Following the success of Venmo in the US, PayPal is seeking to capitalize on P2P transfers in South Korea through mobile payment app Toss. However, to stand out from competitors and generate revenue, Toss will need to provide value-added services.
PayPal has recently announced that it is joining a $48m Series C funding round for South Korea-based P2P payments firm Viva Republic. The round was led by VC Goodwater Capital and was joined by Bessemer Venture Partners, Altos Ventures, and Partech Ventures.
While South Korean P2P transfers generally require a large number of authentication steps, Viva Republic’s P2P mobile payment app Toss creates a simplified solution for consumers. The app allows them to send up to $500 from their phones in three easy steps: enter the recipient, the transferred amount, and a password.
Having benefited from deals with the country’s 19 major banks, Toss has been downloaded more than 6 million times and has facilitated over $3bn in transfers in just two years, making it a success story in the South Korean payments market. However, since most transfers are not revenue-generating, the firm initially aimed to develop a strong customer base, later focusing its efforts on convincing customers to use additional services in order to generate revenue. Consequently Toss has sought to move beyond P2P into consumer financing, with the launch of a financial dashboard, credit scoring, and micro-loan features. The company plans to further extend into micro-insurance and cross-border transfers in the future.
While the US market has witnessed the growing popularity of mobile payment service Venmo (owned by PayPal), PayPal aims to replicate some of its experience in a distinct South Korean market environment. In spite of South Korea often being overlooked by the likes of China or India, there is increasing opportunity for transition to mobile payments due to the country’s almost 65% internet banking penetration (proportion of adult population using online banking) and 79% smartphone penetration (proportion of total population using smartphones) estimated for 2017 (according to GlobalData’s Cards and Payments Market Drivers).
Facing strong competition from messaging platform Kakao, which recently gained a $200m investment from Ant Financial for the development of mobile payments solution Kakao Pay, Toss is likely to grow in the South Korean market if it manages to drive usage through its P2P platform and offer enticing value-added services.
By Nicolae Bacila, Consumer Payments Analyst