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Kakao plans to link up banking and payment platforms

South Korean internet company posted 68% rise in operating profit

SEOUL -- Internet company Kakao said it will connect its new banking service with its popular payments platform later this year, as it seeks to synergize its businesses and innovate in the financial technologies sector.

The company, whose messenger application, KakaoTalk, is used by more than 42 million people in South Korea, said Thursday that its next step is to combine the KakaoBank platform with KakaoPay services. KakaoBank, an internet-only bank, has drawn 2.16 million customers in the two weeks since its launch on July 27. Kakao owns a 10% stake in KakaoBank.

"We expect to create synergy by putting the strengths of KakaoBank and KakaoPay together," said Choi Yong-seok, a director at the company, in a conference call. "We are sharing ideas and trying experiments on the plan which will be introduced in the second half."

Kakao posted better-than-expected earnings in the second quarter on Thursday. Its operating profit jumped 68% to 44.6 billion won ($39.1 million) year-on-year in the April-June period. Sales rose 24% to 468.4 billion won during the same period.

Content sales increased 24% to 236.3 billion, with revenue from music content rising 29% to 117.1 billion won. Sales from advertisements came in at 151.4 billion won, up 11%. But its net profit fell 6% to 12.5 billion won after it paid 23.5 billion won in exceptional corporate taxes as a result of asset sales.

Analysts said KakaoBank would help boost the value of its KakaoTalk platform by offering big data, including the consumption patterns of its customers.

"KakaoTalk can expose targeting advertisements by using the financial information of KakaoBank customers," said Kim So-hye, an analyst at Hanwha Investment & Securities. "KakaoBank is impressive because it aims for a new platform beyond banking and fintech based on KakaoTalk."

Kakao shares were flat at 108,500 won on Thursday, after falling 2.25% the previous day. They have been on a downward trajectory since Aug. 1 when they reached a one-year high of 124,500 won.

The benchmark KOSPI slipped 0.38% to 2,359.46, extending losses over three consecutive days on geopolitical worries as the U.S. and North Korea ratchet up their war of words.

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