While we were not all surprised to see Kakao team up with leading incumbent lender SCB in Thailand, we are intrigued by the Korean company’s decision to invest in Indonesia’s Superbank alongside Grab, Singtel and the Indonesian media conglomerate Emtek. Kakao Bank announced earlier this month it would take a 10% stake in Superbank for an undisclosed amount.
We are intrigued because to date, Kakao has always focused on a sort of vertical integration for software, building layer upon layer of digital services that together equaled a super app. In Korea, it is Kakao Talk, Kakao Pay, Kakao Bank, Kakao Games and Kakao Mobility.
Yet while this approach, which borrows from the Alipay and WeChat ecosystems in China, works well in Korea, Indonesia is a very different market, and Kakao is wisely not trying to replicate its approach at home there. Instead, Kakao appears to be literally buying into an existing ecosystem. In a joint statement, Kakao Bank and Superbank, highlighted Superbank’s strength in its ecosystem of prominent entities such as Grab, Singtel and Emtek Group, known for their extensive market penetration across diverse sectors.
Indeed, this investment can be seen as evidence of a budding alliance between Kakao Bank and Grab, which could learn a thing or two from Kakao about how to make digital banking profitable. Kakao, meanwhile, will look to learn from Grab about how to thrive in Southeast Asia’s disparate emerging markets, where incomes tend to be significantly lower than in Korea (ex-Singapore) and consumer behavior different.
Alongside the 10% equity investment, KakaoBank will also collaborate with Superbank in the planning process for deposit and lending products and services.
Through this venture, Kakao Bank expects to gain a deeper understanding of the Southeast Asian market, where it is a novice, having only just expanded to Thailand. However, one can imagine that the company will start to take strategic stakes throughout the region as it works to build a larger international network. While Kakao has established a strong position in its home market, it faces growing competition from both K Bank and Toss Bank and in a market of just over 50 million, there is a limit to how much it can grow.
"With this investment [in Superbank] as a starting point, we intend to discuss constructing a global digital banking network via strategic service alliances and technical cooperation," CEO of KakaoBank Yoon Ho-young said at a press conference.