South Korea’s KakaoBank plans to venture into alternative investments, marking a strategic shift as the digital lender grapples with declining interest income growth.
The internet-only bank has established a dedicated position within its financial management division to assess alternative investments, including venture capital and international joint ventures. The move comes as the bank’s interest income growth dropped to 17.2% in 2023 from 58.3% a year earlier.
While traditional banks in South Korea have long included alternative assets in their portfolios, digital banks have stayed away due to limited resources. The shift reflects mounting pressure from regulators to reduce household lending and expectations of weaker loan performance amid anticipated interest rate cuts.
Rival Toss Bank is also exploring alternative investments through asset-backed securities, signaling a broader industry trend away from conventional lending models.
A Korea Institute of Finance researcher noted that banks need to move beyond loan-centered profit models, suggesting expansion into asset management as a viable strategy.
The initiative positions KakaoBank as the first among South Korea’s digital-only banks to enter the alternative investment space, potentially setting a precedent for the sector’s evolution.
