Toss's April sales reached 14 billion won (US$11.4 million), well above its average monthly revenue of 9.8 billion won (US$7.9 million) in 2019, according to Korea's The Dong-A Ilbo newspaper. Toss currently handles 4.5 trillion won ($3.7 billion) of transactions a month and processed about 9% of South Korea's online transfers last year.
“This year, the domestic financial industry’s switch to online untact [contactless] services will become accelerated,” Lee Seung-geon, CEO of Viva Republica, said in a statement. “Given the industry trend, Toss is expected to experience greater profit growth.”
Toss has benefited from an open banking system the Korean government adopted in late 2019 that reduced commission payments to banks to 1/3 of the previous cost, Lee told Bloomberg in a May interview. Toss's revenue has increased sixfold in the past two years, he added. Toss was valued at US$2.4 billion in its most recent fundraising round and has raised a total of more than US$350 million.
Toss's improved performance marks the latest stage of Viva Republica's steady turnaround. 11 months ago, South Korea's Financial Services Commission (FSC) rejected Viva Republica's application for a digital banking license, citing the company's 44.5 billion won loss in the 2018 fiscal year. The regulator also expressed concern about Toss Bank's "unstable capital structure" and an ownership structure in which a tech firm was the dominant shareholder.
In December, however, the FSC accepted Viva Republica's new application for an online banking license after the fintech unicorn adjusted its ownership structure and fundraising plans. With the license, Toss Bank will be permitted to offer a suite a retail banking services, including current accounts, credit and loan products.
When Toss Bank launches, competition in South Korea's nascent digital banking segment will intensify considerably. There are only two other online banks, K bank and Kakao bank. Each of those firms has its respective strengths, but neither offers as broad a suite of services as Toss. The Seoul-based company offers about 40 different services at present, among them financial dashboard, credit score management and payments. It claims 30 million downloads and 16 million registered users, about 20% of the South Korean population.
In the future, Toss plans to offer securities brokerage services and loans to both retail customers and SMEs. Viva Republica CEO Lee reckons the South Korean market has a strong appetite for a frictionless, digital-first version of these services. Lee plans to raise about US$200 million from investors to fund Toss's growing suite of digital financial services.
At the same time, Toss is exploring new markets. It has 300,000 monthly active users of a reward service in Vietnam that provides financial incentives for completing specific tasks. It is also reportedly mulling expansion to other Asean countries and Japan.
Should Toss become successful as a digital bank, its strategy could be instructive for other neobanks: Focus on serving customers at home first with a wide array of services - and making that business profitable. Then worry about full-on international expansion.