SEOUL (BLOOMBERG) – Viva Republica, operator of South Korea’s largest fintech start-up, Toss, has secured more funding worth US $ 7.4 billion (S $ 9.95 billion) for Help the super app grow 12-fold sales by 2025 as it moves towards a potential Initial Public Offering (IPO).
The Seoul-based startup has raised 460 billion won (S $ 545.8 million), more than half of which comes from foreign investors including Alkeon Capital Management and Altos Ventures, founder and CEO Lee Seung said. -gun in an interview.
The state-run Korea Development Bank injected 100 billion won into the cycle. It plans another round of fundraising in the first half of 2022 which will be the largest ever and the last before the start-up seeks to go public in the next five years.
Toss is one of a handful of global companies like Ant Group and Grab Holdings that are shaking up traditional financial services with all-in-one digital platforms that offer insurance, payments, credit scoring and even securities trading. .
The start-up plans to launch an online lender as early as September, after receiving South Korea’s third internet banking license earlier this month.
That, along with other services like its fast-growing securities platform, will help Toss double its monthly users to 20 million and increase revenue to five trillion won by 2025, a significant jump from compared to around 400 billion won in 2020, according to Lee.
“We are on the cusp of the great transition from traditional finance to online finance,” said the 39-year-old founder, wearing a short-sleeved shirt and navy shorts. “We have prepared so hard and now is the time to enjoy the thrills on the roller coaster.”
With the latest funding, Toss has become South Korea’s second most valuable startup, behind video game creator PUBG Krafton, which this month filed an IPO that will likely be the largest on record in South Korea. But unlike the game maker, the fintech company and its backers – a list that includes GIC, Sequoia China, and PayPal Holdings – are in no rush to float, Lee said.
“Our investors believe Toss will eventually become a US $ 100 billion company, so they are not rushing for an exit or an IPO,” Lee said. “At this time, we are not preparing or reviewing an IPO, but will list our shares within three to five years. Nothing has been decided on where to list, but we are open to options including listings in the United States or Korea. “
Toss’s success means Mr Lee, a former dentist whose previous eight businesses had failed, is set to join a growing list of billionaires in South Korea. His stake in the startup, roughly in his teens, is estimated at over $ 1 billion with the latest valuation of $ 7.4 billion.
He also follows other self-made tech entrepreneurs by investing in early stage start-ups and said he wanted to use technological innovation to solve major problems, from hygiene to finance to change. climate and food.
“The wealth map is being revamped,” said Mr. Lee, who is known to frequently spend sleepless nights in the office and mentor junior founders in his spare time. “It’s a pleasure to see that the risks the founders took are paying off. I would be happy even if my juniors later pushed me off the rich list.”
Toss, which reduced its losses by 37% to 72.5 billion won in 2020, will use the funds for new companies such as Toss Bank and Toss Securities, as well as for expansion in Southeast Asia, said Mr. Lee. Already in Vietnam, it aims to enter most countries in the region within two years.
Toss Securities officially opened its mobile trading system in March, seeking to capitalize on a resurgence of retail investment in the country.
In the first month, it amassed two million users – a milestone that took Robinhood Markets Inc for two years – after a popular promotion where it distributed a random slice of South Korean companies.
Three months later, it has attracted 3.5 million users and hopes to reach five million by the end of this year, as it aims to overtake Kiwoom Securities to become the country’s largest securities app in terms of users.
The stupendous growth was mainly driven by users in their 20s and 30s as a combination of easy money and free time during the pandemic led to a South Korean retail boom.
In 2020, the number of people under the age of 40 who held securities accounts more than doubled to nearly 3.2 million, according to data from Korea Securities Depository, while the amount of securities held by young people increased. increased by 98%.
Toss plans to further expand its securities trading service next month by adding U.S. stocks and ETFs, which are increasingly popular among South Korean retail investors.
It also plans to offer margin trading and automated advisory services in the first half of next year.
Toss Bank, the final piece of the puzzle for the startup’s financial super-app, also expects the switch to online services during the pandemic to help it compete with traditional incumbents like KB Financial Group. , as well as with Internet-only rivals such as Kakao Bank.
About 23% of loans in South Korea were made through online lenders last year, up from 13% in 2019 and 8% in 2018, Lee said.
Competition in digital loans and payments is intensifying in South Korea.
With easy access to hundreds of millions of people using South Korean internet giant Kakao Corp’s messaging service, Kakao Bank and Kakao Pay have grown rapidly and plan to go public this year. Another rival, K Bank – which recently amassed new users in the crypto space – is seeking to raise 1.2 trillion won from shareholders, including Bain Capital, to expand its business.
“The transition to the Internet is accelerating and I think 40% of loans will be transferred through online platforms next year,” added Mr. Lee. “This year and next will probably be the biggest times of transition.”
Using the wealth of financial data it has amassed, Toss Bank plans to use its new credit scoring system to manage borrowing risks and offer low-interest loans to new users to help them. to convert their existing debt.
This strategy will increase profits and allow Toss to pay higher interest on deposits, compared to the market average, Lee said.
The startup aims to have trillion won in deposits and 600 billion won in loans within six months of launch, he added. It is targeting one million users for the service during this year.
Outside of its home market, Toss is growing rapidly in Vietnam, a young and tech-savvy country of 97 million people where only 5% of the population uses credit cards.
With around three million monthly active users currently, it aims to reach five million by the end of this year, as it intensifies rivalry with local payments app Momo and overseas players like Ant and Grab.
Toss is also looking to enter Japan, where he sees the potential to innovate in the country’s fintech sector and win the market, Lee said.
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