Korea's Kakao Crash Causes Chaos

calendar iconOct 26, 2022

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The crash of South Korea’s widely-used Kakao platform—which provides a range of services including payments—has raised questions around the wisdom of allowing technological monopolies, and serves as a reminder that back-up payment options are essential when using cashless options.

For everything from messaging and ride hailing to banking and payments, Kakao offers an app. It’s flagship platform—KakaoTalk—is used by an estimated 43.2 million people, or around 84 percent of South Korea’s population. Consequently, the disruption caused by a data centre fire that knocked out or damaged services across the network for between 10 hours and two days from Saturday 16 October was keenly felt across the nation.

KakaoPay’s monthly active user base is around 4.6 million, with KakaoBank serving 12.9 million, and many of these found themselves in awkward situations when they were unable to make payments. Cryptocurrency trading was also affected as the country’s largest exchange—Upbit—syncs with KakaoTalk for many user logins.

I was trying to pay for the items in my cart around 7 p.m. yesterday when I found out the services were down. I didn’t have my wallet with me because I was planning to pay through KakaoPay.
"Choi, University Student

Namkoong Whon, Co-chief Executive of Kakao, has resigned his post, telling reporters he felt a ‘heavy burden of responsibility’ over the incident. The company has said it will compensate affected businesses and individuals, and plans to invest in additional data centres from 2023.

Analysts have noted the event exposes the risks of both one company monopolising wide-ranging services, and of society depending exclusively on digital technologies that are subject to disruptive and potentially long-term outages.

The Kakao incident confirmed that a hyper-connected society built on a digital platform can easily collapse.
"Yee Jae-yeol, Professor of Sociology, Seoul National University

In further evidence of the necessity of back-up payment options, Shetland—a British archipelago above Scotland—found card payments unavailable among other disruptions late last week when a subsea cable was cut between it and the mainland. Outages were expected to last days with phone, broadband and mobile services needing to be restored.

Last Updated: Oct 25, 2022