Japan FinTech Observer #55

Cutting through the noise of Japanese Finance & FinTech

Welcome to the fifty-fifth edition of the Japan FinTech Observer. An event-laden week centered around the TEAMZ Summit distracted us. Fantastic to see so many ecosystem players coming to Tokyo again, which has us looking forward even more to SusHi Tech in May, IVS & IVS Crypto in July, and WebX in August.

To top off an exciting week, the Liberal Democratic Party’s web3 project team has published the 2024 edition of their web3 white paper.

Here is what we are going to cover this week:

• Venture Capital & Private Markets: Sumitomo Mitsui Financial Group, Sumitomo Mitsui Banking Corporation, and SMBC Venture Capital will begin impact investing for startups; Global Brain Corporation and All Nippon Airways have jointly established the “ANA Future Frontier Fund”; SMBC Venture Capital leads Smartpay’s USD $7m Pre-Series A; Laser Digital participates in Berachain’s USD 100m Series B round, led by Brevan Howard and Framework Ventures
• Insurance: Nippon Life sets sights on India with approval of new Mumbai subsidiary
• Banking: AEON Financial profile; JR East will launch an online banking service on Rakuten Bank’s BaaS; news leaks of Japan’s MUFG is buying a 20% stake in HDFC Bank’s non-banking unit HDB Financial Services; Sumitomo Mitsui Banking Corporation has introduced the biometric security service “SMBC Safety Pass”; UI Bank, a subsidiary of Tokyo Kiraboshi Financial Group, has renewed its “UI Bank App”
• Payments: non-cash payment methods statistics; Sony Bank has begun consideration of a proof of concept (PoC) for issuing a stablecoin on Polygon, in collaboration with Polygon Labs and Settlemint; Lawson Bank, Rakuten Payment and Rakuten Edy have provided new functionality that makes it possible to charge cash to the online e-money “Rakuten Cash” through the “Rakuten Pay” app at more than 13,500 Lawson Bank ATMs; Slash Fintech lays the claim to be the first-ever legal crypto credit card product in Japan
• Capital Markets & Asset Management: Moomoo Japan has introduced Japanese stock trading services; UBS Securities and Sumitomo Mitsui Trust Holdings agreed on the acquisition and integration of Credit Suisse’s wealth management business in Japan by UBS SuMi TRUST Wealth Management; Activist investor Oasis takes on KAO Corporation
• Digital Assets: Fireblocks CEO Michael Shaulov believes Japan provides a conducive environment for the entire digital assets ecosystem; Metaplanet, a Web3 infrastructure provider, saw its Tokyo-listed stock rise almost 90% in two days after adding Bitcoin to its balance sheet; Animoca Brands Japan, a strategic subsidiary of Animoca Brands, will establish an NFT launchpad in the summer of 2024; extra mile, TV Asahi Corporation, and TV Asahi Music Corporation will jointly launch the “tv asahi Blockchain Games” project which will be led by extra mile
• The Last Word: Spot the bull run

LDP’s web3 white paper 2024

The Liberal Democratic Party’s web3 project team has published the 2024 edition of their web3 white paper. Initially, the white paper as well as the summary is only available in Japanese, but we have provided an English translation of the key sections of the summary, as well as a super-punchy TL;DR.

Venture Capital & Private Markets

• Sumitomo Mitsui Financial Group, Sumitomo Mitsui Banking Corporation, and SMBC Venture Capital will begin impact investing for startups as of this fiscal year; SMBCVC will engage in impact investing in startups that contribute to solving SMBC Group’s priority issues (materiality), namely “environment,” “DE&I and human rights,” “poverty and inequality,” “declining birthrate and aging population,” and “Japan’s re-growth.” Impact investing is positioned as one of the measures to accelerate the achievement of the JPY 135 billion in investment and financing for startups (FY2023–2025) set out in the Medium-Term Management Plan
• Global Brain Corporation and All Nippon Airways have jointly established the “ANA Future Frontier Fund”; this fund focuses primarily on investments in the fields of next-generation mobility (air mobility, MaaS platforms, Universal MaaS, drones, space, etc.), customer base utilization businesses (Fintech, data analytics, NFTs, etc.), carbon-neutral (fuels such as SAF, negative emission technologies like DAC, green energy, carbon offsetting, etc.), and aviation services and operations (robotics, AI, autonomous driving technologies, etc.)
• SMBC Venture Capital leads Smartpay’s USD $7m Pre-Series A; Smartpay is leading digital embedded finance in Japan — the first in Japan to offer no interest, no late fees, and free of charge installments at the point of purchase
• Laser Digital participates in Berachain’s USD 100m Series B round, led by Brevan Howard and Framework Ventures; Olivier Dang, Head of Ventures, said: “We got super excited by the proof of liquidity consensus mechanism and the incredible community engagement so far. This is going to be one of the most exciting crypto project of 2024.”
• Private Equity International has dedicated its April issue to Japan’s PE market
• Bloomberg hosted KKR’s Co-CEOs, who commented on their growth target, and opportunities in Japan

Insurance

• Nippon Life sets sights on India with approval of new Mumbai subsidiary; Nissay received approval from authorities for the establishment of a new Indian subsidiary in Mumbai; Nippon Life aims to strengthen its operations in India, where it already has a presence through Reliance Nippon Life Insurance Company and Nippon Life India Asset Management; Nissay plans to double core operating profit by 2035, with overseas business — particularly acquisitions, a key part of the strategy

Tokyo FinTech will be back with an offline event on Monday, May 13. We are looking forward to hearing from Co-Founder and CEO Samantha Ghiotti about the Habitto journey, and why the time to build your venture in Japan is now.

At the same time, we are moving the Tokyo FinTech Meetup community to Luma. So even if you are not planning to attend this specific event, please register for the community to stay abreast of all upcoming offline & online events.

Banking

• When looking at the retail financial services player in Japan, do not overlook the country’s largest supermarket group, AEON; although financial services was one of the few segments not performing well, it generated around USD 3.2bn in revenue (at current exchange rates) and still contributed around 20% to group operating profit during the past fiscal year; with financial entities in place now also in Vietnam and Malaysia, where AEON Bank obtained one of the newly issued digital banking licenses (for Islamic finance, no less), the segment is set up to grow alongside the core AEON MALL & supermarket business
• As previously disclosed in Rakuten Bank’s quarterly reports, its Banking-as-a-Service partnership with JR East will launch an online banking service to attract customers with offers of reward points and discount coupons as passenger numbers are expected to stall; the JRE Bank service is scheduled to launch on May 9 with a goal of securing 1 million accounts
• Japan’s MUFG is buying a 20% stake in HDFC Bank’s non-banking unit HDB Financial Services Ltd., valuing the IPO-bound subsidiary between $9 billion and $10 billion, The Economic Times reported on Friday; the final decision is likely to take place this week at the HDFC Bank board meeting, according to the report, which cited people familiar with the matter; MUFG responded by press release, stating that the information “is not made public from our company or our bank.”
• Sumitomo Mitsui Banking Corporation has introduced “SMBC Safety Pass” as a new biometric authentication security service for its internet banking service “SMBC Direct” for individual customers; after registering for SMBC Safety Pass, customers can continue to enjoy the convenience of the Sumitomo Mitsui Banking app; however, when logging in from other devices such as personal computers, biometric authentication with the registered device will be required; this makes it possible to prevent unauthorized use by third parties and is the first initiative of its kind among Japanese banks
• UI Bank, a subsidiary of Tokyo Kiraboshi Financial Group, has renewed its “UI Bank App”; it has simplified the design and added various features to allow anyone to easily carry out everyday banking procedures

Payments

• This chart is titled “Payments Instruments other than Cash”, although it includes cash and cash on delivery; still, it provides a good picture of the payment methods used, and associated trends; multiple answers were permitted; from the Bank of Japan’s “97th Opinion Survey on the General Public’s Views and Behavior”
• Sony Bank has begun consideration of a proof of concept (PoC) for issuing a stablecoin on Polygon, in collaboration with Polygon Labs and Settlemint; in this PoC, Sony Bank will handle the legal organization and requirements definition for issuing the stablecoin, adopt the “Polygon PoS” blockchain, and SettleMint, with a diverse track record in blockchain development, will be responsible for developing and building the foundation for the proof of concept
• Lawson Bank, Rakuten Payment and Rakuten Edy have provided new functionality that makes it possible to charge cash to the online e-money “Rakuten Cash” through the “Rakuten Pay” app at more than 13,500 Lawson Bank ATMs installed at Lawson stores nationwide and other locations; this will bring the total number of locations where cash can be charged to “Rakuten Cash” to 40,500 nationwide; even without a credit card or bank account, anyone can start using the “Rakuten Pay” app by charging cash to “Rakuten Cash” at an ATM and setting it as the payment source
• Slash Fintech Limited has published version 3 of its project white paper, laying the claim to be the first-ever legal crypto credit card product in Japan; while other crypto credit card products have existed, regulatory hurdles have prevented their operation within the country; Slash Card’s innovative approach ensures compliance with Japan’s stringent crypto and payments regulations

Capital Markets & Asset Management

• Moomoo Japan has introduced Japanese stock trading services, allowing investors in Japan to seamlessly trade both US and domestic stocks using moomoo, a global investment and trading platform which was officially introduced to Japan in September last year; launched in March, investors in Japan can now access a vast selection of over 4,000 stocks, ETFs, ETNs, REITs, and other securities listed on the Tokyo Stock Exchange (Prime, Standard, and Growth markets) through moomoo while leveraging a wide variety of professional-level tools and exclusive in-depth market data on the platform; following the successful launch of US stock trading in Japan, Moomoo Japan is taking a step further to diversify its offerings to deliver upgraded trading experience for local investors
• UBS Securities and Sumitomo Mitsui Trust Holdings agreed on the acquisition and integration of Credit Suisse’s wealth management business in Japan by UBS SuMi TRUST Wealth Management, a securities firm specializing in wealth management jointly invested by UBS Securities and Sumitomo Mitsui Trust Holdings; upon the expected completion of the global merger between the parent companies UBS AG and Credit Suisse AG by the end of June 2024, UBS SuMi TRUST Wealth Management will inherit the client assets of CS Securities’ wealth management business in Japan; additionally, client advisors and other employees from CS Securities’ wealth management division will join UBS SuMi TRUST Wealth Management as new members
• Activist investor Oasis strikes again; as General Counse Phillip Meyer would insist, we should only hear from Oasis in this manner once the private conversation with management has broken down; let’s see how Kao Corporation handles this, with the AGM season coming up

eXponential Finance Podcast

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Digital Assets

• Michael Shaulov, the CEO of Fireblocks, delivered a keynote address in Tokyo on April 9, 2024, discussing the potential of blockchain technology and digital assets to create utility in financial infrastructure and internet ownership; Shaulov believes Japan provides a conducive environment for building, testing, and launching new products across the entire digital assets ecosystem
• Metaplanet, a Web3 infrastructure provider, saw its Tokyo-listed stock rise almost 90% in two days after saying it was adding $6.56 million in Bitcoin to its balance sheet in partnership with Sora Ventures , Morgan Creek Capital Management, LLC , Mark Yusko and others; this copies the MicroStrategy playbook, enabled by tax changes in Japan that does not require mark-to-market at year-end for corporate holdings of cryptocurrency
• Animoca Brands Japan, a strategic subsidiary of Animoca Brands, will establish an NFT launchpad in the summer of 2024; the launchpad is now inviting applications from Web3 projects here; the NFT launchpad will be a platform that supports the activities of projects and creators by providing them with opportunities to sell their NFTs; the NFT launchpad by Animoca Brands Japan will provide NFT sales opportunities for projects selected, and also provide multifaceted support for sales strategies and marketing
• extra mile, TV Asahi Corporation, and TV Asahi Music Corporation will jointly launch the “tv asahi Blockchain Games” project which will be led by extra mile, part of the TV Asahi Music Group; the “tv asahi Blockchain Games” project is Japan’s first hands-on “blockchain game accelerator program” in the Web3 field; it will work with licensors or anime production committees holding IP such as music and video, as well as game developers and Web3 marketing companies, to provide support ranging from game incubation and game publishing to community marketing and token assistance

The Last Word: Spot the bull run

Hard to spot the bull run in Japanese stocks when looking through the lens of global market cap share.

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.

We have also created two LinkedIn groups, the “Japan Startup Observer” if your interest in Japan goes beyond FinTech, and the “FinTechs of India” to capture the developments on the subcontinent. We invite you to join both these groups.

Have an awesome week ahead.