Japan’s fintech market is estimated at JPY1,210 billion (USD 12 billion), which is still very small compared to markets such as that of the US (USD 4 trillion). However, it has been showing constant growth. From 2017, a CAGR of nearly 70% is estimated towards 2022.

Fintech emerged in the US and in Europe to disrupt conventional financial services industry following the global financial crisis. However, in Japan it evolved in a bank-centric way - not as a force for disruption, but rather to make existing financial services more frictionless.

There is an added imperative for banks to digitalise as the low interest rate era was denting profitability. The revised Banking Act (2018) required banks to open APIs within 2 years from enforcement. Nearly all banks complied with this requirement and approximately 120 firms have registered as electronic settlement agents to connect with banking APIs, resulting in a plethora of new services available to retail banking customers. The opening of the Zengin System (clearing system for Japanese banks) to money transfer agents in October 2022 is expected to enhance user experience further as methods for money transfer diversify.  

Japan is a cash-centric society; with the ubiquity of ATMs (also available at Japan’s dense network of convenience stores), cash is easily accessible. However, with the government’s push to promote cashless payment with a target of 40% by 2025. This ratio reached 36% in 2022, so things are starting to change. 

We are seeing some Japanese institutions working with foreign firms to improve their customer experience. Some Japanese financial institutions have been choosing foreign firms as their innovation partners in areas such as wealthtech, KYC, cybertech, omnichannel customer engagement etc. 

Given the size of the financial services industry, and the take-off of digitalisation and cashless having just come around, there is untapped growth potential yet to be explored. FinCity.Tokyo, as a public-private agency established to promote Tokyo as a global financial hub, would be delighted to support EU firms to connect with Japan’s ecosystem.

More information on the Japanese market at FinCity.Tokyo