With the bank code 90, Kakao opens up bank branches on everyone's smartphone.
Nothing changes if no one asks a question. In everyday life, we throw the question, 'Why should we do this?' The 'first penguins' that courageously jump into the ocean change our world little by little.
'Should there be a bank window?' 'Is the official certificate an essential security measure?' 'Can banks not pursue 100% mobile?'
These questions that might have sounded absurd only a few years ago became a reality in mid-2015. That's because mobile infrastructure has spread rapidly so that over 90% of the population under the 50s used a smartphone. Various services and devices were vying for higher convenience and performance, and the topic 'FinTech' emerged as a real issue. Consensus about the need for financial innovation also increased.
Although pursued twice in 2001 and 2008 only to fail, the discussion over establishing Internet-Primary Bank retook place. On June 18, 2015, the government announced that it would allow innovative management entities to ▲enter the banking industry to enhance consumer convenience, ▲promote competition in the banking industry, and ▲create new growth engines.
#Leading the consortium
At that time, Kakao was looking for a new challenge after completing PMI (Post-Merger Integration: the organizational convergence process for maximizing the merger effect). Daniel, who had experience in Daum Communications and insurance companies, brought up a plan at the management meeting.
"Recently, the Financial Services Commission announced a plan to introduce a specialized Internet bank. I suggest we should try it."
'Why should we do it?' A negative vibe was dominating rather than an upbeat note. That was because of the question, "Can Kakao pick up speed in the finance sector, a representative license industry? Moreover, in the banking sector, one of the highest regulatory businesses?" The fact that KakaoPay, which had been launched earlier, moved toward 5 million users while promoting payment innovation had Krews waver in determination.
Daniel started persuading from a different perspective. He stressed that there were few opportunities to challenge the licensed business; thus, if Kakao ran a bank in the 'primary financial sector,' it would be advantageous to connect with other financial and non-financial businesses. There were fewer reasons for 'not doing' than for 'must do.' Accordingly, Kakao established the 'Mobile Bank TF.'
No wonder fierce competition for preliminary approval was expected as it was about to create a new bank in 23 years after the establishment of Pyeong-Hwa Bank in 1992.
Here's Daniel's account. "We pondered over and over again before organizing consortium. We crisscrossed the country to engage companies in the financial industry that Kakao had never experienced before and companies that could help us expand into life-infrastructure. An advisory professor shared an example of his experience while spending a sabbatical in the United States. In Korea, he had a smooth financial life thanks to his high creditworthiness, but there was no data on his economic activity in the United States. So it was difficult to issue a credit card. At that very moment, the records of purchasing academic and professional books on Amazon provided clues to resolving the situation. Thinking that this was a new value existing banks couldn't provide, we invited major players from each industry as shareholders."
With 50% capital investment by Korea Investment Financial Group, the KakaoBank Consortium was formed in August 2015, in which Kakao, KB Kookmin Bank, SGI Seoul Guarantee, Post Office, Netmarle, eBay, Sky Blue (Tencent), and YES24 participated.
#Reinterpretation of banking business
On October 1, the KakaoBank Consortium was kicked off by submitting the preliminary approval application form. While preparing the business plan, it focused the most on 'reinterpreting the banking business.' To this end, Krews first identified what inconveniences consumers took for granted since they had been chronicled for a long time.
'Should I visit the bank window between 09:00~16:00?' 'Isn't it too wasteful if I have to take a half-day to wait at the bank window?' 'Isn't there a simpler and stronger security measure than the official certificate?' All these questions ran through our minds on a continual loop, and eventually, we got to be on the same track. We pursued 'digital money box' attached to our life, not a conventional bank distanced from everyday life. Krews gathered all the questions raised while discussing and identifying the essence of KakaoBank.
There was also the urgency behind this reinterpretation and identification because Kakao had to deal with existing banks, which were strong competitors in terms of capital, human resources, sales force, and work experience. Daniel said, "We had to derive competitive edge and differentiating factors in that 'we resolve problems,' while existing banks sell product or service.' We had to promote the app without a single bank branch. The thought feared us all that the app could not survive if money box's usefulness or innovation fell short of expectations."
On November 29, two companies obtained preliminary licenses. As of 2015, 20 Internet-only banks were doing business in the U.S, 20 in Europe, and 8 in Japan. China had just approved two operators. All eyes were on how different