Two IPOs reveal Gen Z’s vision of banking

India’s biggest-ever initial public offering can’t be chalked up solely to the zeitgeist. Like most markets, irrational exuberance and easy money will no doubt play a part in Paytm’s upcoming $2.2 billion share sale. But above all, investors will be placing bets on what a 12-year-old, unprofitable fintech firm backed by SoftBank Group Corp and Ant Group Co could yet become.
As for what that might be, look toward South Korea.
There, KakaoBank Corp, an affiliate of Ant-backed Kakao Pay Corp, is going public at the top of its indicated price range after institutions bid $2.25 trillion, more than 1,700 times the shares offered to them. Retail participation was expected to end on Tuesday.
Internet-based businesses are raising funds at a record pace, making use of the boost given by the pandemic to all things digital. Additionally, exposure to a Korean new-age virtual bank or an Indian fintech gives yield-starved global investors a hiding place from Beijing’s unpredictable regulatory action against China’s tech titans, including Ant.
But there’s more going on at KakaoBank, something that might also be relevant to Paytm. The tempo is being set by customers in their 20s and 30s who don’t care much about banks as brick-and-mortar institutions but want to consume banking online like any other service, customised to their spending patterns and investment priorities.
When younger tenants approach the internet-only KakaoBank for loans to lease apartments — known in Korea as “jeonse” — they don’t have to show up at a branch, which doesn’t exist anyway. Face-to-face contact offers little additional information to the lender, given that 90% of the population is on KakaoTalk. From within the popular, 11-year-old messaging service — parent Kakao Corp’s first big success — users can access the Kakao Pay wallet for cashless person-to-person and in-store payments.
That’s a big advantage over traditional lenders that “lack a platform to attract customers and collect data from nonfinancial services, as well as incur higher costs to maintain physical branches,” according to Moody’s Investors Service. KakaoBank, which currently competes in 14% of the country’s won-denominated debt market, will in 12 to 18 months start attacking 65% of the market, Moody’s says. No wonder, then, that KakaoBank’s post-IPO market value won’t rank too far behind that of the largest retail lenders, KB Financial Group Inc. and Shinhan Financial Group Co.

—Bloomberg

Leave a Reply

Send this to a friend