Welcome to the eighty-second edition of the Japan FinTech Observer.
Japan will go to vote on October 27, so we will be able to bring you the results in the next edition. Currently, most polls see the ruling parties losing seats, and some even the majority, leading the The Japan Times to state, "Japan goes to vote, but it's not clear why".
The Bank of Japan Monetary Policy Meeting will meet two more times this year, on October 30/31 and December 18/19. The panel of economists we track does not expect any action this month, and remains somewhat split between December and January. This will also allow the MPM to take into account the October CPI data, which will become available on October 25 (Tokyo) and November 22 (national), and will provide further indication whether wage raises negotiated in April will have found their way into the service sector as well.
Real wages had turned up in June and July for the first time in more than two years, but gave back slightly in August. They are expected to rise again for the September reading. In other news, rice prices are up 40 to 50% year-on-year, at least partially due to hoarding at the time of the severe earthquake warning.
Here is what we are going to cover this week:
- Venture Capital & Private Markets: Mitsubishi Corporation acquires around 6.5% of the Philippine's financial super app "Mynt", following MUFG's strategic investment; double jump tokyo makes an LP investment in Neoclassic Capital, which in turn becomes strategic investor at DMM Crypto
- Insurance: Tokio Marine has paused the sale of its USD 1 billion Southeast Asia life insurance business
- Banking: The Bank of New York Mellon Corporation and Mizuho Bank jointly announced a landmark agreement for correspondent bank network connectivity for international trade; Sumitomo Mitsui Financial Group partners with OpenAI; Money Forward released third quarter results; Seven Bank combines retail purchase data from “7iD” with Seven Bank’s financial data for loan screening; India's DMI Finance, an MUFG strategic investment, comes under scrutiny by the Reserve Bank of India
- Payments: Wise has become the first non-bank operating in Japan to be granted approval to join Zengin, while the next generation Zengin System has been delayed to 2028; PayPay is now available from within LINE Chats, one step towards retiring LINE Pay; Digital Garage has launched a B2B payment service together with strategic partner Resona Holdings
- Capital Markets: Mitsubishi UFJ Financial Group will take full control of au Kabucom Securities, while selling its stake in au Jibun Bank to KDDI
- Digital Assets: The Depository Trust & Clearing Corporation (DTCC) and Japan Securities Clearing Corporation (JSCC) have been exploring the transformative potential of digital assets in collateral management; Metaplane announced purchasing an additional JPY 1 billion worth of Bitcoin; Slash Vision Labs partners with Minto to co-develop services that integrate crypto with intellectual property (IP)
- The Last Word: Banking's valuation discount
Venture Capital & Private Markets
- Mitsubishi Corporation (MC) announced that MC, Ayala Corporation (AC), and AC Ventures (ACV) have reached an agreement on MC’s investment in ACV subject to the execution of definitive transaction documents and the satisfaction of customary closing conditions; AC is a major conglomerate in the Philippines and ACV currently holds an about 13% stake in Globe Fintech Innovations (Mynt), the parent company of GCash, the Philippines’ number one finance super app and largest digital cashless ecosystem in the country; under the terms of the agreement, MC shall acquire a 50% stake in ACV and pursue future investment opportunities; with the Mitsubishi UFJ Financial Group (MUFG) having also announced its investment in Mynt this past August, MC and AC shall work with MUFG as fellow shareholders to aid the company’s future growth and development
- double jump.tokyo, which had just raised over USD 10m in funding in its Series D first closing at the end of August, has made an LP investment in Neoclassic Capital, a fund focusing on Web3 and the entertainment industry in Asia; through this strategic partnership with Neoclassic Capital, double jump.tokyo aims to foster collaboration and build relationships with Web3 startups emerging from Asia and beyond, accelerating the global adoption of Web3 technologies from Asia
- DMM Crypto, a subsidiary of DMM.com and creator of the "Seamoon Protocol", has welcomed Neoclassic Capital as the lead investor in its strategic round, and has also entered into a new global strategic partnership with quantitative trading company Presto; DMM Crypto was established in January 2023 with the purpose of expanding into web3 businesses such as blockchain games and NFT projects
- Globis Capital Partners led the USD 27m funding round for ODD, with participation from Coral Capital, aSTART, Green Co-Invest Investment, Japan Post Bank Spiral Regional Innovation Fund, Mitsui Sumitomo Insurance Venture Capital, SMBC Venture Capital, among others; the startup, a spinout from Japan’s AIST and Hokkaido University, was specifically founded in 2021 to help with decommissioning the Fukushima Daiichi nuclear power plant
Insurance
Banking
- The Bank of New York Mellon Corporation and Mizuho Bank jointly announced a landmark agreement for correspondent bank network connectivity for international trade; through this agreement, both banks are able to enhance their services to clients through frictionless access to each other’s expansive trade network; powered by BNY’s Trade Network Access Service, the correspondent banks’ end clients can expect streamlined trade services and simplified compliance processes
- Sumitomo Mitsui Financial Group partners with OpenAI: SMBC Group has been actively working on its own digital transformation (DX) and providing digital-based value to customers in pursuit of its medium to long-term vision of becoming a “Global Solution Provider that develops together with customers and society through the highest level of trust”; with this agreement, SMBC Group has become the first major Japanese financial institution to enter into a contract with OpenAI
- Money Forward, a Japanese financial technology company, hosted its FY11/24 3Q Financial Results Briefings Call on October 15, 2024; the company presented a positive outlook for the quarter, highlighting strong performance across several key metrics, including steady progress in sales and EBITDA, continued quarterly EBITDA surplus, and robust growth in its SaaS business
- Seven Bank has implemented a time-limited initiative to utilize data from “7iD,” a common member ID provided by Seven & i Holdings, in credit screening for personal loan services offered by Seven Bank; this service combines retail purchase data from “7iD” with Seven Bank’s financial data, creating a new perspective on credit screening through AI analysis; this will help develop new loan-related products and resolve issues for customers who previously couldn’t qualify for loans, creating a retail × financial hybrid service
- The Reserve Bank of India (RBI) has taken action against DMI Finance, a major new-age non-banking finance company (NBFCs) and recipient of MUFG strategic investments, by asking DMI Finance (and several other NBFCs) to stop offering credit products from October 21st; the Economic Times wrote on October 17 that Lendingkart, a popular small business-focused lending firm, is raising an internal round at a valuation of $100 million; the valuation is down from $350 million in the previous round, indicating the increased risks faced by the segment
Payments
- Wise has become the first non-bank operating in Japan to be granted approval to join Zengin, Japan’s domestic payment network; access to the Zengin system has historically been restricted to local banks. However, following a review in October 2022, Zengin-Net’s Board decided to extend access to fund transfer service providers, which paved the way for Wise Payments Japan to apply to directly join the system
- Next generation Zengin System delayed to 2028: since its second generation, the Zengin System has been updated every eight years; this implied the eighth generation was scheduled for November 2027; at the board meeting held last week, it was decided to begin development of the next Zengin System, with a scheduled go live in May 2028; the new API Gateway, which Wise will likely depend on, was originally scheduled for July 2025, and had already been delayed to November 2025
- LY Corporation and PayPay Corporation have announced that an entry point to the “Send / Receive” feature of the cashless payments app “PayPay” has been made on the communication app “LINE,” enabling "PayPay" use from LINE Chats; ultimately, this is one of the steps required to retire "LINE Pay" and consolidate all users on "PayPay"
- Digital Garage has launched the B2B payment service “Online Bill Payment by Card” together with Resona Holdings; the service is now available at Resona Bank, Saitama Resona Bank, as well as Kansai Mirai Bank, and will be available from January 2025 at Minato Bank; this initiative is based on the capital and business alliance between DG and Resona HD
Capital Markets
Digital Assets
- As leading infrastructure providers for the financial industry, The Depository Trust & Clearing Corporation (DTCC) and Japan Securities Clearing Corporation (JSCC) have been exploring the transformative potential of digital assets in collateral management; the JSCC has leveraged DTCC’s Digital Launchpad to develop a groundbreaking proof of concept (PoC) focused on Central Counterparties (CCPs); by leveraging digital assets for collateral processing, CCPs can potentially enhance market stability, improve digital asset quality, and increase the efficiency and liquidity of collateral
- Metaplanet, a Japanese budget hotel operator turned investment firm, announced purchasing an additional JPY 1 billion (USD 6.9 million) worth of Bitcoin; this recent acquisition of 108.786 BTC brings the company’s total Bitcoin holdings to 639.50 BTC, now valued at approximately USD 40.54 million
- Slash Vision Labs partners with Minto to co-develop services that integrate crypto with intellectual property (IP); Minto is a production company that develops new possibilities for content based on manga and anime, and continues to work with creators to create content loved around the world by taking advantage of new opportunities such as SNS, webtoon, and Web3; Slash is a crypto project that develops and offers cryptocurrency payment solutions, including Slash Payment and Slash Card
The Last Word: Banking's valuation discount
McKinsey & Company, in their recently published "Global Banking Annual Review 2024", state that global banking is valued at a price-to-book ratio of 0.9—the lowest of all industries—which suggests the market is expecting the industry will erode economic value as a whole. And this challenge exists across most markets, as the graph below shows.
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