial products and services that can be conveniently accessed by everyone. Kakaobank links customers and finance in positive and varied ways that go beyond simple convenience.”
A key selling point is still its ability to convince teens to open their first account with the lender: at the end of 2022, it had 1.61 million ‘mini’ customers – between 14 and 18 years old. That’s up 40% year on year and, the bank reckons, accounts for 69% of people in that age bracket.
[We] aspire to become not only Korea’s leading retail bank but also the country’s number-one financial platform
Daniel Yun
But it is no longer just a young person’s bank. The largest single demographic – 36.1% of the total – is men and women in their 40s, and more than a third are in their 30s. Kakaobank lends to individuals and businesses, offers broking services and issues co-branded credit cards. Its business clientele includes firms engaged in construction, transportation, services and food and beverage.
What is perhaps its crowning achievement is its ability to inspire others. From Indonesia to Vietnam, digital banks have sprung up with the clear aim of attracting young customers put off by the uninspiring branding and superficial stolidity of mainstream lenders.
In other markets, even very large banks have moved to roll out new mobile banking services that target a younger clientele, for fear of losing that prized demographic to a digital upstart like kakaobank.
Every year, the Korean firm feels more and more like a bank that is here for the long haul.
“[We] aspire to become not only Korea’s leading retail bank but also the country’s number-one financial platform, providing a diversified range of 100% mobile products,” says Yun.
