PayPal backs South Korean maker of Toss in $48m round

Viva Republica, the maker of money transfer app Toss, plans to use the $48 million funding to expand its fintech product range and become a full financial services platform.

viva-republica-ceo-sg-lee.jpg

Viva Republica CEO SG Lee

Image: Viva Republica

Viva Republica, maker of peer-to-peer money transfer app Toss, announced that it has raised $48 million in a Series C round led by San Mateo-based VC firm Goodwater Capital, with PayPal, Bessemer Venture Partners, Altos Ventures, and Partech Ventures also contributing to the round.

The latest funding round brings the total amount raised by the Seoul-based company to 87.5 million won.

Toss was launched two years ago to address what the company CEO and former dentist SG Lee felt was a frustratingly "archaic" web and mobile banking experience in Korea.

"Despite Korea being a large market and despite its strong technology infrastructure, strict regulations and a traditional banking system have led to financial apps with inefficient and cumbersome user experience," Lee said in a statement.

"Before Toss, users required five passwords and around 37 clicks to transfer $10. With Toss, users need just one password and three steps to transfer up to KRW 500,000. The process is quick and simple."

Since its inception, Toss has garnered 6 million users -- its user base grew 13-fold in the last 12 months alone -- and processed more than $3 billion in money transfers, Viva Republica claims. It has also signed contracts with 18 of Korea's 19 banks.

Lee, who is also a fintech advisor to government regulators, said 90 percent of Toss' growth has been achieved through word of mouth.

The company said it plans to use the fresh capital to become "Korea's first full-service consumer financial application on mobile", offering additional services such as microloans and cross border money transfers.

"We have an incredible opportunity to expand our product offering and user base in Korea, where there's a tendency for vertical markets to consolidate to one or two top players," Lee said.

"We've done extremely well attracting millennials to Toss. Now we're developing services that will appeal to an older audience, for example a range of financial management services."

In addition to Toss' core money transfer service, Viva Republica has launched three other products: Toss Loans, Toss Financial Dashboard, and Toss Credit Score Monitoring.

Lee said the company is looking at Southeast Asia as its first international market.

"Many countries in Southeast Asia have old banking systems, similar to Korea's in the 1980s and 1990s. But mobile penetration in the region is very high -- in many cases already more than 90 percent," he said.

Lee added that the company is excited about its new relationship with PayPal, which acquired mobile payment service Venmo through its acquisition of Braintree in 2014 for $800 million.

"They are the number one player in online payments globally. Their participation shows that they recognise our potential. With their help, we can advance to the next level, globally and at speed," Lee said.

Viva Republica remains unfazed by Ant Financial's $200 million investment in South Korean mobile payments solution Kakao Pay.

"Honestly, we don't see Ant Financial's partnership with Kakao as a major threat. First, our user growth has been strong and steady since Kakao Pay launched. Also, they're focusing on mobile payments, rather than mobile money transfer," Lee said.

"Kakao Pay is primarily a B2B play, focusing on acquiring merchants. That strategy requires an enormous marketing budget that doesn't leave much in terms of margins. Toss is a B2C offering, focusing on providing a range of financial services to its users."

Lee also noted that Kakao has registered as a bank, making it a competitor to banks.

"[It] makes it more difficult for them to sign deals with rival financial institutions. Essentially, they compete with the banks, whereas we complement them," Lee added.

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