Kakao Bank, South Korea’s largest and most successful digital lender, posted a record cumulative profit in the first 9 months of the year of 375.1 billion won (US$259.1 million), up 5.5% over the same period in 2024. A diversified revenue base offset narrowing margins in interest income and was a key factor in its strong performance.
Though interest income in the first three quarters fell 3.1% to 1.49 trillion won, non-interest income grew briskly. Derived from fee-based services, platform businesses, and asset management, non-interest income jumped 26.7% to 835.2 billion won. “Despite the falling interest revenue from loans, non-interest revenue has grown to support overall growth in operating revenue,” a spokesperson told The Korea Herald.
Unlike many of its peers, Kakao Bank developed a successful business model almost from its inception (in 2017) and achieved profitability just two years later. It concentrated on attracting customers in its home market of South Korea to an ecosystem of digital financial services accessible through the ubiquitous messaging app, gradually adding in-demand products like stock trading and mortgage loans. Despite its impressive growth, Kakao Bank held off on international expansion until 2023, six years after its founding and about two years after it listed on the Korea Stock Exchange.
As the company approaches its 10th year of business, its growth in Korea is finally starting to plateau—though it may not be evident at first blush. After all, monthly active users (MAU) reached an all-time high of 19.97 million as of September, the largest among all domestic banks, both digital and incumbent. Total customers, meanwhile, reached 26.24 million.
Compare those figures with a year earlier, though, and one sees that growth has slowed from the go-go early days. At the end of 2024, Kakao Bank had about 18.9 million MAUs and about 25 million customers. So MAUs grew 9.4% and 9.6%.
In Korea, Kakao Bank is increasingly competing with K Bank and Toss Bank, which, like Kakao, have developed a strong suite of retail banking products and enjoy the support of deep-pocketed, well-connected backers. In June, drawing on its close relationship with crypto exchange Upbit, K Bank became the first Korean digibank to announce plans for a cross-border stablecoin. K Bank is partnered with blockchain firm BPMG in a deal that includes a blockchain wallet, platform development, and stablecoin consulting. In September, K Bank said that it had completed the first phase of verification of Project Pax, a proof-of-concept project for overseas remittance technology using stablecoins between South Korea and Japan.
While Kakao Bank is exploring the launch of a stablecoin, it has less experience in the digital assets sector compared to K Bank. The latter has been closely partnering with Upbit since 2020.
In the medium and long term, Kakao’s tie-up with Grab, Singtel, and Emtek-backed Indonesian online lender Superbank will provide the Korean company with a strong foothold in the massive Indonesian retail banking market. While Indonesia is a competitive market, Superbank benefits from the large existing user base of its backers as well as their digital banking acumen. Case in point: Kakao has offered advice on the user interface and user experience of Superbank’s mobile banking service. Superbank’s automatic saving service, Celengan, was inspired by Kakao Bank’s existing product that allows customers to save small amounts every day automatically with a high interest rate.
While a more mature and smaller banking market than Indonesia, Thailand also offers Kakao an opportunity to grow overseas. In June, Kakao secured final approval to establish Thailand’s first digital bank together with its local partner SCBX, the fintech arm of the large incumbent lender.
Kakao is not only making history as the first Korean digital bank to enter the Thai market. The move also marks the return of the broader South Korean banking sector to Thailand. South Korean banks largely withdrew from Thailand after the 1997-1998 Asian Financial Crisis, which hit both countries hard.