Product/market fit is a beautiful thing, for any startup, not only FinTechs. When you can confirm that your idea satisfies a market demand and can attract early adopters, you are ready to scale. But are you scaling into the right market?
Likely, some will argue, if you are scaling into the wrong market, you have not achieved product/market fit. Point taken. So please let me explain. Over the past years, it has been proven that successful FinTech startups (e.g., neobanks, payments companies) can attract millions of customers, predominantly biased towards the younger demographic. To date, though, the challenge has been that many of these customers do not hold large balances, and/or are using the startup as a secondary account. The common argument would be to “get ’em early” and ride the wave of the millennials as they grow into their prime earnings power. That might well happen. Or it might not.
Japan today has by far the oldest population in the world, with the percentage of those being 65 years old or older making up about 38% of the population. The birth rate is ~1.4, far below replacement rate, and with hardly any immigration, the population has been shrinking since 2010. Europe is a distant second, with China not far behind. For the latter, it throws up the question whether it will become old before it becomes rich (at a national level), and many policies have been put in place to address that.
So Japan is not only getting old pretty fast, with a shrinking population that will further concentrate in the cities, it is also that a large part of the financial wealth is tied up with the older generation. This is the post-World War II, reconstruction and bubble time population. The post-bubble generation is largely *%@@&^. And that trend of “old wealth” will amplify dramatically over the next 10 years.
By 2030, essentially half of the private household wealth will be held by the three-quarter-century club. The share of the “young” bracket, which will have moved up one rung between 2015 and 2030, will still be in relative decline. So how about some SilverTech (DiamondTech?) instead of MillennialTech?
The challenge in Japan remains that more than 50% of personal financial assets are held in case and bank deposits. For a long, long time, securities brokers and asset managers have tried to incentivize a larger allocation to investments, with limited success. However, the country will need to put its asset to more productive use in the face of a growing number of centenarians.
So, in the context of the Japanese FinTech market, if you are building a consumer-focused business, are you going to target the relatively poor, and also shrinking number of young people, or will you dare to develop a compelling proposition for the affluent old folks? The market is there for the taking.
Nomura Holdings, Nomura Investment Forum, December 2018
Nomura Holdings, ESG Initiatives, December 2019
Nomura Holdings, Japan in the World, January 2020
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