South Korea observes an unprecedented adoption of neobanks

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The Financial Services Commission (FSC) under the Banking Act grants a preliminary license to operate Internet-Only (neobanks) banks in South Korea. The FSC grants the banking license on three significant grounds:

  1. Innovativeness: To create a new wave of competitiveness in the banking sector
  2. Inclusiveness: To help financial customers enjoy numerous benefits such as banking at lower transaction cost, convenient banking services, ease of access to loans
  3. Stability: To promote the creation of jobs in IT, banking, and fintech domains

The primary benefit is that non-banking financial companies (NBFCs) can hold up to 34% stake in the neobank.

Snapshot of South Korea鈥檚 neobanks鈥

Table 1: Profile for South Korea鈥檚 neobanks
NameFounding Year鈥CEO
Kay (K) bank 2015 Shim Sung-Hoon
Kakao bank 2016 Alex Ryu
Toss 2015 Seunggun Lee
Source: Twimbit analysis
Note: The annual revenue is not stated as it is an undisclosed amount since the banks are privately held
Table 2: Learning list of South Korea鈥檚 neobanks funding capital
Total funds raisedUS $434.2 Million
Series AUS $4.5 Million (July 2015)
Series B US $23.7 Million (April 2016)
Series C US $48 Million (March 2017)
Series D US $40 Million (June 2018)
Series E US $80 Million (Dec 2018)
Series F US $64 Million (Aug 2019)
Secondary Market(Nov 2019)
Series F (Feb 2020)
Venture Round (Aug 2020)
Series G US $173 Million (Aug 2020)

In-depth neobank analysis鈥痮n the 5-building block framework鈥

Customer Centricity

  • 100% of the neobanks in South Korea showcase a mobile-first approach
  • Only Kakao Bank offers hyper-personalisation
  • Only Toss offers the feature of budget analytics
Figure 1: South Koreas鈥 neobanks lack in customer centricity across all parameters

Note: The de-highlighted customer-centricity parameters indicate these are not prevalent in any of the neobanks

Customer Reach

  • All 3 neobanks in South Korea are geared towards the Millennial and Gen Z population
  • Toss serves approximately 1/4th of the entire population of South Korea
Figure 2: Representation of each neobanks鈥 customer reach

Product Stack

  • Kakao bank is the only neobank in South Korea that offers international payments
  • Toss offers its customers the unique choice to open an investment account


Each virtual bank product stack is a representation of 4 key parameters across 10 product types:

  1. Unavailable: Does not have a product type in their stack
  2. Testing: The product is currently in pilot-testing phase, not live to all customers
  3. Established: The product is a part of their stack and fully available for customers
  4. Unique: A unique offering within a product type which is exclusively provided by the virtual banks
Figure 3: Representation of each neobank鈥檚 product stack

Partnership Ecosystem

  • Kakao bank and K bank offer credit/debit cards through their partnership with Mastercard and Visa respectively
  • K bank has partnerships with multiple insurance providers to prove an in-app service
  • Toss has partnered with multiple brands to offer rewards to its customers
Figure 4: Representation of each neobank鈥檚 partnership ecosystem

Open banking

A pilot program consisting of 10 traditional banks was conducted in 2019 by Korea鈥檚 Financial Services Commission (FSC). The initial 10 banks included banks such as Woori Bank, NH Nonghyup, KB Kookmin Bank, Shinhan Bank and KEB Hana Bank.

After a successful pilot which saw as many as 5.51 million accounts being registered on the single mobile application, 8 more banks have been invited to join the initiative, including Kakao bank and K bank. The purpose of the open banking initiative is to help customers manage all accounts through a single application.

South Korea鈥檚鈥痭eobanks鈥欌痮utlook鈥

South Korea鈥檚 financial regulators have taken a conservative approach to digital banking, issuing a limited number of licenses and outright rejecting the rest of the applicants.鈥疶he only three banks to get a license till now have been: Kakao Bank, K Bank, and Toss.

  • Kakao bank and Toss serve 10 million and 14 million customers respectively. Even though the number of neobanks in South Korea is less, they have tapped into the market well. We can say so because they serve around 1/4th of the Korean population
  • Kakao bank and Toss鈥 success has proved that Korea is a successful market for neobanks. On the other hand, K bank is struggling to maintain its customer base
  • This indicates that even though South Korea is profitable for neobanks, it鈥檚 not easy to attract customers. Especially when nearly 1/4th of the population is each served by Toss and Kakao bank


Table 3: List of investors in South Korea鈥檚 neobanks
Name of the bank Investor
K bank KT Corporation
Kakao bank Korea Investment Holdings, Kakao Corp
Toss Altos Ventures, Goodwater Capital, GIC, Sequoia Capital China, Kleiner Perkins, Ribbit Capital, Aspex Management

Note: The list is not exhaustive and is based on the publicly available data

End notes鈥

We have sourced information pertaining to the funding value, round, customer base, revenue, and product information from Crunchbase, Owler, respective company鈥檚 annual reports, and their websites.

Aman Jindal, Business Research Analyst Intern, contributed to this research by assisting in writing, conducting preliminary analysis, and conceptualising the topic.


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