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Toss, a popular money transfer app, is drawing attention as its operator Viva Republica has formed an alliance with Shinhan Financial Group to launch a third internet-only bank.
Shinhan is currently the nation's top financial group by total assets and net profits. Other tech startups, including car rental app operator SoCar and mobile realtor app operator Dabang, are also set to join the consortium
The Toss-Shinhan consortium is considered a strong contender for one of two internet bank licenses to be issued by the Financial Services Commission in May.?
Market experts said major financial groups are attracted to the fintech startup Viva Republica because it can bring meaningful changes not only to the market but also to big players.
They said the key factor behind Toss' popularity is its continued innovation to boost user convenience by identifying their core needs.
Suh Jeong-ho, head of digital finance research center at Korea Institute of Finance, said the fintech firm entering the financial industry as a new market player is a meaningful development.
"Establishing a sustainable and viable business model could set a fresh precedent in one of the most conservative industries defined by its reluctance to outside disruptions. But Shinhan must have concluded that the joint partnership has more to gain than to lose," he said.
A much-expected synergy between the two partners is a still a risk-filled business move, he added.
"Shinhan can of course achieve innovation as part of a broader strategy towards digital transformation, which will advance faster and easier with the help of fintech firms. But the danger lingers that the now-partner can become an enemy that can end up overpowering it. And the firm knows it."
While the budding fintech firm is not highly profitable as of yet, it has great potential for future growth, indicated by its growing market presence and popularity with customers over the past few years.
Toss introduced a peer-to-peer (P2P) payment service in 2015 and has since been offering a range of financial services including balance and transaction history inquiries, credit score management, opening savings and installment accounts as well as customized insurance plans.
Over 30 trillion won in cash transfer transactions have been made as of Feb. 11.
"The firm's signature easy cash transfer service has drawn nearly a fifth of the country's population in a short period of time. This means the firm has effectively pinpointed the customers' needs and adapted its business model accordingly in a swift and agile manner. The market has proven the firm has great room for further success," Suh said.
Of over 10 million Toss users, some 40 percent, or 4.02 million, are in their 20s, an indication of the platform's growing popularity among the tech-savvy younger generation, a potentially viable customer base with the launch of new securities firms.
This is the latest business move by Toss in seeking to expand its business ― it secured $80 million from Kleiner Perkins and Ribbit Capital, Silicon Valley venture capital firms, which were investing in the Korean market for the first time.
Ribbit Capital is a fintech investment powerhouse and Kleiner Perkins is an American venture capital firm best known for early bets on tech giants Google and Amazon.
