Japan FinTech Observer #7

This week's content:

• QR Codes: Vietnam, Denso
• Venture Capital & Private Equity: Softbank, Rakuten, MUFG & Liquidity Group, SMBC & Incubate Fund, Genesia Ventures
• Insurance: GA technologies & Tokio Marine & Finatext
• Banking: SBI Shinsei Bank, MUFG & TBT Lab, Japan Post, Authlete, DBS Bank
• Payments: Suica
• Digital Assets: SBI Digital Asset Holdings, Astar Foundation
• The Last Word: Tokyo FinTech on LinkedIn Audio with Bluejay Finance's Sherry Jiang (5/18)

QR Codes

Welcome to the seventh edition of the Japan FinTech Observer. We are reporting this week from Hanoi, where we found significant use of cash, pretty close to the Japanese level, and no QR code signs for payments at small shops or even street vendors that one might have become familiar with in other Asian countries.

Lower end venues tend to operate entirely on a cash basis, while middle-class establishments take credit cards - it is when the whole consumer economy starts tilting towards cashless payments that even the small vendors accept QR code payments. This stage has not been reached yet in Vietnam.

In other news, the inventor of the QR codes, DENSO , received the IEEE Corporate Innovation Award for its effort. Although many payment geeks know this by now, it is always fun to remind everyone that the codes were initially created for the Toyota supply chain, as they can store about 200 times more information than barcodes, can be read at high speed, and include redundancy so that about 30% of the code could be scratched off without any loss of accuracy & readability.

Venture Capital & Private Equity

The week started off with several new fund formations, and ended with the twin maverick entrepreneurs at SoftBank Group Corp. and Rakuten publishing rather dismal quarterly (and for SB, annual) results. Let us work ourselves down from the really big numbers to the more pedestrian ones.

• SoftBank Group announced a loss of JPY 970.1bn (USD 7.2bn) for the fiscal year that ended in March, of which JPY 835.1bn (USD 6.15bn) was attributed to the Vision Funds; while the Vision Fund performance improved from a loss of JPY 3.435bn in FY2021, this was only possible by selling off a significant share of SB's 阿里巴巴集团 holdings; in the FinTech sector, the Vision Funds hold 69 investments, which have been written down by USD 600m in the quarter; the largest names in this segment include Klarna , PayPay Corporation , and Revolut

• Rakuten continues to be weighed down by its continued commitment to become the "price leader" in mobile communications; the mobile segment logged a JPY 102.6bn loss, outweighing profits from e-commerce and FinTech; after listing about 20 percent of Rakuten Bank to generate cash (a transaction in the works since 2021), it has already accelerated its divestitures such as minority holdings by selling off its remaining 20% in Seiyu to majority owner KKR for JPY 22bn (also announced on Friday), and readies an IPO for Rakuten Securities; selling off the family silver to alleviate a looming cash crunch in the face of a significant part of bonds coming due over the next two years

• Big announcements from MUFG and its relationship to LIQUiDITY Group this week; first, MUFG Bank announced that it has invested USD 40m in Liquidity Capital, the core company of Liquidity Group, at a unicorn valuation; second, the partners will establish two new debt funds, the “Mars Japan Fund” and the “Mars Europe Fund”, under their joint venture, Mars Growth Capital; third, MUFG?Bank and?Liquidity Capital will establish a new debt fund, the “Mars NEXI Fund”, utilizing an insurance solution from? Nippon Export and Investment Insurance (NEXI) , to provide financing to startups globally
• 三井住友银行 has co-founded the USD 200m corporate venture capital (CVC) fund “SMBC Asia Rising Fund”, incorporated in Singapore; this joint venture with Incubate Fund aims to accelerate business development and partnerships through investments in high potential Asian startups; the primary investment areas are lending technology, payments, and supply chain finance, as well as Banking-as-a-Service and digital asset companies
• Lastly, Genesia Ventures announced that it has completed the establishment of “Genesia Venture Fund №3 Investment Limited Partnership” for pre-seed/seed stage startups with a total commitment of JPY 15bn; following on from the №1 and №2 funds, the third fund will continue to specialize regionally in Japan and Southeast Asia, and focus on increasing the amount of investment per company (including additional investment), investing in frontier tech areas, and expanding the investment geography (adding India as a new market)

Insurance

• GA technologies , the operator of the RENOSY online real estate marketplace, and Finatext Holdings Ltd. have jointly developed an embedded property insurance product; by adding Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF) property insurance product for individuals to Inspire, the Software-as-a-Service (SaaS) for insurance business developed by Finatext, and connecting Inspire to RENOSY with APIs, RENOSY can offer property insurance products online, and its users can complete the entire investment process from real estate investment planning to the purchase of properties and insurance without leaving the site

Banking

• Japanese online financial conglomerate SBI Holdings announced that it would take SBI Shinsei Bank private through a USD 1.1bn tender offer, accelerating its drive to create a major banking group, Reuters reported

• MUFG Bank has acquired a total of JPY 600m in shares of JP UNIVERSE and LOGSYS, both subsidiaries of TBT Lab, a business development lab focusing on Web 3 and the Metaverse, and has agreed to form a capital and business alliance with TBT Lab Group, through this partnership, MUFG and TBT Lab Group will further accelerate their efforts to create a joint Metaverse Economic Zone
• Since we talked last week about the reduction in bank branches and ATMs, the Nikkei this week published an interview with Japan Post President Masuda, who aims to sort out the 24,000 post offices.....by 2040; Japan Post was established in 2007 with the privatization of postal services; since then, the number of domestic post offices has decreased by only about 250; Japan Post contributes only 15% to consolidated earnings, while Japan Post Bank and Japan Post Insurance account for the majority of financial success
• Our friends at Authlete ?have achieved compliance with the current?Financial-grade API (FAPI)?2.0 certifications, with their own version 2.3, which also conforms to all profiles of the?Brazil?Open Banking & Insurance and the?Saudi Arabian?Open Banking ecosystems
• The much-maligned Mizuho Bank, which has suffered a string of system outages, including ATMs that would not return the customers' cards, is still under a business improvement plan, the progress of which is reported publicly every quarter; however, they are still relieved not to be regulated by the Monetary Authority of Singapore (MAS) that has just slapped additional capital requirements on 星展银行 for similar failures

Payments

• Happy 10th birthday, Suica! And Pasmo! And all the other flavors of regional JR prepaid cards that have become the ultimate digital money in Japan; if only it had not implemented a different NFC standard from most other nations, namely NFC-F (for Felica), which makes Japan the only market where mobile phone manufacturers require specialized hardware

Digital Assets

• Digital Asset ?and leading market participants have announced their plans to launch the Canton Network, the industry’s first privacy-enabled interoperable blockchain network designed for?institutional?assets and built to responsibly unlock the potential of synchronized financial markets; SBI Digital Asset Holdings is part of the founding consortium

• Kyushu Railway Company announced that it will issue NFTs on top of the Astar Foundation Network; by distributing NFTs to its users, JR Kyushu aims to create new touch points and enhance its existing relationship with its customers; the project will kick off in July 2023 and provide riders with new ways to enjoy Kyushu while maintaining a holistic track record of their travel experience; as a first proof-of-concept, JR Kyushu has distributed a free NFT during the Blockchain Expo in Tokyo this week, displaying the new Nishi Kyushu Shinkansen

The Last Word: Tokyo FinTech on LinkedIn Audio

We are excited to announce our next meetup as a LinkedIn audio event, featuring Bluejay Finance Co-Founder & CEO ?? Sherry Jiang , on Thursday, May 18, starting at 9pm JST and 8pm SGT; please join us if you can!

If you would like to see more of our content, please head over to the?Tokyo FinTech YouTube Channel?or check out the?eXponential Finance Podcast.

Have an awesome week ahead!