SEOUL (Reuters) - South Korea’s top chat app operator Kakao Corp said on Tuesday it will start charging fees for some services such as faster taxi bookings and business trips, ending nearly three years of wholly free services offered by its taxi-hailing app.
Kakao has capitalized on its dominant position in messenger services to expand into deposit-taking services and taxi booking in the nation’s $8.5 billion taxi market. The new plan will help it monetize its fast growing user base at a time when rival Uber Technologies [UBER.UL] continues to struggle in the country, analysts said.
Its no-fee service and taxi drivers’ ubiquitous use of the Kakao platform have been seen as key to its success in the country, despite it being a latecomer. By contrast, Uber has faced opposition from local taxi drivers and was forced to discontinue a ride-hailing service using private cars in 2015.
Kakao Mobility, Kakao’s taxi-hailing unit, unveiled on Tuesday a corporate taxi-hailing service for business trips that charges a fee per ride. It also plans to charge fees sometime this year if customers want taxis immediately or want better vehicles.
“Other than the existing regular hailing, options will impose a fee for using the platform,” CEO John Jung told reporters. He did not give details of the charges or their financial impact, only saying that Kakao Mobility is moving towards making a profit.
Kakao’s taxi-hailing service is No. 1 in South Korea, with 18 million subscribers - about 35 percent of the population - and 96 percent of taxis in the country as partners, according to the unit. It has been charging no fees since its launch in early 2015.
“Uber was the first to enter the market, but because it’s such a global company, it drew concentrated fire from the taxi associations,” said Samsung Securities analyst Oh Dong-hwan.
South Korea has about 250,000 licensed taxis and sees about 9 trillion won ($8.46 billion) in annual revenue from taxis, according to Meritz Securities analyst Kim Dong-hee.
In South Korea, Uber currently offers premium taxi-hailing, licensed taxi-hailing without fees, licensed car hire for longer trips, a service for seniors and people with disabilities, food delivery, plus a limited private-car carpool service available only from Gangnam, Seoul.
A local spokeswoman declined to give user data for Uber’s South Korean services.
Uber has faced bans, restrictions and protests in Asia and around the world as authorities took a tougher stance against the San Francisco-based firm amid complaints from traditional taxi drivers who say Uber drivers are not properly registered or insured.
Private equity firm TPG has invested 500 billion won in Kakao Mobility last year, Kakao said, and sold about 3 percent out of its 30 percent stake in the firm to Hong Kong and U.S. institutions last month.
($1 = 1,064.0500 won)
Reporting by Joyce Lee; Editing by Miyoung Kim and Muralikumar Anantharaman