Deal focus: PayPal backs Korean counterpart Viva Republica

PayPal has made several attempts to take Venmo, its peer-to-peer (P2P) money transfer service, into South Korea but failed to gain traction due to the fragmented nature of the market. Meanwhile, local player Viva Republica – which operates a similar platform called Toss – has been on a consolidation drive. With $3 billion in transactions processed from six million users over the past two years, it has claimed to be expanding at four times the rate of Venmo.

Such is the success of Toss that PayPal came into Viva Republica’s oversubscribed Series C round, which recently closed at KRW55 million ($48 million). The deal was led by existing investor Goodwater Capital, with participation from Bessemer Venture Partners, Altos Ventures and Partech Ventures.

“Viva Republica was the fastest growing financial services company in the world. We identified it and decided to invest,” says Eric Kim, co-founder and managing partner of US-based VC firm Goodwater, which co-led a $23.7 million Series B for the company last year alongside Qualcomm Ventures. “And then in the Series C, we decided to double down because Viva Republica has grown even faster than we had expected. The business model and management team are getting stronger as well.”

Although Korea is a global leader in terms of IT infrastructure and smart phone penetration, mobile banking has proved more problematic. For example, it takes five password checks and around 37 clicks to transfer $10 when through online banking services provided by the major commercial lenders. With Toss, only need to enter their password once and complete three steps to transfer up to $435.

Having established itself as service through which users can split the bill at restaurants, settle utility invoices and make online purchases, Toss has branched into other areas of consumer finance. There is now a financial dashboard that provides a complete picture of a user’s bank accounts, as well as credit scoring and micro-lending services. “At $1 trillion a year, South Korea is one of the largest consumer loan markets in the world. Viva Republica could provide a lot of transparency with its consumer-focused tools,” says Kim.

Kim and S.G. Lee, Viva Republica’s CEO, are also looking to ride a wave of deregulation to achieve deeper penetration of the electronic financial services market. Citing data provided by the Bank of Korea, Viva Republica claims its app is 10 times larger than those of all its Korean competitors combined – and most of those are primarily focused on B2B services.

“We will only focus on the Korean market this year to ensure we are dominant. We will decide whether or not to expand overseas by the end of the year. If we go abroad, Southeast Asia will be in our priority because the market situation is similar to Korea,” says Lee. He adds that there are currently no plans to launch joint products with PayPal in the near term.

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• Topics
• North Asia
• Expansion
• Financials
• Technology
• South Korea
• Growth capital
• Venture
• Goodwater Capital
• Bessemer Venture Partners
• Altos Ventures