Viva Republica Raises $410M for Toss Super App - Valuation Hits $7.4B

Viva Republica Secures $410 Million, Valued at $7.4 Billion

Viva Republica, the Seoul-based fintech firm responsible for the Toss super app, has announced a successful funding round of $410 million. This investment results in a post-money valuation of $7.4 billion for the company.

Alkeon Capital, a U.S.-based investment firm, spearheaded the funding initiative. Participation also came from new investors, including the Korea Development Bank, alongside existing backers such as Altos Ventures and Greyhound Capital.

Launch of Toss Bank and Expansion Plans

The acquired capital will primarily support the launch of Toss Bank, a neobank scheduled for release in September 2021. The company views this as a crucial element in completing its comprehensive super app strategy.

Furthermore, funds will be allocated to ongoing expansion efforts in international markets, notably Vietnam, where Toss initiated operations in the previous year.

Growth and Funding History

Having achieved unicorn status in 2018, Viva Republica has now accumulated over $940 million in equity funding throughout its history.

Focus on Lending and Competitive Interest Rates

SG Lee, founder and CEO, revealed that Toss Bank will prioritize lending services. The bank will also offer savings accounts featuring highly competitive interest rates.

He explained that, unlike many challenger and neobanks concentrating on the banking experience and interchange fees, Toss already provides a broad spectrum of financial services. This includes P2P payments, money transfers, and card services. Therefore, the focus will be on diverse loan products – unsecured loans, mortgages, and more – to deliver superior interest rates to users.

Leveraging Data for Improved Risk Assessment

A key differentiator for Toss Bank lies in its ability to offer improved loan rates to individuals with moderate credit scores. Traditional South Korean banks often impose subprime rates on such borrowers.

Toss Bank’s advanced risk-scoring model utilizes data derived from its extensive user base, enabling more accurate assessments.

User Base and App Evolution

Currently, Toss boasts a total user base of 20 million, representing over a third of South Korea’s population of 51.7 million. Of these, 11 million are monthly active users.

Initially launched in 2015 as a peer-to-peer money transfer platform similar to Venmo, the app has evolved to encompass a wide array of financial services.

Comprehensive Financial Services within the App

Users can now manage nearly all their financial needs through the app. This includes viewing balances across various banks and credit cards on a unified dashboard.

Merchants benefit from Toss Payments for online transactions and business finance management. Additional features encompass budgeting tools, bill payment options, credit score tracking, and insurance plans. Over 20% of bank accounts and credit cards in South Korea are already linked to Toss.

Data Integration and Credit Evaluation

As a financial super app, Toss Bank will integrate data from South Korea’s credit rating agencies with its own user transaction data. This includes spending patterns, frequency, cash flow, and account balances.

Backtesting by KCB (Korea Credit Bureau) demonstrated that Toss’ engine outperformed existing models, exhibiting 150% greater differential power analysis and a 30% reduction in delinquency rates. Lee emphasized that this is the first engine in South Korea to incorporate asset-related data into credit evaluation, without relying on machine learning technologies.

Expansion into Investment Services

In March, Toss introduced Toss Securities, an investment service aimed at making stock trading more accessible to novice investors. Within three months, the platform attracted over 3.5 million users.

International Growth in Vietnam and Beyond

Viva Republica initiated its international expansion with the launch of Toss in Vietnam in 2020. The app offers services such as fee-free money transfers, debit cards, and a financial dashboard through a partnership with CIMB bank.

Toss currently has over three million monthly active users in Vietnam, with an average of 500,000 new active users joining each month. The company is also exploring opportunities in other Southeast Asian markets.

Future Plans and Potential IPO

Malaysia is being considered as the next target market, potentially by the end of the current year. Lee stated that the Vietnam-focused product is readily scalable across Southeast Asia.

Regarding a potential initial public offering (IPO) or other exit strategies, Lee indicated that plans are still under development. The company aims to secure another funding round of over $300 million by the end of the year or early next year, which would likely be its final private fundraising effort. A timeline of three years is being considered for a potential listing, with both Korean and U.S. exchanges being evaluated.