（Original Video in Japanese was published on the FINOLAB CHANNEL on Feb. 10, 2025）

This article summarizes the FINOLAB CHANNEL’s FinTech Topics #113 video, which discusses the diversification of online and mobile banks in Japan, focusing on the utilization of Banking as a Service (BaaS) and the entry of new business sectors into the financial industry.

The First Generation of Internet Banks

The video begins by noting that over two decades have passed since the emergence of the first generation of internet-only banks in Japan. These initial players, while some have rebranded, laid the groundwork for today’s digital banking landscape. These include Japan Net Bank (now PayPay Bank), Sony Bank, eBank Bank (now Rakuten Bank), Sumitomo SBI Net Bank (which actively promotes its BaaS platform under the name NEOBANK), and Jibun Bank (now au Jibun Bank).

The Second Generation and Mobile-Only Approaches

Following the initial wave, a second generation of online banks has emerged, often in collaboration with other financial institutions or as part of larger internet groups. These include Daiwa NEXT Bank (linked with Daiwa Securities), GMO Aozora Net Bank (part of GMO Group), Minna Bank (part of Fukuoka Financial Group), and UI Bank (part of Tokyo Kiraboshi Financial Group). Notably, some of these newer banks have adopted a mobile-only strategy, solely focusing on smartphone-based transactions.

Convenience Store Banks

Alongside these developments, major convenience store chains like Seven Bank, Lawson Bank, and AEON Bank have also established their own banks. While having ATM networks, these convenience store banks can be considered similar to online banks due to their lack of traditional branch networks.

Banking as a Service (BaaS) and NEOBANK

The discussion then shifts to Banking as a Service (BaaS), with Sumitomo SBI Net Bank’s NEOBANK highlighted as a key player. NEOBANK partners with various industries to create new banking services. Examples include JAL NEOBANK (with Japan Airlines), Takashimaya NEOBANK (with the department store, Takashimaya), Yamada NEOBANK (with electronics retailer chain, Yamada Denki), Dai-ichi Life NEOBANK (with Dai-ichi Life Insurance), SBI Securities NEOBANK, and SBI Remit NEOBANK.

Recent Developments in BaaS Partnerships

The video emphasizes significant developments in BaaS in the past 2 years, with new entrants from diverse sectors. These include:

• Transportation: JRE Bank (a partnership between JR East and Rakuten Bank, launched in May 2024, offering railway-related benefits), and KEIO NEOBANK (a collaboration between Keio Corporation and Sumitomo SBI Net Bank, from Sep. 2023, providing services linked to Keio Passport card membership and benefits along the Keio railway lines).
• Real Estate: Hebel Haus NEOBANK (a service from Asahi Kasei Homes and Sumitomo SBI Net Bank, launched in June 2024, tailored for residents of Hebel Haus, offering enhanced housing loan guarantees), and Yutaka Bank (a service from KI-Star Real Estate and Sumitomo SBI Net Bank, focusing on housing loans and KI Points), .
• Energy: Katene Bank from Dec. 2024 (a partnership between Chubu Electric Power and Sumitomo SBI Net Bank, offering benefits like housing loan discounts and points for electricity/gas usage), and a planned collaboration between Kansai Electric Power, UI Bank, and Kiraboshi Group to create a new bank focused on zero-carbon initiatives, where deposits will fund environmentally friendly projects and offer eco-friendly housing loans.

Digital Banks for Small and Medium-sized Enterprises (SMEs)

The video also introduces the concept of digital banks specifically targeting SMEs, such as the planned 01 Bank. This initiative by Ikeda Senshu Bank, a regional bank from Osaka, utilizing GMO Aozora Net Bank’s BaaS platform, aims to launch in fiscal year 2024 with significantly lower initial investment compared to first-generation online banks. 01 Bank intends to integrate with various cloud services used by SMEs (e.g., accounting, expense management) to streamline financial operations and create a compelling banking service.

Key Trends and Future Outlook

The video concludes by highlighting several key trends:

• Evolution of branchless banking: New online/mobile banking services prioritize smartphone applications.
• Lower entry barriers: BaaS significantly reduces the initial investment required to launch a digital bank.
• Diversification of BaaS providers: The BaaS landscape is becoming more competitive, with multiple online/digital banks offering these services.
• Synergy with core businesses: New entrants are increasingly focused on creating synergies between their existing businesses and their banking services to offer unique value propositions to customers.
• Impact of rising interest rates: The return to a world with interest rates allows banks to differentiate their services more effectively.

Overall, the Japanese online and mobile banking sector is experiencing significant diversification driven by the adoption of BaaS, enabling companies from various industries to enter the financial services market and offer tailored banking solutions to their customer bases.