What’s more important: knowing the sector or knowing the customer?
kakaobank is transforming banking in South Korea by creating customer-first experiences.
In July 2017, a new mobile-only bank was launched in Korea. In the first 24 hours, it had attracted more than 300,000 subscribers. Within a fortnight, it surpassed two million customers, amassing ₩1 trillion (US$930m) in savings and providing ₩770 billion (US$701m) in loans. Today, it is well on the way to having 10 million customers, that in a country of just over 50 million people (economically active population is 25 million). This is the story of the staggering growth of kakaobank.
Formed by the company behind South Korea’s hugely popular Kakao Talk messaging app, the rapid rise of the new, separate kakaobank digital-first bank was the result of looking at banking in an entirely new light. By constantly asking: “what is the purpose of a banking business?” and by applying digital-first thinking, kakaobank is transforming banking services in South Korea — and driving innovation in the banking industry.
The purpose of a banking business
Examining the existing banking landscape, EY and the kakaobank preparation team — made up of a number of key shareholders — identified that there were many Koreans who were not using many banking products and services because they had not been designed in a customer-centric way, and were often very difficult to use.
And market research by the EY FSO Advisory team in Seoul found that price was a driver of Korean banking customers switching providers. Creating a significant cost differential was therefore another important consideration.
Traditional banks spend large sums on their operational costs. Some banks can see up to 60% of their outgoings spent on branch operations and back offices. The kakaobank team wanted to strip away these costs and then share the benefits with their customers. Indeed, a key part of bringing the Korean financial regulator on board to issue new digital bank licenses was to demonstrate the benefits that could be passed on to the public.
So important was running a lean business that the kakaobank team even ruled out creating an online banking service, seeing it as unnecessarily expensive. This decision was reflective of the EY and kakaobank approach throughout the development process.
“The kakaobank team was very good at asking difficult questions,” says Young-Suk Kim, EY Korea Digital Lead and EY APAC FSO PI Lead. “Throughout, they kept asking ‘why are we doing this? Why are we selling loans and other banking products? Do we want to make money?’ — all to maintain their focus on delivering a bank beyond a bank.”