Line bets on digibanking in Taiwan, Thailand and Indonesia

Written by Kapronasia || July 18 2023

Naver’s Line has been keen to leverage the strength of its messaging app and e-wallet in select markets to expand into digibanking. Yet Line Bank Japan, which was supposed to be a tie-up between Line and Mizuho Bank, quietly folded in March, 4.5 years after the venture’s first preparatory company was established. Chalk up its failure to regulatory woes. However, Line has set up three other digibanks in the Asia-Pacific region that rely on a similar strategy of teaming up with incumbents.

Looking at Line Bank’s presence in three different Asian markets – one developed, one middle income and one developing – we can see several common points. One, Line chose to launch its digital bank where its messaging app is widely used, and it made sure to use a traditional bank as its partner in each venture.

Arguably Line’s highest profile digibanking venture is in Taiwan, where the Line messaging app is as ubiquitous as in Japan. Line’s partners in the venture include a who’s-who of incumbent lenders in the Taiwanese market: Fubon Bank, CTBC Bank, Standard Chartered and Union Bank of Taiwan. Though the digibank accrued more than a million users in its first year of operation, its average account balance has been pretty low – in the neighborhood of US$1,000-US$1,500 – while heavy losses in its first year of operation necessitated a recapitalization of US$243.2 million in May 2022.

We are cautiously optimistic on Line’s long-term prospects in Taiwan – as long as regulators do not try to choke off its growth. Taiwanese digibanks already face many constraints on their business models intended to protect incumbents and minimize market disruption. We think regulators will take solace in the fact that Line Bank Taiwan is not a startup in the traditional sense, but rather a mash-up of Big Tech and traditional banks eager to capitalize on the increasing digitization of financial services.

In Thailand, Line is working with the incumbent Kasikornbank on Line BK, dubbed as the kingdom’s first so-called “social bank.” Line BK must be doing something right, because in November 2022 it was named by The Asian Banker as the best digital-only bank in Thailand. According to The Asian Banker, Line BK processes more than 20,000 loan application daily and grew its outstanding balance from the lending business by 100% year-on-year.

Line BK aims to acquire 1 million new users this year, which would give it 6.3 million customers, and disburse 5 billion baht in new loans. Line BK is targeting profitability – not EBITDA, but net income – by 2024.

Meanwhile, in Indonesia Line has teamed up with Korea’s Hana Bank in which Line holds a 20% stake. “Membership” in the bank surpassed 500,000 within a year of its launch," Hana Financial Group Chairman Ham Young-joo said in a statement.

While this venture is the most nascent of Line's three international fintech projects, and competition is intensifying in Indonesia's digibanking sector, it also has the most long-term potential. After all, Indonesia has more unbanked and underbanked adults than the combined total populations of Thailand and Taiwan.