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[Summary] Diversification of Online and Mobile Banks: Leveraging BaaS and New Industry Entrants | FinTech Topics #113

FinTech Topics

[Summary] Diversification of Online and Mobile Banks: Leveraging BaaS and New Industry Entrants | FinTech Topics #113

（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.

[Summary] The Digitalization of End-of-Life Planning – Addressing the Needs of a Super-Aging Society | FinTech Topics #112

FinTech Topics

[Summary] The Digitalization of End-of-Life Planning – Addressing the Needs of a Super-Aging Society | FinTech Topics #112

（Original Video in Japanese was published on the FINOLAB CHANNEL on Jan. 15, 2025）

Japan’s Growing Need for Digital End-of-Life Planning

With Japan’s rapidly aging population, end-of-life planning (終活, shūkatsu) is becoming increasingly important. By 2025, one in five people in Japan will be over 75, bringing significant challenges in pensions, healthcare, and caregiving. Traditionally, end-of-life planning focused on funeral arrangements and inheritance, but in recent years, it has expanded to include personal reflection, life organization, and most notably—digital assets.

The Rise of Digital End-of-Life Planning

As financial transactions and social interactions move online, digital legacy management has become a growing concern. Many elderly individuals now use the internet, with about half of those in their 70s actively online. However, digital assets—ranging from online banking accounts and subscription services to social media profiles and cryptocurrency holdings—can be difficult for family members to manage after one’s passing.

Without proper planning, families may struggle to access or even become unaware of valuable digital assets, leading to financial loss or the continuation of unnecessary subscription fees. This has created a demand for digital solutions that help organize and transfer digital assets effectively.

Common Challenges in Managing Digital Assets

Key issues that arise after an individual’s passing include:

  • Inaccessible Online Accounts: Without passwords, families cannot access social media, email, or banking services.
  • Unclaimed Digital Assets: Cryptocurrencies, e-money, and other digital financial holdings may go unnoticed.
  • Ongoing Subscriptions: Services linked to credit cards (e.g., streaming, cloud storage) may continue to charge fees indefinitely.
  • Legal Complexities: Navigating inheritance laws for digital assets is often more complicated than for physical property.

How to Prepare for Digital End-of-Life Planning

The National Consumer Affairs Center of Japan recommends the following steps to ensure a smooth digital inheritance process:

  • Document Important Passwords Securely: Write down smartphone, email, and key account passwords and store them in a secure location. However, be cautious about security risks.
  • Organize Account Information: List all active online services, including social media, subscriptions, and financial accounts.
  • Create an “Ending Note”: A document that outlines what should happen to digital assets and personal belongings after passing.
  • Appoint a Trusted Contact: Designate a family member or close friend who can access important accounts when necessary.

Emerging Digital Solutions for End-of-Life Planning

To address these challenges, various digital services have emerged in Japan, offering solutions for managing and transferring digital assets:

  • tayorie: Sends pre-written messages and important information to designated recipients when specific conditions are met, ensuring that vital details reach the right people.
  • Yuigon Net（遺言ネット）: A service supervised by legal professionals to help users create digital wills and organize end-of-life documents.
  • Digital Legacy Services by J-Factory: Assists with retrieving, organizing, and securely disposing of digital data.
  • Digital Keeper: Enables individuals to securely store and transfer login credentials and digital assets to their families.
  • SonaSapo（そなサポ ）： A real estate-related service supporting seamless inheritance processes via a digital platform.
  • SMBC Digital Safety Box: A digital vault that allows users to store important documents and instructions for their heirs.

Future Outlook and Challenges

As digital transformation accelerates, the need for structured end-of-life digital asset management will continue to grow. Additionally, as Japan experiences a rise in single-person households, new services will be required to address cases where there are no immediate family members to manage digital legacies.

The digitalization of end-of-life planning is still evolving, but the demand for secure, user-friendly solutions will only increase. It is crucial for individuals to start organizing their digital assets early, ensuring a smooth transition for their loved ones.

[Summary] What is a Credit Score? A Comprehensive Explanation of Its Mechanisms and Challenges | FinTech Topics #111

FinTech Topics

[Summary] What is a Credit Score? A Comprehensive Explanation of Its Mechanisms and Challenges | FinTech Topics #111

（Original Video in Japanese was published on the FINOLAB CHANNEL on Dec. 13, 2024）

In modern society, the “credit score,” which quantifies an individual’s creditworthiness, plays a crucial role in financial transactions and daily life. This article provides a detailed overview of the basics of credit scores, their use cases in Japan and abroad, and their future prospects.

What is a Credit Score?

A credit score is a numerical indicator of an individual’s creditworthiness and ability to repay debts. It is used in the following scenarios:

  • Loan approvals (e.g., mortgages, car loans)
  • Credit card issuance
  • Rental agreements (credit checks by guarantee companies)
  • Mobile phone contracts (installment payment reviews)

Higher scores indicate greater creditworthiness, while lower scores are seen as a sign of higher risk.

Factors in Calculating a Credit Score

Credit scores are typically calculated based on these elements:

  1. Payment history
  2. Ratio of credit usage to credit limits
  3. Length of credit history
  4. New credit accounts
  5. Types of credit

Credit bureaus use these factors to calculate scores using proprietary criteria.

The Credit Score System in the United States

The U.S. is considered a leader in credit scoring, with centralized data management by credit bureaus such as Experian, Equifax, and TransUnion. A prominent metric is the FICO score, which typically ranges from 300 to 850 points.

Key components of a FICO score include:

  • Payment History (35%)
    • Whether credit card and loan repayments are made on time.
    • Presence of past delinquencies or defaults.
  • Amount Owed (30%)
    • The ratio of the amount used to the credit card limit (credit utilization rate).
    • A utilization rate of 30% or less is considered ideal.
  • Length of Credit History (15%)
    • The length of time credit accounts have been held. A longer history indicates reliability.
  • New Credit (10%)
    • Frequency of applications for new credit cards or loans.
    • Submitting multiple applications within a short period can lower the score.
  • Types of Credit Used (10%)
    • A diverse mix of credit, such as credit cards, home loans, and education loans, is rated more favorably.

FICO scores impact not only loan and credit card approvals but also rental agreements, insurance premiums, and even job applications.

Tips for Improving Your Credit Score

To boost your credit score, consider the following:

  • Make payments on time.
  • Keep credit utilization below 30%.
  • Maintain a long credit history.
  • Avoid applying for too much new credit in a short time.
  • Regularly check your credit score.

Challenges with Credit Scores

Credit scoring methods can be complex and difficult for many to understand. Furthermore, immigrants and young people with no credit history often face disadvantages, leading to difficulties in accessing financial services. Privacy concerns regarding the handling of data required for credit scoring are another issue.

Credit Scoring in China: The Sesame Credit Example

China’s credit scoring system has garnered global attention. A notable example is Sesame Credit (芝麻信用), provided by Ant Financial, part of the Alibaba Group. It uses credit scores for various societal applications. High scores offer benefits such as waived deposits for car rentals or preferential loan rates. In some cases, families even consider scores when evaluating potential marriage partners.

Sesame Credit evaluates users based on factors such as “personal traits,” “fulfillment ability,” “credit history,” “social connections,” and “behavioral preferences.” Compared to the U.S.’s FICO score, Sesame Credit incorporates broader and more detailed personal data.

Social Impact and Challenges

The widespread use of credit scores in China has had the following effects:

  • Reduced theft in unmanned stores.
  • Increased return rates for free rental umbrellas.
  • Fewer disputes over payment after services.

However, challenges include excessive data collection, falsification of information to improve scores, and income or occupational disparities leading to score gaps.

Credit Scoring in Japan

Japan has three major credit information agencies: CIC, JICC, and KSC. Each agency manages information for different purposes. While some of the data they hold overlaps, it is not entirely identical.

  • CIC handles information primarily from credit card companies and consumer finance companies.
  • JICC focuses on managing consumer finance information.
  • KSC centers on banking-related information and includes data such as utility payment records.
    These agencies cover different areas of credit information.

Consumers and businesses can request disclosure to check the information registered about them. However, credit scores themselves have not been disclosed so far, which has contributed to a lack of understanding of individual credit standings.

Introduction of Credit Guidance

Starting in late November 2024, CIC will launch a new service called “Credit Guidance,” which provides consumers and businesses with credit scores calculated based on their credit information. This service will display a three-digit score along with the main factors that influenced the score.

The goal of this initiative is to help consumers understand their credit status, improve financial literacy, and prevent over-indebtedness. For member companies, the service is expected to facilitate appropriate credit agreements and standardize credit evaluation, contributing to the promotion of digital transformation.

Scoring Criteria and Usage

The Credit Guidance score is calculated based on objective data such as payment history, outstanding balances, the number of contracts, the duration of contracts, and the number of applications submitted. This allows users to view their credit information in a transparent manner.

Disclosure requests require a fee of 500 yen via the internet or 1,500 yen via mail. The score and four key influencing factors are disclosed. Additionally, score distribution data shows that the average score typically falls within the range of 630 to 709 points.

Other Credit Score Initiatives in Japan

In recent years, several new credit score initiatives have emerged:

  • J.Score: Launched in 2017 by Mizuho Bank and SoftBank, this service aimed to provide a new credit scoring system for consumers. However, despite growing user registration, borrowing performance stagnated, leading to its termination in 2022.
    Reasons for this included:
    • Users with high scores were unable to secure loans.
    • Loans for users with low scores were challenging.
    • Differences from conventional credit scores were unclear, which discouraged active use.
    • Insufficient explanation to users.
  • Docomo Score Link: Since August 2019, NTT Docomo has offered this service using its lending platform. It calculates scores based on various user data, leveraging big data. The scores are made available for financial institutions to use in credit evaluations.
  • M.Score by MILIZE: In February 2024, fintech company MILIZE introduced “M.Score,” a SaaS-based credit scoring model developed in collaboration with Tensor Consulting. By answering questions via a smartphone or computer app, consumers can calculate their own credit score. The service aims to make credit scores more accessible and relevant to consumers, with expectations for broad usage scenarios.

These efforts represent steps toward exploring new approaches to credit scoring in the financial industry, and further improvements are anticipated in the future.

Challenges and Prospects for Widespread Adoption of Credit Scores

Efforts related to credit scores are expected to become increasingly important. With the enhanced disclosure functions of agencies like CIC, credit score awareness is likely to grow. However, several steps are necessary for broader adoption:

  1. Expanding the Utility of Credit Scores: Credit scores should be applicable in various situations, promoting the perception that “having a credit score is useful in many contexts.”
  2. Improving Financial Literacy: It is crucial to ensure that people understand what credit scores represent and how they affect borrowing.
  3. Advancing Digitalization: Utilizing AI and big data to simplify credit score calculations is essential. Allowing businesses to check and track scores anytime through smartphones can increase convenience.
  4. Cultural Perception Shift in Japan: Traditionally, debt has been viewed negatively. However, it is necessary to reposition credit scores as a “positive indicator of personal trustworthiness.” This shift in perception will accelerate the adoption of credit scores.

As developments surrounding credit scores continue to accelerate, addressing these challenges, enhancing their utility, improving financial literacy, and advancing digitalization will be key to their successful integration.