Tag: digital banking

  • Klarna fights an uphill battle with investors

    Klarna fights an uphill battle with investors

    Swedish payments giant, sometimes bank and stablecoin issuer Klarna is learning that it’s a lot harder being a listed fintech firm than a unicorn whose eye-popping valuation is decided by private investors who cannot resist hitting the inflate button.

    The aura of invincibility enjoyed by erstwhile unicorns like Klarna dissipates pretty quickly after an IPO “pops” and reality sets in. Investors in public markets are not necessarily more rational than their private market counterparts. They are less forgiving, though.

    The Swedish company’s  fourth quarter performance wasn’t half bad. In some respects, it was pretty good. The company posted US$1 billion in revenue for the first time, driven by rapid U.S. expansion and increased adoption of its banking products. Revenue in the U.S. expanded 38% annually. Users of Klarna’s banking services (card, financing, savings) doubled to 15.8 million.

    Unfortunately, the Swedish payments giant still lost US$47 million in the fourth quarter, equivalent to a 12-cent loss per share. The net loss was driven by high upfront provisions for credit losses, which are booked immediately, while revenue from these loans is recognized over time. For 2025 overall, Klarna lost US$241 million.

    Klarna’s share price just keeps on falling, suggesting that investors don’t like what they see. It’s lost 71% of its value since the Sept. 2025 IPO and 26% over the past month.

    We are heartened to see that investors aren’t giving the Swedish firm a free pass and that they are not moved by its AI cheerleading. In a news release, Klarna emphasized that headcount has declined 49% since 2022, “proving that with the right technology and the right talent, you can do more with less.”

    It remains to be seen how smart a move it was for the Swedish company to cut half of its staff.

    What about the company’s fundamentals? After all, it is not unusual for a high-flying fintech startup to encounter a steep learning curve after it becomes a public company.

    Auguring well for Klarna is the fact that it has achieved serious scale. As of Q4 2025, it serves 118 million active consumers and nearly 1 million merchants across 26 countries.

    Realizing the limitations of buy now, pay later (BNPL), Klarna is pivoting to banking to make its operations more profitable. However, in the U.S., which is crucial to the company’s overall growth strategy, it lacks a banking charter. Klarna currently partners with Utah-chartered WebBank to offer credit, and it partners with Marqeta to support its U.S. debit card, allowing for FDIC-insured deposits.

    But is the partner bank route the way forward? We aren’t so sure about that.

    Lacking a banking charter in the U.S. restricts Klarna’s growth by forcing it to rely on partner banks for regulatory compliance and funding, which increases costs, limits product offerings, and creates operational friction compared to licensed banks. While Klarna is a licensed bank in the European Union, its reliance on Utah-based WebBank to issue products in the U.S. limits its ability to directly hold deposits and compete on traditional banking.

    Crucially, without a bank charter to directly accept low-cost consumer deposits, Klarna is forced to fund its lending book (BNPL) through more expensive alternative debt facilities, warehouse lines, or equity.

    At the same time, without its own charter, Klarna cannot directly manage relationships with regulators. Without those relationships, Klarna will find it harder to navigate complex American banking regulations and gain approval for new, innovative financial products.

    There is also a branding problem that goes along with lacking a banking charter. State laws in the U.S. restrict companies without a charter from marketing themselves as a “bank.” If Klarna continues on its current path, its ability to build customer trust might be reduced.

    We will be interested to see how Revolut’s plans to acquire a U.S. banking charter go. If the UK fintech giant succeeds in that endeavor, it may force Klarna to reconsider its strategy.

  • Grab doubles down on fintech

    Grab doubles down on fintech

    Singaporean super app Grab reached its first full year of profitability in 2025, posting US$200 million in net income. For a company once best known for burning cash in a race to the bottom against Uber and later GoTo, this is an important milestone—even if investors remain skittish: Grab’s stock has fallen 22% over the past year despite its improved financials.

    We have been following the Singapore-based firm closely ever since it launched a bid for a digital banking license in Singapore almost six years ago, and it has come a long way in terms of fintech capabilities. In the fourth quarter, Grab reported a 34% annual increase in financial services revenue to US$99 million, up from US$74 million a year earlier.

    Financial services revenue, while growing fast, is still just a fraction of the company’s overall business. Total group revenue for the fourth quarter was US$906 million, generated mostly by mobility and deliveries.

    Grab’s digital banking deposits in Singapore and Malaysia have reached US$1.6 billion, a modest increase over US$1.2 billion a year earlier. Perhaps more noteworthy is that its loan portfolio has doubled over the past year from US$1.18 billion from US$536 million at the end of 2024.

    Still, even by digital bank standards, this is not yet a significant lending business. Brazil’s Nubank, for instance, has a US$30.4 billion loan portfolio.

    Additionally, Grab’s fintech business remains unprofitable while facing stiff competition from both pure-play fintechs and incumbent banks in Southeast Asia. Despite having millions of users in its ecosystem, converting them into active, high-balance digital banking users has proven difficult for the Singaporean firm. Most of the company’s customers have low average balances because they are not switching over from their primary banking providers.

    At the same time, Singapore and Malaysia don’t have large underbanked populations that can allow digital banks to quickly build scale. More than 90% of adults in both countries have bank accounts, and most of the analysis claiming they have large “underbanked” populations stretches the definition of that term.

    Grab does own an 11% stake in Indonesia’s SuperBank, which is also backed by Emtek and Kakao Bank. Superbank went public on the Indonesia Stock Exchange in December, raising approximately US$168 million (Rp 2.79 trillion). The shares jumped 24% on their debut after being oversubscribed 318 times.

    Superbank offers Grab’s fintech business more significant growth potential than GXS Bank in Singapore and Malaysia because Indonesia actually has a large underbanked demographic. About 60% of Superbank users come from Grab’s ecosystem, allowing it to scale up quickly. The digital lender posted a profit of about US$5 million in the third quarter of 2025.

    The most ambitious fintech-related move by Grab in recent months is its acquisition of the U.S.-based investment app Stash Financial for US$425 million in a deal expected to close in the third quarter of 2026. Grab will acquire 50.1% of Stash in a mix of cash and stock at closing, with the remaining stake purchased over the next three years.

    The acquisition provides Grab with an established platform to enter the mass-market investment segment. Stash has over US$5 billion in assets under management and over one million subscribers.

    We don’t see Grab trying to bring its super app to the United States, but owning Stash will give it exposure to the U.S. market that it would not otherwise have.What we expect Grab to do, though, is try to leverage Stash’s capabilities in Southeast Asia to offer more tailored wealth management systems to its customers. It remains to be seen, however, how much traction this move will get. Grab’s communications about the acquisition emphasize Stash’s “AI-powered ”capabilities”—which could describe just about any digital wealth management service in existence today.

  • U.S. Fintech IPOs Surge, Then Fizzle

    U.S. Fintech IPOs Surge, Then Fizzle

    After several years of a slow deal pipeline, U.S. fintech IPOs rebounded strongly in 2025. The concerns about inflation and high interest rates that had made investors risk-averse dissipated this year, despite ongoing macroeconomic uncertainty linked to the United States’ trade policy.

    2025 saw several long-awaited big-ticket deals come to fruition, including Chime, Circle, and Klarna. Deal flow has remained steady in the second half of the year, with Wealthtech making its market debut in December.  

    While the fintech IPO resurgence is welcome, it comes with a reality check. Public markets are less forgiving than their private counterparts—whose complex methodologies for calculating valuations often result in overly high expectations for startups. The process requires estimating future revenue/EBITDA multiples, a target return on investment (often 20-50% or more), and then discounting that future value back to the present. The assumptions around exit timing and target returns are subjective. 

    It is thus unsurprising that the share prices of Chime, Circle, and Klarna – all erstwhile high flyers in private markets – have fallen by double digits since their respective IPOs—though these are early days.

    Chime: Overreliance On Interchange Fees

    The June 2025 IPO of Chime, the biggest American digital bank, was a success. The San Francisco-based company priced its market debut at US$27 per share, above the expected range, raising US$700 million at a valuation of US$11.6 billion. Chime’s arrival in public markets was long anticipated and helped thaw an erstwhile tepid fintech IPO pipeline.

    Yet since then, Chime’s share price has fallen 28%. On the one hand, investors are likely reacting to a perception the stock was initially overvalued.

    On the other hand, Chime remains unprofitable. In the third quarter, revenue grew a brisk 29% to US$544 million, surpassing sales guidance, while its active member base grew 21% to 9.1 million. But Chime still lost US$55 million in the September quarter but posted a significant improvement in adjusted EBITDA of $29 million.

    With 22 million customers, Chime exceeds the size of U.S. online banks like SoFi, Dave, and MoneyLion, according to a 2024 Cornerstone Advisors survey. It has been successful tapping into a market where there has historically been limited competition given fragmentation, regulatory barriers, and hesitancy among American consumers to switch banks.

    The online lender relies on interchange fees for its core business, offering no-fee banking services, debit cards, and early paycheck access. These fees account for about 72% of revenue and are paid by merchants when customers use their Chime debit or credit cards.

    The company’s model, and that of its bank partners, is built on a regulatory exemption from the Durbin Amendment for banks under a certain asset threshold. This allows them to earn higher interchange fees than large, regulated banks.

    Yet the model is inherently risky because Chime is betting that it can continue to enjoy a regulatory exemption that may not last. The digital lender is much less diversified than traditional banks, which have revenue streams from lending, wealth management, and other fee-based services.

    Klarna’s BNPL Challenge

    After several years of delays, Klarna finally went public on the New York Stock Exchange (NYSE) in September at a valuation of US$15.1 billion, which is about 1/3 of what it was worth in private markets back in 2021. Although the fintech IPO itself was considered successful, the company’s share price has dropped 35% since September as investors worry about Klarna’s ability to generate sustained profits. 

    While Klarna’s third-quarter revenue reached a record US$903 million, its net loss widened to $95 million. Klarna says that it posted a loss mainly due to a US$235 million provision for credit losses, an accounting requirement tied to the rapid growth of its expanding Fair Financing product.

    The U.S. is a key growth area for Klarna, but its credit loss rates are higher there than in its core European markets. This is partly because Klarna must compete more directly with traditional credit cards in the U.S., where its primary users tend to be consumers who need more time to pay. 

    With its core BNPL product showing its limitations, Klarna has decided to hop on the stablecoin bandwagon as part of its diversification strategy. In a news release, Klarna explains its rationale for the issuance of KlarnaUSD, which is currently in a testing phase and will be available to the public on mainnet in 2026—likely in the middle of the year. Citing consultancy McKinsey, the Swedish fintech giant says that stablecoin transactions now exceed US$27 trillion a year and could overtake legacy payment networks before the end of the decade. 

    Launching a stablecoin does not fundamentally address the issues with Klarna’s current business model, but it could reduce the US$32.7 billion in cross-border fees the company pays, lowering its costs and allowing it to make faster payouts to merchants. 

    As Crypto Goes, So Does Circle 

    Speaking of stablecoins, Circle’s June IPO was a blockbuster fintech IPO, raising $1 billion at an $8 billion valuation. Shares surged 168% on its first day (June 5th) after pricing at $31 and opening at $69 on the NYSE. Investors rushed to snap up the shares of the USDC issuer, which benefited from optimism about stablecoin regulation (the GENIUS Act).

    Since then, the company’s shares have fallen about 50%. However, unlike Klarna and Chime, there is no fundamental shortcoming in Circle’s business model. Rather, investors are reacting to how lowered interest rates may impact Circle’s core revenue from USDC reserves. Lower interest rates will reduce the company’s income on cash and U.S. Treasuries.  

    In addition, the ultra-volatile crypto market is currently experiencing a downturn that Circle cannot escape. Macroeconomic jitters, year-end portfolio rebalancing, and high investor leverage leading to forced liquidations are all factors that have pushed crypto market capitalization to under $3 trillion, down from $4.3 trillion in October. 

    Auguring well for Circle is its strong third-quarter performance. The company’s net income tripled to $214 million, driven by increased USDC stablecoin circulation boosting reserve income, despite a lower return rate on those reserves. Total revenue reached $740 million, beating Wall Street estimates. Other highlights of the September quarter for Circle included a 60% rise in reserve income, strong service revenue growth, increased operating expenses from headcount, and an overall beat on earnings per share.

    What To Expect In 2026

    Looking ahead, the U.S. fintech IPO pipeline is likely to remain robust in 2026. One possible big-ticket deal next year is Airwallex. In mid-2024, CEO Jack Zhang said that the payments unicorn was aiming to be fintech IPO-ready by then. Airwallex’s financials have continuously improved over the past few years, and it recently closed a $330 million Series G funding round that valued it at $8 billion.

    When talking about fintech IPOs, one cannot help but think of payments infrastructure provider Stripe, whose valuation has reached an astonishing $106.7 billion in private markets. Yet unlike some of its peers, Stripe has not mooted any timeline for its market debut. Its leadership is focused on long-term growth, prefers controlled expansion, and does not feel pressured by market hype. With that in mind, we would not bet on a Stripe IPO next year.

    In contrast, a Revolut IPO next year would be unsurprising as one of the next fintech IPOs. The UK fintech unicorn recently reached a massive $75 billion valuation following a secondary share sale. Its financials are solid, having reported a net profit of $1 billion for the financial year ending December 31, 2024, on revenue of $4 billion. This marks the company’s fourth consecutive year of profitability.

    However, there is one major caveat: Revolut still does not have a full UK banking license. If that issue gets resolved in the first half of next year, it would instill confidence in investors, making a fintech IPO in the second half of the year more likely. If not, then Revolut is unlikely to go public in 2026. 

    In any case, if 2026 is anything like 2025, it will be a busy year. 

  • Are N26’s best days behind it?

    Are N26’s best days behind it?

    Are N26’s best days behind it?

    N26 is one of Europe’s most prominent digital banks, with $486 million in sales in 2024. Yet despite the German neobank’s impressive growth over the past 12 years, we cannot help but wonder if it will ever live up to the promise of the US$9 billion valuation it achieved in 2021—the height of pandemic-induced tech startup hype.

    The valuation of N26 has reportedly fallen by nearly 2/3 since then. While a $3 billion valuation is nothing to sneeze at, it is important to note that there has been no recovery in how investors value the company in private markets, in stark contrast to its peers Monzo and Revolut. Both of the UK neobanks saw their valuations fall in the post-fintech bubble hangover, but not as sharply as N26. And the valuations of Revolut and Monzo both rebounded as investors regained confidence about the UK neobanks’ prospects.

    All neobanks struggle with the regulatory learning curve. It is one reason incumbents are hard to displace. But for N26, the regulatory travails are constant—and interfering with its core business.

    In December, Germany’s financial regulator BaFin banned N26 from issuing new mortgages in the Netherlands and imposed new capital requirements on the digital lender, citing anti-money laundering (AML) shortcomings. BaFin also installed a special representative to track N26’s progress in fixing its compliance problems.

    In explaining its decision, the German financial regulator said that a special audit found lapses in N26’s business organization, risk management, and complaint handling, violating the German Banking Act. The measures mark the second time since 2021 that BaFin has ordered a special monitor to oversee N26.

    The German neobank has sought to address regulatory concerns with some personnel changes. In August, one of the original founders, Valentin Stalf, said he would step down as co-CEO and join the supervisory board. A new chief risk officer was also appointed starting on Dec 1. The bank in 2025 doubled the size of its supervisory board to six, installing a new chair who once sat on the board of Germany’s central bank.

    N26’s new CEO, Mike Dargan, who will begin his job in April, hails from the world of investment banking. He worked at UBS for almost a decade, most recently serving as Group Chief Operations and Technology Officer. Before that, he served in senior roles at Standard Chartered and Merrill Lynch.

    The appointment of Dargan, with his extensive background in traditional banking, is seen as a move to reassure regulators and strengthen N26’s internal controls and risk management.

    “What drew me to this role is both the clarity of the mission and the scale of the opportunity,” Dargan said in a LinkedIn post commenting on his job change. “The future of banking will be shaped by those who combine disruptive technology with unwavering client trust. My focus will be clear: to build on N26’s strong culture of innovation while strengthening its position as a trusted, world-class digital bank.”

    Under Dargan’s leadership, and assuming it can overcome regulatory obstacles, N26 has reasonably good prospects. Its fundamentals are, after all, strong. The German neobank has five million customers in 24 countries in Europe and has raised nearly US$1.8 billion from heavyweight investors known for backing winners. They include Singapore’s sovereign wealth fund GIC, Tencent, and Peter Thiel, as well as venture capital firm Earlybird and insurer Allianz.

    N26 also wisely pulled the plug on misguided expansion, exiting the U.S., UK, and Brazil in recent years to focus exclusively on its profitable core European markets of Germany, France, Spain, and Italy.

    Looking ahead, N26 should continue its shift to an interest-driven model, leveraging rising rates on customer deposits and growing subscription revenue from premium accounts. Building out investment platforms (stocks, crypto) and introducing business banking services could also help diversify revenue streams.

    If N26 can do these things, its best days may be yet to come. 

  • Starling Bank mulls next big steps

    Starling Bank mulls next big steps

    Technology forward with a lean cost structure and known for being customer centric, Starling Bank is one of the most successful UK digital lenders. It has operated as a licensed bank in the U.K. since 2018 with shareholders that include Goldman Sachs, Fidelity Investments and the Qatar Investment Authority. 

    In the fiscal year ended March 31, 2025, Starling Bank posted a profit of US$301.9 million on revenue of US$963.4 million.While that is an enviable performance by the standard of most fintech startups, for Starling Bank it was a bit of a disappointment. The company’s net income fell 26% annually because of a Covid-era business loan fraud issue and a regulatory fine over financial crime failings. Revenue grew 5%, but that was a significant slowdown from the 50% expansion rate in Starling’s 2024 fiscal year.

    Never as audacious as competitors like Revolut and, to a lesser degree, Monzo, Starling still faces the reality of being an 11-year-old fintech startup long past the go-go days in private markets. Investors want Starling Bank to show them the exit ramp—and for this reason, the company has reportedly engaged investment banks, including Morgan Stanley and Rothschild, to explore options for a sale, targeting a potential valuation of up to £4 billion.

    Though Starling Bank is a UK company whose largest business is in its home market, we would not be surprised if it were to eschew the London Stock Exchange (LSE) and instead go public in the United States. To be sure, a New York Stock Exchange (NYSE) listing—which we consider the likeliest destination for the offering—would signal a change in direction from what former interim CEO John Mountain said in 2024. At the time, Mountain said that London was the “natural home” for Starling, and he even emphasized that the company was not “considering other markets” for its market debut.

    That was then. Now, Starling Bank is leaning towards a U.S. listing. The UK digital lender’s CFO, Declan Ferguson, told the Financial Times in July that while no decision had been made on where the bank would list, it was a U.S. IPO. “We continue to observe what is happening externally with our peers and also what is happening on the global stage in terms of the UK versus US [stock markets],” he said.

    One reason for Starling Bank to go public in the U.S. would be to achieve a higher valuation than it could on the LSE. The U.S. IPO market benefits from bigger size, greater investor sophistication regarding technology stocks, and higher valuation multiples. UK fintechs often feel they are valued more like traditional banks in London, whereas in the U.S., they might be valued as high-growth technology platforms.

    At the same time, the U.S. has a much larger financial services market than the UK that, despite its fragmented nature, offers Starling significant opportunities. Starling’s management reckons that its cloud-native technology platform (Engine) could be a key differentiator in the massive U.S. banking market, especially when it comes to its thousands of mid-tier and community banks.

    To that end, Starling is also likely to expand in the U.S. prior to its IPO and has reportedly looked at acquiring a U.S. bank. If the UK digital lender can acquire a traditional U.S. bank, it will avoid the regulatory morass that would be guaranteed if it independently applied for a U.S. banking license. Further, an acquisition would give Starling Bank instant infrastructure and deposits in the American market, as well as an immediate opportunity to deploy Engine.

    If the UK neobank finds an attractive M&A target, we expect it would move to make the deal in the first half of 2026 and help pave the way for an NYSE IPO, perhaps in the second half of the year.

  • Why the K Bank IPO is a crapshoot 

    Why the K Bank IPO is a crapshoot 

    South Korean digital lender K Bank has been talking about an IPO for years, literally. Since 2022, the company has twice aborted plans to go public. In early November, it formally filed for a third time, aiming to go public in the first half of 2026 on the Korea Stock Exchange (KOSPI). Both the company and investors are hoping this third time is the charm.

    In some ways, K Bank is stuck between a rock and a hard place. On the one hand, it is bound by a conditional rights offering from May 2021 that requires an IPO by July 2026. Investors, including Bain Capital and MBK Partners, injected 725 billion won into the South Korean digital lender at that time under the condition that if the IPO does not happen by July 2026, they can exercise their “drag-along rights” to sell their shares as well as those of top K Bank shareholder BC Card to recover their investment.

    While BC Card secured a “call option” back in 2021, which gives it the right to buy back the shares of the other K Bank investors first, doing so would be expensive. BC Card would probably have to pay 1 trillion won (almost 63% of its own capital) to cover the investors’ initial 725 billion won plus an 8% promised internal rate of return.

    Because of that promised 8% annual return, K Bank needs to achieve an IPO valuation of 4-5 trillion won, which is ambitious given its financials. K Bank posted a record quarterly profit of 68.2 billion won in the second quarter, but that figure fell to 19.2 billion won in the third quarter, down 48% year-on-year.  Net profit in the first nine months of the year also dropped by 15.5% year-on-year to 103.4 billion won.

    However, K Bank has performed well overall in recent years. Its 2024 net profit of 128.1 billion won was nearly 10 times as large as its 2023 profit of 12.8 billion won. It also had 12.74 million customers by the end of 2024.

    The Asia Business Daily noted that K-Bank’s target price-to-book ratio (PBR) for its desired IPO price is 2.5 times, well above the Kakao Bank PBR of 1.6 times. To reach its target IPO valuation of 4 trillion to 5 trillion won, “K Bank must prove its platform value exceeds that of Kakao Bank,” the newspaper said. “However, it remains uncertain whether the market will view K Bank as a platform company.”

    It is true that Kakao Bank achieved a whopping 18.5 trillion won IPO valuation when it listed on the KOSPI in November 2021, but that was at the height of a tech startup bubble that rapidly deflated after the company went public. Kakao Bank’s stock has lost almost 70% of its value since the IPO.

    Meanwhile, regulators are probing K Bank’s close ties with leading South Korean cryptocurrency exchange Upbit. K Banks has had a real-name account partnership with Upbit since 2020.  

    The financial authorities plan to closely review whether K Bank has thoroughly detailed investment risk factors, including its concentration of funds from Upbit, in the securities registration statement. Regulators are evaluating the possibility of a temporary liquidity issue at K Bank if the Upbit partnership were to end and what the bank’s contingency plan would be.

    Auguring well for K Bank is that it has significantly reduced its Upbit exposure in recent years. The partnership began in June 2020, and by 2021 K Bank was reliant on the cryptocurrency exchange for about half of its deposits. However, as of the second quarter this year, of Kbank’s total deposit balance of 26.8 trillion won, about 4.4 trillion won (16.42%) are Upbit escrow funds, compared to 50% in 2021.

  • Kakao Bank Hits New Record In First 9 Months of 2025

    Kakao Bank Hits New Record In First 9 Months of 2025

    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.