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Kakao to offer money transfers

February 25, 2014
Lee Sir-goo Kakao co-CEO

Lee Sir-goo
Kakao co-CEO

By Choi Kyong-ae

BARCELONA — Kakao, the operator of the country’s most popular messaging application KakaoTalk, will run a test of a money transfer service next month in cooperation with banks, the company’s chief executive said Monday.

“We have been working with banks over the past 12 months to start financial services for KakaoTalk. We are now fine-tuning the details of the business partnership,” co-CEO Lee Sir-goo told The Korea Times Monday (KST) on the sidelines of the Mobile World Congress (MWC) in Barcelona.

Kakao will partner with 16 commercial banks to allow its users to send and receive small amounts of money through the messaging app. For example, they will be able to transfer money gifts for weddings or condolence money for funerals, Lee said.

It will be more convenient for the app users to send and get money than going to banks, visiting websites for Internet banking, or making a call for phone banking, Lee explained.

When it comes to security issues, he said the home-grown app company is “in talks with the banks to resolve these.” Banks are expected to take commissions from the new business that are expected to be lower than those they earn from the operation of automated teller machines, he said.

However, he did not provide specific details on how the new system will function.

The Kakao chief also outlined the company’s plans to survive the stiff competition with bigger rivals and rapidly-changing consumer appetites.

Commenting about the future outlook, Lee said “it is really hard to compete with such app giants as WeChat run by China’s Tencent and Line operated by Korea’s Naver. So we will explore hidden needs of customers to come up with whole new services which never existed before.”

He cited the combined model of messaging and gaming as a successful example of such an approach.

Lee said Kakao cannot compete with big app operators in terms of marketing costs. The company will instead further strengthen its ties with partners such as game developers, and emoticon artists for mutual benefits.

Speaking at the annual MWC show, Lee said “New value has to be created through the cooperation of users and partners, and this type of collaborative business model will begin to receive more focus in the future.”

Globally, Kakao will strengthen its collaboration with telecom companies in Southeast Asia to provide data plans to local customers, according to Lee. The companies include Telkomsel in Indonesia and Globe in the Philippines.

Kakao has evolved from basic cell phone text messaging into a multi communication platform within a few years of its foundation. Users can share photos, video clips, engage in group chatting and also talk to each other using the mobile voice over internet protocol technology.

It currently has 130 million users across the world who send about 5.5 billion messages daily, according to Kakao.

Kakao posted 7 billion won ($6.5 million) in net profit for the whole of 2012, shifting from a net loss of 1.7 billion won in 2009. Its sales jumped to 45.8 billion won from 3 billion won during the same period.