LINE Bank Japan folds before opening
LINE Financial and Mizuho Bank established a joint venture in November 2018, and the LINE Bank Preparatory Company was established in May 2019 in order to obtain the necessary approvals required to engage in the online banking business in Japan.
In 2021, LINE Financial and Mizuho Bank made an additional JPY 12 billion investment in the LINE Bank Preparatory Company, increasing its capital reserve to JPY 16.5 billion, to further accelerate system development prior to launching the banking service at some point during the 2022 fiscal year (running until March 2023), which obviously got delayed further.
In the interim, LINE has successfully established banking services in Thailand, Taiwan, and Indonesia, and has also combined with Z Holdings (essentially Yahoo! Japan), which has rebranded the former Japan Net Bank as PayPay Bank.
PayPay Bank
What has been renamed PayPay Bank in April 2021 started off as Japan’s first internet bank in 2000, created by major shareholders Sakura Bank (50%) and Sumitomo Bank (10%), which should only months later merge into Sumitomo Mitsuo Banking Corporation (SMBC). In 2017, Japan Net Bank became a fully consolidated subsidiary of Yahoo! Japan.
Despite a 20 year head start, PayPay Bank benefitted substantially from the PayPay marketing expense and approximately 45m registered users on the platform, gaining close to 1m new accounts per year, and increasing significantly the deposit and loan balances.
The Demise of LINE Bank Japan
Hence, through the combination of LINE with Z Holdings, there were LINE Bank in partnership with Mizuho, and PayPay Bank, which still has SMBC has a major shareholder, under the same entity structure, essentially targeting similar market segments.
The demise of LINE Bank Japan now, however, is attributed to “system development difficult” , a more demanding regulatory (e.g., Know-Your-Customer and Anti-Money-Laundering requirements) and changing competitive environment. For Mizuho, whose domestic digital and FinTech strategy had LINE Bank as a cornerstone, this leaves a gaping hole in their offering. With the Japanese fiscal year closing, and the season for investor presentations fast approaching, we are curious to learn what the revised plans look like.
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