Digital banks in Japan make headway

Written by Kapronasia || June 21 2023

Digital transformation in Japan’s financial sector has been a gradual process, with the earliest pure-play online lenders dating back to the early 2000s, but limited change occurring until recently. Among East Asia’s developed economies, Japan is unique in that it has an unusual number of barriers to digitization of financial services: limited financial inclusion needs, a deep affinity for cash, a comprehensive and mature banking system with branches almost anywhere customers would need them, and the world’s most elderly population. That said, the pandemic spurred Japan to speed up financial digitization, and the trend is proving to be enduring.

Thus far in 2023, there have several notable developments in Japanese digital banking. First, in January, the Japanese fintech Smartpay launched Smartpay Direct, which it claims is the first example of a digital consumer finance company making use of Japan’s open banking system, with a network of 67 partner banks across Japan. Smartpay is also among the first Japanese fintechs to offer buy now, pay later (BNPL) services by credit card.

In April, Rakuten Bank went public on the Tokyo Stock Exchange in what was Japan’s largest IPO in four years. Japan’s largest online bank saw its share price rise as much as 40% in its market debut, reflecting robust demand despite the fact that it downsized its US$625 million IPO.

The stock ended the trading day at 1,930 yen versus an IPO price of 1,400 yen.

Since then, the stock has traded consistently at around the price of 1,900 yen, never falling precipitously like some other major fintech stocks did in the weeks after disappointing market debuts. While it is still early days for Rakuten Bank as a public company, and the company happened to go public during a major rally in the Japanese stock market, so far, so good.

Meanwhile, the Japanese digital bank Habitto, which is operated by SJML Japan K.K. (SJML Japan) and owned by Singapore-based SJ Mobile Labs, recently secured approval to operate as a deposit-taking and electronic financial services intermediary. Habitto was previously licensed to operate as a financial services intermediary in October 2022. The digibank is the first company to obtain all three of these authorizations under New Financial Services Intermediary regime of the Japanese Financial Services Agency (JFSA).

In mid-June, Habitto launched its mobile app. Its main offering thus far is a savings account that offers an interest rate of 0.3% on deposits up to ¥1 million, and comes with a Visa debit card. Habitto’s mobile app also offers free financial advisory services including personalized money plans, in-app chat and video call services.