Open Banking & Open APIs in Japan

Legislation for “Electronic Payment Intermediate Service Providers” came into effect in Japan on June 1, 2018, including a requirement to register with the Financial Services Agency (FSA). By January 2019, 21 parties had done so, and at the end of March the count has almost doubled to 40. Electronic Payment Intermediate Services are defined broadly and include the transmission of payment instructions as well as the processing of basic account, transaction and balance information, for example.

In the report of the Working Group on Payment and Transaction Banking, released in December 2015, and the Japanese Government’s “Japan Revitalization Strategy 2016: For the Fourth Industrial Revolution”, policies for the collaboration of the banking industry with other financial services market participants regarding the opening up of banking system application programming interfaces (APIs) have been formulated. This was to enable the creation of new services in partnership with banks while also ensuring information security.

At the same time the bill to amend a section of the Banking Act related to the treatment of intermediary service providers for banking settlements was passed in the Diet (to become effective in 2018 as mentioned above), the Ministry of Economy, Trade and Industry (METI) also released “Japan’s FinTech Vision”. Under the category of “Facilitate the smooth flow of money”, this vision explicitly includes an action item to “promote the adoption of open application programming interfaces (APIs) by banks and credit card companies.” Ultimately, “fully digitalized financial services by promoting open APIs and leveraging blockchain technology” were to be achieved.

Lastly, the Japanese Bankers Association (JBA) released a “Report of Review Committee on Open APIs: Promoting Open Innovation” in July 2017 that focuses primarily on the question of standardization of API specifications, as well as security measures.

The amendments to the Banking Act include the following provisions:

• Definition of “Electronic Payment Intermediate Services”
• Introduction of a registration system for Electronic Payment Intermediate Service Providers
• Regulations governing the business of Electronic Payment Intermediate Service Providers
• Supervision of Electronic Payment Intermediate Service Providers
• Provisions for Certified Association for Electronic Payment Intermediate Service Providers
• Penalties

In the definition of services, there is a differentiation made between Payment Initiation Service Providers (PISP) and Account Information Service Providers (AISP), with the former essentially effecting transaction, and the latter reporting/aggregating information.

It is interesting and educational to take a look at those entities that have registered as Electronic Payment Intermediate Service Providers to date. The full list is available here, and includes companies like freee, LINE Pay, Money Forward, Moneytree, Rakuten Bank and Rakuten Securities, SBI Ripple Asia, SMBC Nikko Securities, as well as the large telecoms carriers.

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