Digital Banking? The Jury’s Still Out in Japan

Digital Banking? The Jury’s Still Out in Japan

Pablo Lacruz

Business Development Manager EMEA at Strands

Pablo Lacruz is Strands Area Manager and the person responsible of the regional development of Strands in the United Kingdom, Ireland, Russia, Nordics & Baltics countries. Within the last 5 years he has been strongly involved in the Fintech European ecosystem from both the financial and the technological side.

Views 986

Digital Banking? The Jury’s Still Out in Japan

29.03.2017 09:45 am

The Japanese culture is a combination of traditional and modern like few others. When you think of Japan, it would be normal to associate their culture with digital technology, mobile phones and virtual reality, but when it comes to banking, the old system remains firmly rooted to its analogue ways.

Walk into any branch of a bank in Japan and it is a thing of luxury; all the personalized assistance, glamourous lobbies and plush furnishings you could imagine.  All for a simple bill payment or money transfer at the cashpoint. So why go to such lengths when the global future of banking is proven to be so clearly digital?

As it stands, less than 20% of the Japanese population use digital banking services, and for a small country, Japan has what could be considered too many banks for the number of users; a branch on every corner and as a result, there is no inconvenience associated with going to the bank to carry out daily transactions.  

People in Japan trust their banks implicitly, often holding between 3 and 5 different bank accounts, and as such traditional banks are reluctant to change the status quo.  A case of “if it isn’t broken, don’t fix it”.  Can they afford to remain in this offline, transaction-only existence simply because their clients have an overtly analogue mindset, or is it time to force them get up to speed, in keeping with the rest of the world?

It seems clear that it is precisely this that worries banks of this kind:  too much world to be discovered, so by remaining firmly un-digital, they remove the risk of customers being tempted by the competition.  The prettier the bank’s facilities, the more attentive the staff, the lower the chances their clients will jump ship?

Kazuya Sakakibara, Executive Officer of IT Strategy and Product Development at Jibun Bank, the only Japanese mobile-first bank in Japan, says:

It will take some 5 - 10 years to see real change in the Japanese market.  We can’t change the habits of the older population, and so-called millennials are earning more and are increasingly mobile, so a move in the right direction is imminent. At Jibun Bank, we believe the future is digital and our focus is firmly placed on proving that there is a modern side to banking that is designed to offer a personalized service online, without the need to eliminate the conversation and essential element of trust”

The vast majority of Japanese people are cash users.  This, coupled with the fact that almost half of all shops and establishments do not provide customers with the facilities with which to pay by any other means, makes progress complicated, especially considering ATM machines are not open 24 hours.  Is this system really as easy as all that for the average Japanese person, or is it more a case of old habits die hard?  

With cash transactions comes an almost impossible obstacle; a lack of data about how customers spend their money.  Debit cards are rare in Japan and information about credit card spending is not currently being used to better understand customer behaviour.Banks like Jibun Bank have gone round the issue by setting up Machine Learning and Analytics teams and establishing contracts with credit providers directly. Their parent company, the Japanese telecom company KDDI Corporation launched their new au Wallet service in May 2014, enabling customers to carry out transactions electronically, check their balance and top up via the application.

With the remaining 80% of the population still ripe for the picking by digitalized banking services, surely the race is now on for banks to be the main platform on which to aggregate user’s other bank accounts?

Jibun Bank is the first mobile-centric bank in a traditional Japan, and as such, a ground-breaker in this country, as it has no physical branches or cashiers to speak of.  All transactions traditionally carried out at the bank can now be done via their online application.

Though they are fully aware of the challenges this new system poses, they are focused on improving communication with their clients, albeit through virtual technology or chatbots. The move from transactional banking to relationship banking is underway, but thanks to banks like Jibun, the relationship is revolutionizing a stagnant system.

This post originally appeared on blog.strands.com

Latest blogs

Nish Kotecha Finboot and Bryan Foss, NED, Visiting Professor at Bristol Business School and member of the FRC Audit & Assurance Council

How Listed Companies Can Use Blockchain to Prevent Auditing and Reporting Malpractice and Avoid Scandal

Not too long ago, there was very little to link Wirecard, the disgraced payments platform in Aschheim, Germany, with Boohoo, the fast-fashion online retailer in Leicester, England, but both have recently been embroiled in high-profile scandals. Read more »

Leon Muis Yolt Technology Services

The Time for Financial Services to Become Truly Digital is Now

The financial services industry looks set to change dramatically over the next couple of years in response to COVID-19. The pandemic has certainly highlighted some inefficiencies and weak spots in current processes for many businesses, such as those Read more »

Granville Turner Turner Little

The Lockdown Money Revolution

Many Brits have found that lockdown has been beneficial for their money, having cut back on personal spending and managing to put away some extra cash. According to eToro, Brits with unspent discretionary income are set to accumulate £75.5bn in Read more »

Sandra Higgins Sysnet Global Solutions

Are You ‘Prescribing’ the Right Security Solution to Your Merchants?

When it comes to leading a healthy lifestyle, eating the right food, taking regular exercise, and maintaining a positive mindset are key. However, despite these best intentions and practices, you still might not get all the nutrients your body needs Read more »

Robert Flowers DivideBuy

It Doesn’t Have to Be the End – How Retailers Can Grow in Light of COVID-19

It’s no news that the retail industry has been flipped on its head by the COVID-19 pandemic. Due to the lockdown, most in-store operations have been shut down, and nationwide furloughs, reduced pay and steady streams of income at risk have fuelled a Read more »

Related Blogs

Habib Hanna Diebold Nixdorf

Accelerating Transformation at a Time of Uncertainty

As with every industry in every country, the world of banking has been disrupted to its core in recent months. Consumers have been unable – and in some cases, unwilling – to complete banking processes in person, and the reality is that some Read more »

Alex Malyshev SDK.finance

The Biggest Danger to Branchless Banking

With a third of the global population on lockdown and scores of bank branches closed, many are convinced that branch banking is dead, and the future is branchless. Is this really true? Read more »

Aoife Crean Strands

If It’s So Good, Why Hide It? Invisible PFM - A New Take on Money Management

Banking has gone undercover and it’s been a long time coming. We want our banks to do a lot for us, but it transpires that the less you can actually see your bank doing for you, the better. So, it begs the question: why would banks suddenly decide Read more »

Vaida Pakulyte Strands

Dear Banker, We Need to Talk About UX

Design has changed (and even transformed) a lot of industries: music, technology, electronics, fashion. And not surprisingly,  the financial industry is not immune to their impact. Read more »

Estefania Gual Strands

It’s Not About Millennials

As of 2015, the generation known as ‘millennials’ – those born between 1981 and 2005 - is the largest generation in history, surpassing the so-called Baby Boomers, one of the most important generations of our time, according to Pew Research Center. Read more »

Magazine
ALL
Free Newsletter Sign-up
+44 (0) 208 819 32 53 +44 (0) 173 261 71 47
Download Our Mobile App
Financial It Youtube channel