Kakao to challenge Naver, Apple for offline payment services

South Korea’s largest mobile payment app KakaoPay has bought a stake in the country’s No. 1 electronic payment system provider, according to industry sources on Wednesday, a move seen to challenge its archrival Naver Pay and new competitor Apple Pay in the offline payment service market.

KakaoPay, a unit of the mobile messenger app operator Kakao Corp. recently purchased shares in OKPOS Co., which controls almost 40% of South Korea’s point-of-sale (POS) payment services.

Details such as the investment size and its ownership rate were not immediately disclosed.

NICE Holding Group, a domestic automated teller machine provider, owns 88.17% of OKPOS.

The stake purchase is expected to help KakaoPay accelerate it penetration into the payment service market for small-size retailers.

Founded in 1993, OKPOS develops POS terminals and unmanned order payment system kiosks. It provides them to 240,000 stores across the country, a majority of which are mom-and-pop stores.

A POS device processes credit cards and debit cards, as well as cash payments.

KakaoPay’s investment in OKPOS comes as the country’s dominant online platform Naver Corp. is building its presence in the offline payment market through Naver Pay and its online shopping mall Naver Smart Store.

Heating up competition, Apple Pay, a mobile payment app of Apple Inc., recently announced its entry into the Korean market.

Kakao is trying to increase the number of stores that accept its payment service. As part of such efforts, it formed a strategic alliance with Toss Payments, a unit of fintech platform Toss.

South Korea’s mobile payment market swelled to 221 trillion won ($154 billion) in 2021, a 57% surge on average per year over the past five years. The figure represents slightly more than one-fifth of 1,000 trillion won payments by individuals in the country.

In the second quarter of this year, a total of 29.1 trillion won ($20 billion) of transactions were settled through KakaoPay on both online and offline platforms, including money transfers.

That is more than twice as much as Naver Pay’s 12 trillion won, including 700 billion won at offline stores, during the same period. But Naver Pay reported a 100% surge on-year in its offline payment services.

Write to Jin-Woo Park at jwp @hankyung.com
Yeonhee Kim edited this article