What do Tokyo residents need?

Photo by Vicky Eden Saputra on Unsplash

The Tokyo Metropolitan Government is offering the “Tokyo Financial Awards” to companies that address weaknesses in the financial services offerings identified by Tokyo residents, who had been invited to submit any dissatisfaction they feel, or services they wish. The application deadline for companies is October 16, 2018, and from the all applicants, the best three candidates will be chosen and awarded at a ceremony in February 2019. The first prize winner will receive JPY 10 million, followed by JPY 5 million for the second place, and JPY 3 million for the third place. So how do Tokyo’s citizens feel?

Banking

1. Services remain that require physical presence at the bank teller window
2. Management of different IDs and verification methods for online banking
3. UX design — difficult to navigate and to actually find the services
4. High deposit and withdrawal fees

Author’s comments: Compared to the world-class and ruthlessly efficient manufacturing sector, Japan’s service sector is woefully inefficient. Although all the major banks by now have announced reductions in workforce, these are to be spread out over almost a decade. Layoffs due to restructuring are still not acceptable in Japan, and hence the banks feel they cannot go down that route. Enter any Japanese bank branch and watch your application paper passed around the various work stations, and you understand immediately. Arguably, Japanese banks cannot push more business towards online banking and ATMs, as all these employees would be out of work.

Payments

1. Universal e-money (without depending on a specific service)
2. Too many different types of e-money
3. Credit card acceptance in stores still low
4. Security concerns when cards or mobile phones are stolen

Author’s comments: Japan is inherently a cash-based society. Please refer to our previous articles “The Curious Case of Cash in Japan” and “Japan Cashless Promotion Council”. There are a number of fintech startups that are trying to crack the market, including Revolut, Wirex, Transferwise, but first and foremost Chinese companies Alipay and WeChat Pay are pushing their services, initially for Chinese tourists, and further with the aim to establish a Japan-domiciled and licensed business. Lastly, it is an indication of the low crime rates in Japan that residents are worried about credit card crime, but think nothing about running around with the equivalent of USD 5,000 in cash in their wallets!

Asset Management

1. Improve financial literacy
2. Independent advice on products & financial planning
3. Investments for small amounts/young people
4. Administrative overhead, paperwork, etc.

Author’s comments: Japan, just like Germany, has a relatively low percentage of its net wealth invested in the stock market. Different investment schemes have failed to change that substantially. After 20 years of deflation, the money sits almost entirely with the older generation, with young people not having much to invest.

Insurance

1. Independent advice on products
2. Administrative overhead, paperwork, for the policy & claims
3. Transparency of insurance coverage

Author’s comments: Changes in the insurance business law have made it mandatory for insurance agents to understand their client needs (!), offer products based on these needs, and document the entire process for compliance purposes. It is therefore expected that smaller insurance agents will slowly disappear from the market and be replaced by companies like “Hoken no Madoguchi” (Insurance Window) that have the scale to implement the required infrastructure.

Loans

1. Simplified loan agreements
2. Independent advice on products
3. Startup funding
4. Cash-flow based rather than collateralized loans

Author’s comments: Startup and SME financing is a huge challenge in Japan. Again, technology can help. We believe that companies like LendFlo, which we have previously profiled, would help Japanese companies tremendously.

Other

1. Cross-sector services combining bank accounts, insurance, securities, etc.

Author’s comments: Currently, Japan’s financial regulator operates by market sector, but is looking to adjust to a more function-based regulatory oversight, as we have recently described. This will significantly increase the flexibility in providing such services.

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