Coupang, Naver borrow funds from internal financial arms

[Courtesy of Coupang, Naver]

South Korean online platform giants expanding their business domains into the financial sector, including Coupang Inc. and Naver Corp., have reportedly been borrowing a considerable amount of operational funds from their financial subsidiaries.

According to the Korea Fair Trade Commission (KFTC)’s report detailing internal transactions within conglomerates on Monday, Coupang extended its existing agreement to borrow 400 billion won ($307 million) in working capital from its affiliated financial company Coupang Pay in 2022. Coupang Pay is Coupang’s wholly owned fintech subsidiary, and this borrowing via affiliates was the largest among the 82 conglomerates in Korea. According to disclosures from the conglomerates, the volume of money transactions between financial and non-financial companies within conglomerates totaled 2.45 trillion won in 2022, of which, excluding Nonghyup, 690 billion won was for commercial purposes.

Recent financial transactions between conglomerate-affiliated financial and non-financial entities have prominently involved online platform companies. In Naver’s case, SNOW and Naver Cloud borrowed 75 billion won in operating capital from Naver Financial in 2022, marking the third largest in terms of fund borrowing for commercial purposes, following Coupang and Samsung. The financial transactions between financial subsidiaries under Coupang and Naver constitute a substantial 69 percent of all internal financial transactions within conglomerates, excluding Nonghyup.

Coupang retained its top position in borrowing funds for commercial purposes among conglomerates last year, having borrowed 400 billion won from Coupang Pay in 2021 and in the same year, Naver subsidiaries including SNOW and Naver Cloud borrowed 150 billion won from Naver Financial. While it is not illegal for a conglomerate to transfer funds between its non-financial firms and financial affiliates, there are concerns that the growing scale of the transactions could undermine the principle of separation of industrial and financial capital.