Digital banking is on the rise. After the outbreak of the COVID-19 pandemic, online and mobile banking have become more widespread than ever before. This trend can also be clearly observed in South Korea. With its fast internet speed and high online banking penetration, it was only a matter of time before digital transformation in the South Korean banking sector was initiated.
Kakao Bank is at the heart of this innovation. Founded in 2016 and launched in 2017, Kakao Bank was the second digital bank in South Korea after K Bank. Digital banks, also known as internet-only banks or neobanks, have no physical branches and operate only through digital channels. Within just four years of launching, Kakao Bank has acquired more than 17 million customers and experienced dramatic growth like no other bank in South Korea. Now it has established itself as one of the leading digital banks not only domestically but also globally.
Kakao Bank’s recipe for success
Kakao Bank's success is often summed up in three words: accessibility, convenience, and attractive products. With its intuitive banking app, Kakao Bank enabled its customers to access banking services as quickly and easily as possible. For example, it simplified the process of opening a bank account by using only a passcode or fingerprint scan, bypassing the time-consuming and partly complicated authentication process required at other banks.
The most successful products include, for example, the "moim account", "26-week installment savings" and, more recently, "Kakao Bank mini". Moim account allows customers to regularly collect money from a group of friends or colleagues to use it later for joint activities. 26-week installment savings enables customers to save a set amount of money that increases each week. The recently launched Kakao Bank mini is an electronic prepaid payment method for teenagers aged 14 to 18 years and has seen a rapid increase in subscribers in a short time.
Future prospects
The rise of Kakao Bank has significantly changed the banking landscape in South Korea. However, the inclusion of the financially disadvantaged, the expansion of services for business customers, and differentiation strategies vis-à-vis existing banks are still seen as aspects in need of improvement. In view of the growing digital competition also from traditional banks, the development of the South Korean banking sector will continue to be very interesting to follow.
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