Japanese megabanks step up Asia fintech investments

Written by Kapronasia || April 19 2023

Japan’s largest banks are increasingly looking to fintech opportunities in Asia’s emerging markets as an avenue for growth, as their home market is mature, a laggard in digital transformation and constrained by the  world’s greyest population. In contrast, much of Southeast Asia as well as India still have plenty of low-hanging fruit, whether in the payments segment, banking, or both.

Among Japan’s three largest lenders, MUFG has been among the most active investing in Asia. Undeterred by the global fintech slump, it has taken stakes in multiple companies across the continent in the past year. These include the Philippine and Indonesian units of Dutch consumer finance company Home Credit BV (HC) for about 596 million euros, a US$200 million stake in the Jakarta-based fintech Akulaku, and the launch of a US$100 million fund focused on Indonesian startups called MUFG Innovation Partners Garuda No. 1 Limited Investment Partnership.

Earlier this month, MUFG announced it would take a minority stake in the Indian digital nonbanking financial company DMI Finance for 19.1 billion Indian rupees. Existing investor Sumitomo Mitsui Trust Bank also participated in the funding round. DMI Finance claims to cover 95% of India’s pin codes and has an accessible customer base of 25 million, and expects its customers to grow to more than 40 million by FY24.

The Japanese lenders are shrugging at the sharp decrease in startup funding in the subcontinent, betting that digital financial services has a bright long-term future in the world’s largest country by population. Startup funding fell 75% in Q1 2023 compared to Q1 2022, according to data compiled by the Indian media Inc42. Nevertheless, fintech performed the best of any tech sector during the first quarter, raising US$1.3 billion in 25 deals.  

Looking ahead, MUFG’s overseas M&A shopping spree is set to continue. S&P Global noted in a January research note that MUFG expects to close deals worth at least a combined ¥108 billion in Asia-Pacific in 2023.

Meanwhile, Mitsui Financial announced in late March that it would take a 15% stake in Vietnam Prosperity Joint Stock Commercial Bank. Sumitomo Mitsui said Vietnam Prosperity has a strong presence in the country’s retail and small and medium-size enterprise sectors. The Japanese company had formed a tie-up with the Vietnamese bank in May 2022, leading to collaborations in multiple fields and various synergies, it said. Sumitomo Mitsui’s consumer-finance unit also invested in Vietnam Prosperity’s consumer-lending unit in October 2021.

Additionally, in March Mizuho Financial invested US$125 million into Kredivo Holdings Ltd., a Singapore-base digital financial services provider that focuses on the Indonesian market. Mizuho seems especially interested in Kredivo’s buy now, pay later (BNPL) capabilities. In underbanked Indonesia, BNPL has helped to plug a significant lending gap. Credit card penetration in the country is less than 10%, while up to 181 million Indonesians lack a bank account. With a rapid shift digital financial services in recent years, digital payment methods such as BNPL have gained strong traction among consumers.