How to build an ecosystem: DWC expands into Telco-as-a-Service

We have seen all major telcos in Japan expand into a financial services ecosystem (with the acquisition of Monex by NTT Docomo to fill their securities brokerage gap), and most recently also into the physical world (KDDI buying 50% of Lawson and jointly managing it with Mitsubishi Corporation).

We have not seen FinTechs going the other way to build an ecosystem. Of course, virtual telco operators have been around long before the “XaaS” terminology (Software-as-a-Service [SaaS], Banking-as-a-Service [BaaS] was invented, so our TaaS acronym in the title was intended tongue-in-cheek. In the telco world, these are called mobile virtual network operators, or MVNOs.

Now Digital Wallet Corporation (DWC), which operates one of Japan’s most popular remittance services, Smiles, and which acquired Seven-Eleven Group Japan’s international remittance service earlier in the year, has launched “Smiles Connect” as an MVNO on the NTT Docomo and Softbank networks.

As one would expect from an ecosystem, or “economic zone” as they are often referred to in Japan, there are benefits for customers who are both using the remittance and the telco services, offering discounts on plans and the ability to utilize points earned via telco services to cover remittance fees. Maybe most importantly, a credit card is not required to register for Smiles Connect, charges will be withdrawn from the Smiles Wallet, which can be charged via ATMs.

Many FinTechs suffer from the “walled gardens” that have been created by the different point system alliances, as these have been pretty effective in customer retention. DWC seems to be well on its way to build its own self-reinforcing ecosystem. We are looking forward to seeing what is next.

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