Naver and Kakao are fleeing to Japan and other countries to start new businesses because of growing regulatory risks here amid conflicts with existing players, industry officials said Monday.
The moves reflect the latest trend that not only manufacturing but also services companies are increasingly leaving Asia’s fourth largest economy to seek new opportunities abroad.
Naver, Korea’s largest portal operator, recently decided not to seek a permit to operate an internet-only bank in Korea.
“We decided to drop out after conducting a careful review on whether we would have a competitive edge in the internet bank business here,” a Naver official said.
Instead, Naver has been active in expanding its financial business in Japan through its subsidiary, Line.
Line formed a partnership with the Mizuho Financial Group in November with the aim of launching an online-only bank for smartphone users in Japan by the end of 2020.
Industry officials cited Korean laws, which restrict an IT company to holding a maximum 34 percent stake in an internet-only bank, as one of the reasons Naver is seeking to expand into the fintech business in Japan, not Korea. They said Naver would not be able to smoothly operate various businesses with only a 34 percent stake.
Under their partnership, Line and Mizuho will hold a respective 51 percent and 49 percent share in the upcoming bank, which means that the Korean firm will be able to do business more freely by coordinating with the Japanese firm.
Line has also formed partnership with M3, a subsidiary of Japanese tech giant Sony, to enter the remote medical services market.
The move comes as such services remain illegal in Korea.
M3 operates a medical information website, offering various services.
The two companies plan to offer remote consultations and medical treatment through Line’s mobile messaging app.
Kakao, the nation’s largest mobile messenger app operator, is also using Japan for a strategic foothold to expand its blockchain businesses.
In March last year, the firm set up Kakao G, a holding company for its blockchain subsidiaries including Ground X, in Tokyo.
“Kakao is seeking to take the lead in blockchain technologies in the Asian market,” a company official said. “The reason we chose Japan as a strategic base was because various blockchain services are being tried and offered there. We have an advantage in Japan in creating a blockchain community for global developers.”
One industry official, asking for anonymity, noted that Kakao may be looking overseas as the government has shown a somewhat negative attitude toward blockchain on concerns about virtual currency speculation.
“ICT companies’ efforts to expand into new businesses are limited by several factors here including regulations,” he said.