Toss Bank, Kakao Pay to launch car installment payment comparison service

[Photo by Lee Chung-woo]

South Korea’ Viva Republica, the operator of internet-only Toss Bank, and Kakao Pay Corp. are set to join the country’s automotive finance market that is estimated at 40 trillion won ($30.8 billion) by launching a new car installment payment comparison service.

According to sources on Thursday, Viva Republica is preparing to launch its new car installment payment comparison service in July. Kakao Pay is also planning to introduce a similar service soon, following the release of a card lump-sum cashback comparison service.

The moves are taken as the first step in establishing presence in the local car finance market, which is segmented into various sectors such as car insurance intermediary service and car lease and installment intermediary business.

Toss recently added a car insurance contract renewal notification service to its app, as it gears up to launch an online platform for insurance comparison and recommendations later this year.

The company has also obtained a license as a financial product sales agent, which allows for potential expansion of its lineup in the future. It may also collaborate with its subsidiary Toss Bank.

In response, K-Bank, a major competitor of Toss Bank, plans to release a car loan refinancing service later this month and provide car purchase funding loans within this year.

Automotive financing in Korea can be broadly categorized into auto loans and auto installments, and card installments. Unlike loan products such as auto loans or auto installments, card installments are not a loan product and are intended for relatively high credit consumers.

Even in the current economic downturn, card installments maintain a favorable margin structure.

Kakao Pay has already laid the foundation for entering the card installment payment market by launching a card comparison service for auto financing in April, allowing users to compare card lump-sum cashback offers when purchasing a new car.

Fintech companies have been entering the Korean auto finance market in recent years. The market, which is growing steadily, presents opportunities for fintech companies to make their mark to address inefficiency from dominance by car dealers.

The local car installment finance market, which was only around 1 trillion won in 2013, grew to over 10 trillion won last year. Car financing, which spans various sectors such as capital, banking, insurance, and fintech, is estimated to be around 40 trillion won.