Tokyo FinTech
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Tokyo FinTech

LINE Bank Japan — will it launch in 2022?

LINE Financial and Mizuho Bank established a bank preparatory company through 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.

About a year ago, 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).

In the interim, LINE has 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.

LINE Banking

LINE BK in Thailand, in partnership with KBank, was launched first, in October 2020, and has achieved 3.9 million users, 4.5 million saving accounts and 2 million debit cards by the end of 2021.

In Taiwan, LINE Bank offers a wide range of easy-to-use financial services — including transfers between friends, a debit card, Taiwan dollar deposits and personal installment loans — through the LINE messenger. The service has over 600,000 users as of December 2021 after launching in April of the same year.

In Indonesia, LINE Bank operates as a collaboration between PT Bank KEB Hana Indonesia and LINE Financial Asia. In Indonesia in particular, due to this market’s unique geographical characteristics and the large numbers of “unbanked” people, bringing banking services to people’s mobile phones has the potential to greatly increase their availability and convenience. The services has surpassed 300,000 users as of December 2021, in only six months of operations.

Alas, while LINE is a messaging market leader in Taiwan and Thailand, it had long de-prioritized the Indonesian market to fund its financial services forays (LINE Bank in Japan, LINE Securities, etc.). With the new, consolidated Z Holdings structure now in place for almost a year, the strong cash flow, especially from the combined advertising business, could potentially be deployed to take another stab at this major ASEAN market.

Thailand as the first mover for banking services, shows the way. Gaining about 7.4% of the Monthly Active Users (MAU) of the messaging service as bank customers is a significant achievement, and indicates the available headroom in Taiwan (just over 1%) and Indonesia (3.3% on a much smaller MAU base).

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 over the past year, and increasing significantly the deposit and loan balances.

Hence, with Z Holdings multi-partner strategy, there will be LINE Bank in partnership with Mizuho, and PayPay Bank, which still has SMBC has a major shareholder, under the same entity structure.

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