Aju Business Daily

SEOUL -- The operator of Toss, a popular fintech unicorn in South Korea, made a second attempt to win state approval as a new internet-only bank by forming a strong consortium with two commercial lenders as well as foreign and domestic investors, five months after the first bid was rejected by regulators due to concerns about capital stability.

Viva has extracted positive assessment for its innovative idea by benchmarking European digital challenger banks, but it failed to secure preliminary approval from financial regulators in May after South Korea's leading financial group, Shinhan, withdrew as a key partner. At the time, evaluators raised questions about the consortium's ability to finance and make a continued investment.

For its second bid, Viva Republica attracted powerful domestic partners like KEB Hana Bank and lowered its stake in the consortium from 60.8 percent in May to 34 percent. The combined stake held by foreign investors was reduced from 19.3 percent to 10.33 percent.

"We want to introduce a new Internet bank that goes beyond the common sense of the existing financial sector," Viva said in a statement on Tuesday after sending an application to the Financial Services Commission.

Viva has advocated an innovative start-up system like a digital challenger bank which emphasizes inclusiveness and easy access. It now offers to strengthen risk management and provide optimized financial services to small businesses.

KEB Hana Bank, Hanwha Investment and Securities, the Korea Federation of Small and Medium Business and E-Land World, a clothing product retailer, each hold a 10 percent stake, followed by Standard Chartered Bank Korea with 6.67 percent, Welcom Savings Bank with five percent and Korea Electronic Certification Authority (Crosscert) with four percent.

Foreign partners include Altos Ventures, a venture capital firm based in Silicon Valley, Goodwater Capital which invests in Britain's challenger bank Monzo, and Ribbit Capital, the investor in Brazil's challenger bank Nubank.

The Viva consortium is a strong candidate to become South Korea's third internet-only bank because another consortium led by Kiwoom Securities, an online brokerage service company, decided to give up after its previous partner, KEB Hana Bank, teamed up with Viva. There are two internet-only banks, K bank and Kakao Bank, which provide diversified loan services and easy lending to young smartphone users.

Viva made its foray into South Korea's digital banking and peer-to-peer payment service with Toss which provided one-stop internet banking and transaction services in February 2015. The simple banking service quickly gained popularity as Toss allows users to access and manage credit, loans, insurance, investment and more from financial service providers.

During its journey to become a tech unicorn, Viva Republica has successfully raised money from foreign investors to bolster its financial strength. In August, it attracted a fresh investment of $64 million from foreign investors including Aspex Management, a Hong Kong-based investment company.

In October, Viva was selected as the preferred bidder to acquire the payment gateway (PG) business of LGU+, a third mobile carrier in South Korea. PG is a merchant service provided by an e-commerce application service provider that authorizes credit card or direct payments processing for e-businesses, online retailers, bricks and clicks, or traditional brick and mortar.

The payment gateway facilitates payment transactions by the transfer of information between payment portals and front-end processors. The PG market has grown consistently, backed by the expansion of online shopping malls, but competition is getting fierce.

The acquisition price is estimated at around 300 billion won ($253 million). Vivia aims to provide a comprehensive fintech platform with its own online payment network.


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