Rakuten FinTech Segment Q1 2024: A Deep Dive into Growth and Expansion

Key Highlights

• Revenue growth: +15.1% YoY, driven by increased customer base and transaction volume (GTV) across all businesses.
• Operating Income (OI) growth: +47.4% YoY, with all businesses, including Rakuten Securities, achieving year-on-year growth.
• Rakuten Card: Significant OI increase due to strong GTV growth and improved profitability.
• Rakuten Securities: Successful customer base expansion, with general accounts and trading volume continuing to grow, leading to increased OI.
• Rakuten Bank: Significant increase in accounts, deposit balances, and AUM, driving revenue growth.
• Rakuten Payment: Achieved profitability for the first time, thanks to successful expansion of offline merchants and users.
• 2024 Strategy: Focus on enhancing the convenience of payment services, promoting high-LTV services, and leveraging data insights for personalized customer experience.
• FinTech Reorganization: Integration of the FinTech business into one group to take effect in October 2024, aiming to foster deeper data collaboration and innovative service offerings.

Rakuten’s FinTech segment performance in Q1 2024 revealed robust growth across various businesses and outlining the company’s strategic direction for the future.

Strong Financial Performance:

• Revenue: The segment experienced a notable 15.1% year-on-year (YoY) increase in revenue, fueled by the expansion of its customer base and a significant rise in transaction volume (GTV) across all its business units. This indicates a strong demand for Rakuten’s diverse FinTech services.
• Operating Income (OI): Even more impressive is the 47.4% YoY surge in OI, demonstrating the segment’s increasing profitability. This growth is attributed to effective cost management and strategic investments that are driving efficiency across the board. All businesses within the segment, including Rakuten Securities, recorded positive OI growth.

Business Unit Highlights:

• Rakuten Card: This key player in the segment achieved a remarkable 22.7% YoY increase in GTV, driven by both a growing member base and a rise in average GTV per customer. The improved profit structure, marked by a lower level of bad debt-related expenses and optimized marketing expenditures, significantly boosted the company’s OI margin.
• Rakuten Securities: The zero domestic stock commission strategy, coupled with the introduction of new NISA offerings, resulted in substantial growth in general accounts and trading volume. This strategic move has proved successful, with OI exceeding pre-zero commission levels and securing the top position in new NISA accounts.
• Rakuten Bank: The bank experienced a significant increase in both accounts and deposit balances, alongside steady growth in AUM. This translates to a notable rise in interest income, contributing to the overall revenue growth. The bank also saw improvements in its key performance indicators, including ROE (return on equity) and capital adequacy ratio.
• Rakuten Payment: Q1 2024 marked a significant milestone for this business as it achieved quarterly profitability for the first time. The successful implementation of measures to expand offline merchant partnerships and user base since 2022 has driven this positive outcome. The company is poised for continued growth going forward.

Key Strategies for 2024:

• Enhancing Payment Service Convenience: Rakuten is committed to streamlining its payment services, aiming to create a unified and seamless user experience. This includes integrating key features from the Rakuten Card app into other payment apps, such as Rakuten Pay, Rakuten Point Card, and Rakuten Edy, to create a cohesive ecosystem. The company also plans to integrate AI technology and personalize UI/UX for each user.
• Promoting High-LTV Services: Recognizing the importance of customer lifetime value, Rakuten leverages its payment services as an entry point to attract customers to its high-LTV offerings, such as banking, securities, and insurance. This strategy leverages the company’s vast member base to create a sustainable and profitable business model.
• FinTech Reorganization: To further solidify its position as a leading FinTech player, Rakuten is implementing a strategic reorganization of its FinTech business, aimed to take effect in October 2024. The integration of its various FinTech entities under a single group will facilitate deeper data collaboration and accelerate the development of innovative services.

Conclusion:

Rakuten’s FinTech segment is demonstrating remarkable growth and profitability, driven by a focus on customer acquisition, strategic partnerships, and innovative service offerings. The company’s ambitious plans for 2024, including the strategic reorganization and ongoing efforts to enhance payment services, suggest a commitment to continued success in the dynamic FinTech landscape.

Please follow us to read more about Finance & FinTech in Japan, like hundreds of readers do every day. We invite you to also register for our short weekly digest, the “Japan FinTech Observer”, on Medium or on LinkedIn. Our global Finance & FinTech Podcast, “eXponential Finance” is also available through its own LinkedIn newsletter, or via our Podcast Page.

Should you live in Tokyo, or just pass through, please also join our meetup. In any case, our YouTube channel and LinkedIn page are there for you as well.