Japan FinTech Observer #87

Welcome to the eighty-seventh edition of the Japan FinTech Observer.

I have finally obtained my new NFC-capable MyNumber card (used to get along with the paper version until now), and incidentally, Woodstock announced their launch for foreign residents in Japan the same day. Why is this a big deal? Well, if you have an SBI Shinsei Bank account, and you would like to get intermediated to SBI Securities, for example, as a foreigner you cannot. So this upstart has accomplished what the incumbents could not.

In addition, the combination of MyNumber and Foreign Resident's card in my hand, and outstanding Woodstock UI/UX backed up by high-performance Alpaca APIs on the service side made onboarding a breeze. Colonel Sanders would say, "Fingerlickin' good" (since we are on the subject, make sure to put your KFC Christmas orders in early!). First class delivery by Brian Yun, his team, and Woodstock's partners. I have seen the future of customer onboarding in Japan.

Here is what we are going to cover this week:

• Venture Capital & Private Markets: Dai-ichi Life Insurance Company has invested JPY 1 billion in the first Boost Capital fund; Global Brain and Tencent have co-led an additional investment in UPSIDER, provider of the corporate credit card “UPSIDER” and business payment solution “Shiharai.com"; Simple Form has raised a total of 4 billion yen in Series B funding to enhance its Japanese entity due diligence capabilities; Money Forward invested in Fondo
• Insurance: Fujitsu and SAP Fioneer on the development of the Japan Edition of SAP Fioneer Cloud for Insurance; Agrex and justInCaseTechnologies have begun building a BPaaS model that supports everything from insurance product design to business operations
• Banking: Daiwa Securities and Airborne Capital enter into an aircraft leasing joint venture; MUFG fired an employee who allegedly stole as much as ¥2 billion
• Payments: ELESTYLE announced that “OneQR” has been adopted by Kirin Beverage Company
• Capital Markets: Woodstock is now available for foreign residents in Japan; Bridgewise and Rakuten Securities will bring AI-powered financial investment analysis solutions to the Japan market; KlimaDAO JAPAN will begin a beta test of the blockchain-based carbon credit marketplace; Higo Bank has adopted The Depository Trust & Clearing Corporation’s (DTCC’s) ITP services
• Digital Assets: Suntory has tokenized special edition Premium Malt’s bottled beer on Avalanche; the Japanese Financial Services Agency is exploring the creation of a new regulated entity specifically for cryptocurrency brokerages; KDDI and Mawari partner for DePIN
• The Last Word: Wanderlust contained

Japan FinTech Outlook 2025

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Venture Capital & Private Markets

• The Dai-ichi Life Insurance Company has invested JPY 1 billion in the Boost Capital №1 Investment Limited Partnership managed by Boost Capital; the fund is the first fund established by Boost Capital and will mainly invests in Japanese IT startups; it is characterized by its policy of supporting investees to accelerate their growth and utilizing M&A and buyouts in addition to IPOs, which have traditionally been the typical exit in Japan
• Global Brain and Tencent have co-led an additional investment in UPSIDER, provider of the corporate credit card “UPSIDER” and business payment solution “Shiharai.com"; through these services, UPSIDER has been tackling challenges related to cash flow and payment processing; since UPSIDER’s service launch in May 2018, over 60,000 companies have adopted its services, with cumulative corporate credit card transaction volumes exceeding 450 billion yen as of September 2024
• Simple Form has raised a total of 4 billion yen in Series B funding, consisting of a 2.6 billion yen third-party allotment of shares to nine investors, including a government-affiliated fund, four megabank-affiliated venture capital firms, and independent venture capital firms, and a 1.4 billion yen loan from financial institutions; Simple Form is developing products such as ‘SimpleCheck,’ which automates the corporate investigation process by collecting and databasing qualitative information on 5 million corporations in Japan, and ‘SimpleMonitor,’ which monitors important changes in corporate risk information
• Why Money Forward invested in Fondo

Outside of FinTech

• DCM Ventures, a global early-stage venture capital firm headquartered in Silicon Valley, announced a change to its investment operations; it is spinning off its pre-seed and seed team into a new, separate firm that General Partner Osuke Honda will lead; the new firm's initial fund is expected to invest a majority of its capital in Japan, with investments in other markets
• Plug and Play has entered into a partnership agreement to participate as a co-GP in the joint fund “SBI US Gateway Fund” established in September 2024 by SBI Holdings and Shin Nippon Bioscience

Insurance

• Fujitsu and SAP Fioneer have signed a partnership master agreement to accelerate the digital transformation of Japan’s insurance industry; under the agreement, they will collaborate on product planning, development, and marketing, including the development of the Japan Edition of SAP Fioneer Cloud for Insurance, an end-to-end cloud-based platform that packages core insurance services and combines localized business content with global industry best practice
• Agrex, a member of the TIS INTEC Group, and justInCaseTechnologies, which has built the SaaS insurance system “joinsure", have entered into a capital and business alliance agreement for collaboration in the BPaaS sector; as their first collaborative business venture, they have begun building a BPaaS model that supports everything from insurance product design to business operations

Banking

• Daiwa Securities Group, its consolidated subsidiary Daiwa Securities, and Airborne Capital have agreed to enter into a capital and business alliance in the aircraft leasing sector; Airborne Capital Japan, a Japanese subsidiary of Airborne Capital, will undergo a reorganization into a corporation; subsequently, Daiwa Securities Group will acquire common shares and non-voting preferred shares of Airborne Capital Japan through a third-party allotment; post-capital increase, the ownership ratio will be 50% for Daiwa Securities Group and 50% for Airborne Capital
• MUFG fired an employee who allegedly stole as much as ¥2 billion ($13 million) from the safe deposit boxes of approximately 60 clients
• The Bank of Japan's Institute for Monetary and Economic Studies (IMES) has published a new paper, "A Quantitative Assessment of the Impact of Deflation in an Aging Economy"; this paper quantitatively evaluates the long-run effects of changes in inflation on the real economy, with a focus on deflation and population aging in Japan

Payments

• ELESTYLE announced that “OneQR” has been adopted by Kirin Beverage Company’s health-related product office-oriented placement service “Wellness Stand”, an unattended sales service that sells smoothies and other items to help people skip breakfast, targeting companies with 10 to over 10,000 employees, and it has been introduced in over 500 locations

Capital Markets

• Woodstock is now available for foreign residents in Japan: Woodstock’s platform expansion represents a significant milestone in the company’s journey of inclusivity and innovation; previously restricted to Japanese nationals, the trading platform has now opened its doors to foreign residents in Japan, marking a pivotal moment for international investors; this strategic decision reflects the company’s commitment to navigating regulatory landscapes while providing accessible investment opportunities to a broader international audience
• Bridgewise, the financial investment intelligence platform for global securities, and Rakuten Securities have announced a strategic partnership to launch AI-powered financial investment analysis solutions for the Japan market; from spring 2025, this partnership will include the provision of Bridgewise’s AI-powered investment intelligence services to over 11 million Rakuten Securities customers, with further innovative features set to be rolled out later in the year
• KlimaDAO JAPAN will begin a beta test of the blockchain-based carbon credit marketplace “KlimaDAO JAPAN MARKET”; in this test, OPTAGE will provide the corporate wallet, Mizuho Financial Group will provide practical support for the project, and PBADAO will provide project management and development support; J-Credits will be tokenized on a public chain to enable trading; these J-Credit Tokens will be issued as ERC-20 standard tokens on the Polygon blockchain, and one token will correspond to 1 t-CO2.
• Higo Bank has adopted The Depository Trust & Clearing Corporation’s (DTCC’s) ITP services to automate their middle and back office, helping them achieve no touch processing across domestic and cross-border transactions; Higo Bank, the largest Japanese regional bank in Kumamoto Prefecture, selected CTM, DTCC’s platform for the central matching of cross-border and domestic equity and fixed income transactions
• The Ministry of Finance has published its "JGB Newsletter" for November 2024

Digital Assets

• Suntory Group, a world-leading beverage company, launched its first-ever pilot project featuring the sale of tokenized Premium Malt’s bottled beer on Avalanche; as part of the project, the 715ml Premium Malt’s beer — aged in Yamazaki Whisky barrels — will feature near-field communication (NFC) technology on the neck of the bottle. When the cap is opened and the NFC tape is broken, customers will receive a Non-Fungible Token (NFT) as a certificate of consumption, providing a unique digital collectable for Premium Malt’s enthusiasts
• The Japanese Financial Services Agency is exploring the creation of a new regulated entity specifically for cryptocurrency brokerages; currently, any entity facilitating crypto transactions is subject to the same regulations as full-fledged exchanges, even if they only perform intermediary services; the FSA recognizes that this may stifle innovation and be an unnecessarily high barrier to entry for businesses that pose less risk to consumers
• KDDI and Mawari have signed a memorandum of understanding under which KDDI will become the infrastructure operation partner for the Decentralized Physical Infrastructure Network (DePIN) that Mawari is building in preparation for the advent of the spatial computing era; as technological innovation in spatial computing and Web3 advances rapidly, the development of distributed infrastructure to support these foundations is becoming increasingly important; Mawari aims to decentralize and strengthen the infrastructure that supports these technologies as a company that provides a distributed GPU network that is lightweight and efficient in 3D streaming and XR content delivery

The Last Word: Wanderlust contained

Visiting Japan is as popular and cheap as it has ever been, evidenced by a record 3.31 million tourists in October 2024, which also marked the fastest pace to 30m annual visitors, ever. However, what might be cheap for you is pretty expensive for us and the average Japanese household, and the decline in Japanese passport holders by almost 7 percentage points since pre-pandemic shows that wanderlust has been contained.

With flights to Europe, additionally burdened by the suspension of the Northern route over Russia, coming in regularly around USD 2,000 or JPY 300,000 at current exchange rates, there is a real incentive to vacation domestically - alas, those numbers have been pretty muted as well.

I was looking for a breakdown of passport holders by age bracket, but could not (easily) find any. The "bubble generation", now over 60 years old, used to travel far & wide and might still hold such document, while the under 30s and young families might be hard pressed to afford international travel (unless it gets paid by one of the many JETRO- or government-sponsored startup support programs). But without data that is just my speculation.

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