It has been almost been two years since the launch of Kakaobank in Korea and within that short span it has grown phenomenally and now has an account held by almost one in five Koreans. Its customer centric approach to revisit banking with a differentiated experience and a focus on convenience has helped it become one of the fastest growing banks in the world.
How have Kakaobank been able to grow so fast?
The argument for investment into digital banking propositions from the bank’s perspective are most often pillared by the reduction in the cost to serve its customers as traditional banks spend a significant portion on operational costs such as branches and back office. Kakaobank has been able to save on costs by not just being digital only, but by being a mobile banking service only available through mobile apps on Android and Apple mobile devices.
From the consumer perspective, these cost savings have been passed onto them through fee free accounts, free interbank transfers, lower loan rates, and lower exchange rates for FX remittances. Pricing is such an important part of the process as RFi Group shows it to be one of the key acquisition drivers in deposit products which is the cornerstone product of any main bank relationship. Given that the majority of Korean consumers are value driven, pricing is a key reason why Kakaobank have been able to attract customers to try it to begin with, opening the door to more cross selling opportunities that come further along with the customer journey.
For mass adoption in the banking segment, Kakaobank had to focus on transactional banking and start with the simpler banking needs. Everyone needs a deposit account to store their money and pay their bills and a payment card given the proliferation of online transactions, so what made Kakaobank’s products stand out?
Kakaobank has a huge advantage when it comes to the way their customers are able to use their deposit account as they are easily able to transfer (for free) to friends through their Kakao messaging apps without the rigmarole of OTP tokens which many of the banks in Korea still use. It also leverages Kakao’s existing brand equity as it has the main characters from the emoticons plastered across their check cards, which offer fee free withdrawals from any bank’s ATMs.
Account opening has often been compared to opening a Facebook account as Kakaobank implements e-KYC so that customers can open an account in 7 minutes which is significantly less time then it would take at a traditional bank branch.
The customer centric approach is quite evident from RFi data as it shows Kakaobank at the top of the charts for two years running when it comes to mobile app net promoter scores (NPS) in Korea. Kakaobank customers love the convenience it brings them at no cost to them and are now happy to look at Kakaobank when they’re looking to take up more complex products such as personal and home loans. The traditional banks have every right to worry about the future of its revenue pools as Kakaobank continues to attract customers of all ages with its ease of use and will be interesting to see whether Kakaobank can continue its exponential run to match the usage of Kakao’s messaging app.