Introduction

Kakao Bank, a subsidiary of Kakao Corporation, made its debut in 2017, setting the stage for a revolutionary approach to banking. Built on the foundation of the ubiquitous KakaoTalk messaging app, the bank harnessed the power of digital technology to offer an entirely new way of managing finances.

Since its launch, the bank has gained over 21 million customers. It has reached a customer penetration rate of more than 40% with a far lower acquisition cost per customer than traditional banks, leveraging KakaoTalk. It is the #1 mobile banking app in South Korea with a rating of 3.6.

The bank has a revenue of WON 1065 billion (USD 823 million) divided into platform revenue (5%), fee income (14%) and interest income (81%). The bank has seen a growing trend in operating revenue with a CAGR of 33.7% in the last 5 years. Increased loan book and interest income continue to be a major driver of its profitability.

Strategic Initiatives

• #1 Evolving through collaborative ecosystem

Kakao Bank has adopted an ecosystem approach that goes beyond traditional financial services. This strategy leverages technology and partnerships to create a seamless and interconnected network of services, redefining how customers engage with their finances.

• #2 Bolstering its platform business

Kakao bank aims to monetize and evolve its platform to create a holistic and interconnected financial ecosystem that enriches the experiences of its customers and partners both.

1. Customers-Delivers convenience, personalized services, and a seamless experience, making their financial journey smoother and more accessible.
2. Service providers-Provides an opportunity to tap into a large and engaged customer base of 21.2 million, expanding their reach and customer base.
3. The platform itself benefits by attracting more customers and increasing engagement, thus creating opportunities for generating revenue through transaction fees, commissions, and partnership agreements.

• #3 Driving growth via new services

One of the pillars that set Kakao Bank apart is its data-driven approach. The bank leverages advanced analytics and machine learning to gain valuable insights into customer behaviour and preferences. It uses these insights to tailor its offerings to individual needs and anticipate customer requirements thus elevating customer experience through hyper-personalization.

• #4 Embodying convenience at every step

At the heart of Kakao Bank’s meteoric success lies its unyielding dedication to customer convenience. By eliminating the need for physical branches and lengthy paperwork, the bank tapped into a modern generation’s desire for swift and seamless financial interactions. Through its user-friendly mobile platform, Kakao Bank brought banking to the palm of people’s hands, enabling them to manage accounts, transfer funds, apply for loans, and invest—all with a few taps on their smartphones.

ICT strategy

In 2022, Kakao bank invested WON 106.4 bn (US$ 82.2 Mn) in ICT expenses. The bank spent ~49% of its total ICT spend on its software service contracts.

Kakao Bank’s operating interface is based on machine learning technology and high-end software including, Linux of X86, MySQL, and Apache/Tomcat (open source). The use of cutting-edge technology has enabled the bank to achieve high levels of efficiency and customer interaction.

Further, to create seamless customer experiences, the bank invests heavily in AI which includes AI chatbots for customer support and AI-powered mortgage loan.

How to match up with Kakao Bank?

In a landscape shaped by innovation and customer expectations, matching up with Kakao Bank requires dedication to digital transformation, customer-centricity, and strategic partnerships. Here are key strategies to consider:

1. Leverage the APIs of social media giants or create in-house instant messaging banking capabilities within your banking application to simplify your customers’ banking journey.
2. Adopt gamification practices to make your customers’ banking, budgeting, and savings experience fun and engaging.
3. Extend your product offerings by taking an ecosystem approach to drive more diversified revenue streams.

For more detailed insights, download our report, above.