Ant Group-backed financial technology firm Kakao Pay is facing renewed scrutiny ahead of its upcoming initial public offering as South Korea’s tech crackdown shows no signs of abating.

Regulators’ tightening grip on online financial platforms puts Kakao Pay, known for its mobile payment app interoperable with Korea’s popular messenger app KakaoTalk, under mounting pressure to revise its prospectus again to scale down its fintech service.

The stock market debut of Kakao Pay, expected to be valued up to 10.2 trillion won ($8.6 billion), could be put off yet again despite an earlier revision of its debut plan on Aug. 31 that had cut the target value by up to 1.5 trillion won.

Market watchers are already casting a bleak outlook for Kakao Pay’s target valuation. Analysts say that financial authorities’ crackdown on Kakao Corp.’s fintech arm, coupled with calls to contain the internet giant’s alleged anti-competition breach, have led to a downward revision of the IPO candidate’s projected valuation.

Hanwha Investment & Securities analyst Kim So-hye projected Kakao Pay’s valuation to as low as 6.8 trillion won, lower than the company’s minimal estimate of 7.8 trillion won as of the current prospectus. Kim cited a “regulatory concern” that puts a damper on Kakao Pay’s scalability, adding that more regulatory news could further heighten Kakao Pay’s volatility.

Meanwhile, Korea Investment & Securities analyst Jung Ho-yoon put the bottom value of Kakao Pay at 8.2 trillion won, placing a 30 percent discount on the firm’s maximum target valuation.

Kakao Pay’s businesses fall on two categories, its prospectus describes. They are financial services aimed at distributing insurance products, loans and funds; and nonfinancial services including mobile payment.

However, with the imminent introduction of the Act on the Protection of Financial Consumers starting Friday, Kakao Pay’s fintech-powered online financial services are subject to violations of the new law.

The controversial services can be construed as “brokerage of financial products” without a license, deemed illegal under the new law, instead of “advertisement” as fintech companies including Kakao Pay have claimed, according to the regulator Financial Services Commission earlier in September.

Kakao Pay has sought to overcome the regulatory hurdles by proclaiming on Sept. 8 that its subsidiary Kakao Pay Securities handles the fund distribution business and KP Insurance Service oversees the insurance product sales business, not Kakao Pay for either case.

In line with the move, Kakao Pay on Sept. 10 announced plans to halt financial services that provided its users with personalized recommendations of auto insurance products before the end of this week. Its recommendations of insurance products for drivers, pet owners, sports enthusiasts and overseas travelers followed suit.

The problem now lies with the mobile payment company that is now subject to a second revision of the prospectus that might again lower its IPO price currently targeted at between 60,000 won and 90,000 won apiece. It comes on the back of a subdued growth prospect of financial services that has accounted for about 15 percent of the firm's revenue since 2020.

In an earlier revision, Kakao Pay had already removed businesses to give its users access to a peer-to-peer lending service and cryptocurrency trades from the description in the prospectus, which was first filed on July 2.

Kakao Pay had also replaced its peer companies -- Paypal Holdings and Square -- with StoneCo and Upstart Holdings.

Its maximum IPO size through 17 million new shares has been reduced to 1.53 trillion won, from 1.63 trillion won as of July. Samsung Securities, JPMorgan Securities and Goldman Sachs are the lead underwriters.

Should the IPO plan remain intact, Kakao Pay’s two-day book building with institutional investors will begin on Sept. 29, while the IPO targeting retail investors is scheduled on Oct. 5-6. Their success will be followed by a proposed listing on Oct. 14.

Kakao Pay is now a 55:45 joint venture of Korea’s internet giant Kakao Corp. and China’s Ant Group.

On top of Kakao Pay, its parent company Kakao Corp. has become the target of an antitrust probe on the alleged misreporting involving Kakao Group’s de facto holding company K Cube Holdings. In response, Kakao Group has sought to quash criticism over its rapid business expansion, pledging to turn K Cube Holdings into a social enterprise and back 300 billion won for small businesses.

Kakao Corp. and its online lending arm KakaoBank have seen their stock price spiral down. In September alone, Kakao Corp.’s price dipped 23 percent, while KakaoBank’s share price sank 19 percent, as of Friday.