Kakao, one of the largest internet companies in South Korea will integrate cryptocurrency transactions into its network of websites in 2018. Its companies include KakaoTalk, KakaoPay, KakaoStory and Kakao Taxi. The company also has a 20% share in Dunamoo, the company that launched the digital currency exchange, UpBit.
This news comes on the heels of another announcement by Kakao. On March 8, the commerce giant began the Closed Beta Test (CBT) for its AI open development tool with a call for participation. People who apply to the program will have access to Kakao’s AI platform, which may be used in developing chat bots and voice services that are similar to its enterprise tool, Kakao Talk. The company has formed partnerships with Samsung and Hyundai.
Besides the AI project, Kakao formed a new blockchain subsidiary, and is expected to raise funds through an ICO. They will integrate Bitcoin, Ethereum and other cryptocurrency processing into its fintech application, KakaoPay. The payment solution has millions of users who use it to send and receive payments, similarly to popular options in the United States like PayPal and Square. Not only will Kakao process both fiat and cryptocurrency, but they will release their own digital currency that people will be able to utilize on their platform.
UpBit was launched in 2017 as the first cryptocurrency exchange in South Korea that did not accept fiat transactions. It has since become one of the top five cryptocurrency exchanges in the country. As competitors like Bithumb have formed partnerships with South Korean ecommerce platforms and other companies, it was a logical next step for Kakao to move in a similar direction.
South Korea has a population of over 51 million people, and Kakao currently has 90% market penetration in messaging, taxi services and fintech in the country. It is most popular with millennials who use it as an alternative to banks. Kakao offers many of the services that people would expect from a bank, including loans, digital bank accounts and transaction processing. Once Kakao integrates cryptocurrency transactions into its platform, nearly the entire population of the country will have access to this alternative to fiat payments.
This move appears to be necessary for Kakao, as Bithumb has already begun installing cryptocurrency kiosks into restaurants and other businesses, and has formed a partnership with Yeogi Eottae, a popular hotel booking platform in South Korea. The kiosk brand, Touch B, came about through a partnership between Bithumb and kiosk manufacturers Unos Space, Tros Systems and IYU. According to the article, Bithumb launched three services as a result of the partnership, including Touchpad, Touchbone and Bithumb Cache.
Though Kakao’s upgrades to its platform will get cryptocurrency transaction capabilities into people’s hands at a massive scale, the method isn’t likely to be adopted, at least for Bitcoin, until Lightning Network is in full effect, where transaction costs and speeds become feasible. Once that happens, however, we can expect the model to serve as a case study for global adoption.