With Japan-based Mizuho Bank and Mitsubishi Tokyo UFJ Bank having recently crossed into the Financial Technology (FinTech) industry, FinTech has become a new trend. However, Japan's financial organizations are tightly ruled by local policies, and therefore FinTech may see difficulties realizing its full potential. Instead, telecom carriers, which are not regulated as strictly as banks and have advantages in user base and telecommunication technologies, are likely to become the main drivers of FinTech technology.
FinTech Association Japan was established in September 2015 by 20 founding companies, many of which were startups, and now has a membership roster that includes Japan's largest banks such as Mizuho Bank, Mitsubishi Tokyo UFJ Bank and Mitsui Sumitomo Bank as well as telecom carriers NTT DoCoMo and KDDI au 2, according to Digitimes Research's latest report about the FinTech industry in Japan.
The three banks' investments in financial IT are expected to grow in a CAGR of 3.4% from 2014-2019. The channel system and customer management categories are the areas with the highest investments. Networks and mobile banking businesses under the channel system category are the foundation of FinTech.
Compared to Europe and North America, Japan's FinTech development is rather behind mainly due to limitations imposed by Japan's Banking Act. Policy forbids Japan's financial organizations to have an over 5% stake in a non-finance-based company, limiting banks in Japan from investing heavily in startups. Meanwhile, Japan's telecom carriers will have an easier time accessing FinTech technology as they have been providing their users with convenient mobile payment services since the feature phone era.
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