EVENT COVERAGE: TOKYO FINTECH SHOWCASE
Tokyo is banking on foreign fintechs to reinvigorate its financial sector Fintechs may tap into US$9.07t (¥984t) of individual cash sitting in banks, according to Tokyo officials.
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okyo’s leaders are looking at overseas fintech to help buoy not just their dreams of becoming Asia’s leading global financial city, but also to help reanimate Japan’s banking sector. The country’s banks have been beset with profitability issues given the low interest rate environment, with the short-term interest rate currently at -0.1% as of November 2019. Further adding to the pressure is the tight competition amongst dozens of regional and foreign banks present in the market. As a result, banks are investing abroad for higher returns and lending towards smaller firms that may be carrying higher credit risk. Others are adding charges for their services--for example, the Mitsubishi UFJ Financial Group is considering fees on dormant accounts, a spokeswoman revealed last December.
Tokyo Governor Yuriko Koike
24 ASIAN BANKING AND FINANCE | MARCH 2020
Amidst this environment, The Tokyo Metropolitan Government (TMG) outlined an initiative to boost itself as Asia’s leading financial hub. Central to this ambition is the fintech industry, which TMG is banking on to tap into the US$16.8t (¥1,860t) of individual financial assets in Japan, US$9.07t (¥984t) of which are kept in underperforming cash and bank deposits, official data revealed. Banks’ saving grace Foreign fintechs are expected to help solve the failing profitability of banks by guiding them to shift away from traditional business models, according Hiroshi Nakaso, former deputy governor of the Bank of Japan and chairman of FinCity.Tokyo. The traditional model saw local banks rely on deposit rates for profits, but with interest rates close to zero and further easing of the fiscal policy
One way to address the [banking] situation is to invite more fintech companies which will introduce highly new business. models.
expected, this model has become insufficient for banks to survive. “I believe one way to address this situation is to invite more fintech companies which will introduce highly new business models. This is what is happening in any major market, which allows fintech companies to directly access the banks’ platform. I think a collaboration of fintech companies with the banking sector will open new frontiers for the banking business,” Nakaso said during a media conference hosted by the TMG. The entry of overseas fintechs into the market is also expected to help solve the problem of overcapacity, according to Nakaso. Midscale banks notably survived the financial crisis two decades ago that saw 20 big banks consolidate to three mega banks and smaller credit cooperatives
