KakaoPay has confirmed it received compensation related to the fire at the SK AX data center in Pangyo in 2022. This settlement comes after nearly four years of negotiations between Kakao and SK AX over losses incurred due to the disruption of key services such as payments, remittances, and loan brokerage.
On August 25, financial industry sources reported that the KakaoPay board recently approved a compensation agreement regarding the damages from the SK AX data center fire.
SK AX has made a lump-sum payment to Kakao, which has since distributed the funds among affected subsidiaries, including KakaoPay. The total amount of the settlement and the specific allocation to KakaoPay have not been disclosed.
The fire at the SK AX data center in Pangyo in October 2022 led to significant service interruptions for major Kakao services, including KakaoPay, KakaoT, KakaoMap, and Daum. KakaoPay experienced disruptions in its core services, including payments, remittances, loan brokerage, and transportation card services, resulting in user inconvenience and business losses.
In response, KakaoPay extended the validity of point coupons and implemented other customer compensation measures, while other subsidiaries also offered service extensions and additional coupons and points.
The total compensation provided by the Kakao community to users and business partners is estimated at approximately 27.5 billion won. Of this, 50 million won was distributed to 205 small business cases that met the compensation criteria. Additionally, around 900 small business owners received 45 million won worth of KakaoTalk channel cash.
When accounting for revenue losses due to service interruptions and costs associated with recovery efforts, the total losses incurred by the Kakao community likely exceeded the 27.5 billion won allocated for user compensation.
The lengthy negotiations over the compensation agreement were attributed to significant disagreements regarding the total amount of damages and the extent of responsibility for both parties. Kakao and SK AX clashed over whether the facts surrounding the fire and the power shutdown plan were adequately communicated, as well as who was responsible for the prolonged service disruptions.
Kakao maintained that the delay in server and service recovery was due to inadequate initial communication and notification regarding the power shutdown. Conversely, SK AX argued that the power shutdown was unavoidable due to requests from fire authorities and that Kakao's lack of server redundancy and disaster recovery systems contributed to the prolonged disruptions. The key issues in the compensation negotiations revolved around the responsibilities for power and facility management at the data center and the backup and recovery responsibilities of the tenant companies.
There were concerns that Kakao might seek reimbursement from SK AX after compensating users and small business owners, which could lead to litigation. However, both companies ultimately chose to settle to avoid the costs and uncertainties associated with prolonged legal battles.
A financial industry source stated, "The prolonged service disruptions and the complex issues surrounding the amount of damages and responsibility contributed to the lengthy negotiations. Both parties aimed to reduce the burden of litigation and ensure stable management, leading to the final agreement."
* This article has been translated by AI.
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