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Viva Republica, the Seoul-based fintech company behind Toss, a super app with more than 40 financial services, announced today it has raised $410 million at a post-money valuation of $7.4 billion. The new funding was led by Alkeon Capital, an American investment firm, and included participation from new investors like Korea Development Bank, and returning backers Altos Ventures and Greyhound Capital.

The company plans to launch Toss Bank, a neobank, in September 2021, which it describes as “the final key component” of its super app strategy. It will also use the funding to continue its expansion in overseas markets, including Vietnam, where Toss launched last year.

Viva Republica, which hit unicorn status in 2018, has now raised more than $940 million in equity funding.

Founder and chief executive officer SG Lee told TC that Toss Bank will focus on lending, and also offer savings accounts with competitive interest rates.

“A lot of challenger banks and neobanks are focusing on the banking experience, such as cards, so their main revenue source is interchange fees,” he said. “Toss is quite different because we already cover all that. We cover P2P payment, money transfer, cards and all sorts of services. So we are focusing on loans, unsecured loans, mortgages, all sorts of loans. We are going to use this vehicle to give the most competitive interest rates to users, and Toss Bank will not have a separate app, since we have super app strategy.”

Toss founder SG Lee

One of the reasons Toss Bank is focusing on loans is because if someone has a middling credit score, many South Korean banks will only offer them loans at subprime interest rates, Lee said. Toss Bank will be able to offer better rates because its risk-scoring model leverages data from its millions of users.

Toss now claims a total of 20 million users (or more than a third of South Korea’s 51.7 population) and of that amount, 11 million are monthly active users.

The app launched as a Venmo-like peer-to-peer money transfer platform in 2015, before adding more services. Now its users can turn to the app for almost all of their financial needs.

For example, they can check their balances at different banks and credit cards on a dashboard. Merchants can use Toss Payments to send and receive online payments and manage their business finances. Other features include budgeting tools, bill payments, a credit score tracker and insurance plans. Lee said more than 20% of bank accounts and credit cards in South Korea are already registered on Toss.

As a financial super app, Toss Bank will be able to supplement information from South Korea’s main credit rating agencies with its own data about user transactions: for example, where do they spend money, how often do they spend, their cash flow and balances.

Lee added that one of South Korea’s leading credit bureaus, KCB (Korea Credit Bureau), backtested Toss’ engine with data from over two million users, and it turned out to be 150% better in terms of differential power analysis and 30% lower in delinquency rates. “This is the first engine that counts this asset-related data, and no machine-learning technologies have been used in credit evaluation” in South Korea, he said. “I think Toss Bank is really well-positioned to disrupt the whole loan market.”

In March, Toss also launched an investment service called Toss Securities, designed to make stock trading accessible to new investors who shy away from traditional brokerages. Over the past three months, it has signed up more than 3.5 million users.

Viva Republica launched Toss in Vietnam, its first international market, in 2020, and the app now has services like no-fee money transfers, debit cards and a financial dashboard through a partnership with CIMB bank. Toss currently claims more than three million monthly active users in Vietnam and says it adds more than 500,000 active users every month. Toss is planning to enter other Southeast Asian markets, too.

Toss hasn’t finalized a timeline, but it is targeting Malaysia for its next market by the end of this year. “The product that we built for Vietnam is actually quite scalable across all Southeast Asia markets, so it’s a matter of time,” Lee said. “But we want to focus on the Vietnam market because it’s scaling increasingly fast and we have to cover the growth.”

As for the possibility of holding an initial public offering or finding another exit opportunity, Lee said the company is still finalizing its plans. “As an Asian company, reaching a $7.4 billion valuation is pretty high, and I think at some point we will face not being able to do more fundraising in the private market. So we’re targeting to raise once more by the end of this year or early next year for over $300 million. That will be our last private fundraising, and then we’re thinking a timeline of three years, and we are reviewing not only for a Korean listing but also a U.S. listing.”