Kakao Pay, mobile payment service under South Korea’s leading messenger app KakaoTalk, has teamed up with Baro Investment & Securities Co. to optimize idle cash management through digital investment, a service modeled after hugely successful Alipay’s Yu`E Bao in China.

“We will work with Baro Investment & Securities to upgrade ‘Kakao Pay Money’ service to enhance our financial services,” Lee Jin, chief operating officer and vice president of Kakao Pay, said in an interview with Maeil Business Newspaper on Monday. “We will offer Yu’E Bao-like wealth management platform in Korea.”

Yu’E Bao is an online spare cash management platform within the Alipay app, allowing Alipay users to conveniently transfer their spare cash into the money market fund. Users can enjoy seamless access to their MMF accounts through their Yu’E Bao accounts for online and offline purchases.

Since its launch in 2013, Yu’E Bao has grown to become the world’s biggest money market fund, which once offered annualized returns of nearly 7 percent. The number of its service subscriptions recorded 580 million last year, meaning more than one out of three uses the platform for investment in China. Total assets under management on Yu’E Bao reach 1.13 trillion Chinese yuans ($162.3 billion).

Kakao Pay’s new service will also allow users to transfer their spare cash on their Kakao Pay account into a money market fund that will be launched and managed in partnership with Baro Investment & Securities. The company is planning to open trial service soon, according to Lee.

The new service customers will be able to enjoy much higher benefits, compared to other deposits on commercial banks with an average interest rate of 0.1-0.3 percent per year, said Lee. Estimated returns vary with investment type, but an annualized 1 percent yield is guaranteed if money is left on the account, according to the company.

In Korea, fintech firms are not allowed to offer interest on customers’ advance payment in accounts. With the new service, Kakao Pay now is able to prepare investment benefits as well as safety measures for customers’ money like financial institutions.

Kakao Pay initially planned to take over Baro Investment & Securities to diversify its financial services but temporarily suspended the buyout plan due to the delayed review process for the acquisition by financial authorities.

Separately, Kakao Pay is planning to enter the digital insurance market with release of so-called ‘mini’ insurance policies that have shorter coverage durations and smaller amounts insured than regular policies, this year in cooperation with Samsung Fire & Marine Insurance.

Demand for mini products such as travel insurance and online shopping insurance are exploding across the globe thanks to the easier acceptance and collection.

Yearly transaction volume on Kakao Pay last year is estimated to have surpassed 50 trillion won, more than doubling from 20 trillion won a year ago, according to market analysts.

The company targets to secure 30 million in subscriptions to become the country’s No. 1 in the mobile payment service industry.

By Lee Sae-ha and Lee Ha-yeon

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]