Financial institutions rely on trust, yet cases of embezzlement, fraudulent loans, and insider trading continue to emerge. Despite various preventive measures, compliance alone is not enough to stop internal misconduct. This article explores the root causes of internal crimes and the necessary steps for financial institutions to strengthen prevention.
Noticeable Scandals and Their Impact
Recent cases, such as embezzlement from safety deposit boxes by veteran employees, highlight severe reputational risks for financial institutions. Scandals not only erode customer trust but also impact financial firms’ appeal in employment rankings. Although banks allocate resources to address misconduct, their effectiveness remains questionable.
How Financial Institutions Respond to Internal Crimes
Japan’s Financial Services Agency (FSA) mandates banks to report misconduct within 30 days, but ineffective internal controls can allow fraud to go undetected. Many institutions publicly disclose scandals, with a typical protocol, including apologies, commitments for cooperating with law enforcement, incident details, accountability measures, and preventive steps.
Common Elements in Fraud Prevention Strategies
A review of multiple cases shows three key areas of preventive measures:
Strengthening Corporate Governance – Establishing independent audit committees, enhancing board expertise in legal and financial crimes, and improving whistleblower systems.
Cultivating a Compliance Culture – Enforcing ethical standards, mandatory compliance training, and revising incentive structures to promote long-term sustainability.
Why a Shift from Stereotype Notion Is Needed
Even with strict governance, internal crimes persist. Institutions assume employees are trustworthy, yet fraud cases indicate that some individuals will inevitably exploit the system. The focus should shift to early detection and rapid response, ensuring misconduct is addressed swiftly to minimize damage.
Internal Fraud Detection based on Evil Human Nature
Given the limitations of manual audits, financial institutions are turning to AI-powered fraud detection to maintain fair oversight:
Fraud Detection Systems – AI analyzes employee transaction patterns in real time, flagging unusual activities.
Employee Activity Monitoring – AI detects suspicious log activity and alerts management.
Access Control Management – Restricts unnecessary data access and prevents external data leaks.
AI-Powered Initiatives in Japan
Mitsubishi UFJ Bank introduced AI-driven AML (Anti-Money Laundering) checks.
Mizuho Financial Group’s Blue Lab developed “AiHawk Filter”, an AI audit system detecting fraud risks in emails and documents.
The Reality: Fraud Can’t Be Eliminated, Only Minimized
Despite various preventive measures announced by financial institutions, internal fraud cannot be entirely eradicated. The most practical approach is to detect fraud early and minimize losses. Moving forward, financial institutions must reduce reliance on manual monitoring and accelerate technology-driven fraud prevention efforts.
（Original Video in Japanese was published on the FINOLAB CHANNEL on Mar. 25, 2025）
Evolution of the Payment Services Act
Before diving into the details of the latest amendment, let’s take a quick look at the evolution of the Payment Services Act since its enactment in 2009:
2009: A new category called “funds transfer business” was introduced, allowing non-banking entities to engage in remittance services.
2016: With the rise of Bitcoin and other virtual currencies, a registration system for cryptocurrency exchanges was introduced.
2019: The term “virtual currency” was changed to “crypto assets,” and regulations on exchanges were tightened. To protect users’ assets, offline (cold storage) management became mandatory.
2022: Regulations were introduced to accommodate stablecoins as a payment method. The transfer limit for funds transfer businesses was raised, and a three-tier licensing system (Type 1, Type 2, and Type 3) was established.
These amendments reflect the industry’s response to technological advancements and emerging use cases.
Key Points of the 2025 Payment Services Act Amendment
The main aspects of the amendment, which was approved by the Cabinet in March 2025, include the following:
1. Introduction of Domestic Asset Retention Orders for Crypto Asset Exchanges
Previously, there was concern that crypto asset exchanges handling spot transactions could transfer their assets overseas. The amendment allows the government to issue asset retention orders to prevent such outflows.
2. Flexible Management Requirements for Trust-Based Stablecoin Reserves
Previously, stablecoin issuers were required to hold reserves in full as demand deposits. The amendment allows issuers to hold up to 50% of their reserves in low-risk assets such as government bonds or redeemable term deposits. This change is expected to enhance the international competitiveness of stablecoins issued in Japan.
Although no registration was permitted for stablecnin operator after the new regulation in 2022, SBI VC Trade, part of the SBI Group, has become the first company in Japan to register for handling stablecoins. It plans to offer USDC, issued by Circle.
3. Establishment of a Brokerage Category for Crypto Asset Transactions
Until now, entities engaging only in mediating crypto asset transactions were required to register as full-fledged exchanges, creating high entry barriers. The amendment introduces a new brokerage category, allowing intermediaries to operate under a separate, more appropriate regulatory framework. This change aligns with financial regulations in other sectors and is expected to promote new service providers.
4. Regulation of Cross-Border Payment Collection Services
Recent regulatory changes now impose rules on cross-border payment collection services, which were previously unregulated. While these services do not require a funds transfer business license under the current framework, some have been misused for illegal activities such as online gambling and investment fraud. To address these risks, new regulations have been introduced.
The new rules aim to crack down on unregistered operators involved in illegal fund transfers. For services with higher risks, additional regulations will enhance consumer protection and strengthen anti-money laundering (AML) measures.
Cross-border payment collection services that do not directly facilitate product or service transactions will now be subject to funds transfer regulations. However, low-risk services—such as platforms directly involved in transactions or escrow services—may be exempt if they are already regulated under other laws.
Some industry groups, including the Japan Association of New Economy, have raised concerns that excessive regulation could harm digital payment services. They urge policymakers to ensure that the new rules are focused on actual risks and do not disrupt existing ecosystems like e-payments and point-based settlements. As the final details of these regulations take shape, it will be important to monitor their impact on businesses and innovation.
5. Faster Refund Process for Users in the Event of a Funds Transfer Business Failure
Previously, even when funds transfer businesses secured user assets through bank guarantees or trusts, refunds were processed through a government-led procedure, taking at least 170 days. The recent amendment introduces direct refund options, allowing banks and trust companies to return funds to users without going through the traditional process. This change enhances consumer protection and ensures faster access to funds in the event of a business failure, improving the overall efficiency of financial services.
Future Outlook
The 2025 amendment is expected to:
Reduce the burden on stablecoin issuers, promoting stablecoin adoption in Japan.
Lower barriers to entry for crypto asset intermediaries, expanding financial business opportunities.
Introduce new regulations for cross-border collection services, with ongoing discussions on implementation details.
As the regulatory framework continues to evolve, stakeholders will be closely watching the government’s next steps, including specific regulations under ministerial ordinances.
（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.
JR West will launch “Wesmo!” in Q1 of fiscal year 2025, an ambitious cashless payment and wallet service integrating various financial functions. This move reflects a growing trend of railway companies expanding into financial services.
What is Wesmo! and JR West’s Financial Expansion? (Source: JR West Press Release)
What is Wesmo!?
Announced on January 21, 2025, Wesmo! aims to enhance daily and business transactions. JR West, the first railway operator registered as a Type II Funds Transfer Service Provider, offers:
For Individual Users
Charge Function: Load funds via bank accounts, Seven Bank ATMs, or J-WEST Cards.
Money Transfer: Peer-to-peer transactions among users.
Point Integration: Earn and use WESTER Points across ICOCA and J-WEST Card services.
For Merchants
Low-Cost Payment Solution: “BLUE Tag Touch” with zero setup cost and a 1.9% transaction fee.
Fast Revenue Collection: Next-day settlements.
B2B Transfers: Free supplier payments to improve efficiency.
Payment Methods
BLUE Tag Touch: Tap to pay via smartphone.
QR Code Payment: Alternative for stores without BLUE Tags.
Launch Timeline & Future Features
Merchant recruitment began in January 2025, with planned expansions including:
ICOCA Charging: Direct top-ups via the Wesmo! app.
Digital Salary Deposits: Pending government approval, offering payroll integration.
Strategic Goals
Higher-Value Transactions: Competes with QR code and credit card payments, supporting transactions up to ¥1 million.
Expanded Transfer Capabilities: Unlike Suica, Wesmo! enables peer-to-peer transfers but imposes limits based on identity verification level.
Aggressive Merchant Acquisition: Competitive transaction fees (1.9% vs. PayPay’s 1.98%) and next-day payouts enhance merchant appeal.
JR West’s Other Financial Activities, Digital Bonds
In June 2024, JR West issued “WESTER Bonds” using blockchain, engaging investors with loyalty rewards and exclusive perks, reinforcing ties with customers beyond traditional railway services.
Railway-Finance Synergy
Railway and airlines are increasingly integrating financial services:
JR East: Launched “JRE Bank” in 2024, offering up to 40% Shinkansen fare discounts.
Keio Corporation: Introduced “KEIO NEOBANK” in 2023.
Airlines: JAL and ANA have integrated banking and payment services.
However, nationwide adoption may take some time; Suica and ICOCA interoperability took a decade, making Wesmo!’s broader expansion a long-term challenge.
Challenges & Prospects
Wesmo! offers comprehensive features but faces a saturated cashless payment market. With 9 million Wester members, JR West has a solid foundation, yet widespread adoption will take some time. Additionally, differing strategies within the JR Group may hinder nationwide implementation.
While Wesmo! is well-positioned for success, overcoming competition and scaling effectively will be crucial for long-term sustainability.
（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.
What are the 10 major trends for 2025?（Photo/Shutterstock.com）
As 2025 approaches, marking a quarter-century since the beginning of the 21st century, it is set to be a milestone year for Japan in many ways. This article will first explain some of the symbolic aspects that have been pointed out in previous discussions. Following that, we will explore 10 key trends, including the expansion of financial DX, the practical application and advancement of generative AI, the progress of cashless payments, new developments in BaaS, the implementation of digital currencies, the diversification of digital securities, the personalization of insurance, the expansion of services for SMEs, and the further increase in online financial crimes.
The 2025 Problem: Super-Aging Society
By 2025, one in five Japanese citizens will be 75 or older, increasing demand for pensions, healthcare, and financial services for the elderly while exacerbating labor shortages.
The 2025 Digital Cliff: Delayed Digital Transformation (DX)
Japanese companies must accelerate DX efforts to remain competitive. Legacy systems, IT talent shortages, and security risks pose challenges, with estimated annual economic losses of ¥12 trillion if DX stagnates.
My Number 2025 Issue: Electronic Certificate Renewal
Japan’s National ID, My Number Card system will require the renewal of 27 million electronic certificates in 2025 before the renewal of physical cards, raising concerns about disruptions in access to healthcare and other services.
With 2025 marking such a critical transition year, the following paragraphs will explore 10 key fintech trends that are expected to play a significant role in shaping the industry.
1. Expansion of Financial DX
The financial industry is shifting from process digitization to full operational restructuring. This includes AI adoption, talent reskilling, and fundamental changes in banking and insurance sales.
2. Generative AI in Finance
AI is evolving from automating tasks to acting as an autonomous financial agent. AI-driven “machine workers” may replace human customer service, and “machine customers” could conduct financial transactions independently.
3. A “World with Interest Rates”
Japan’s exit from zero-interest rates is reshaping financial strategies. Banks are strengthening deposit acquisition, and fintech firms are exploring new revenue models. Risk management solutions are becoming critical to prepare for the further interest rise.
4. Progress of Cashless Payments
Japan’s cashless payment ratio reached 39.3% in 2023, nearing its 40% target for 2025. Expansion efforts now focus on businesses and inbound tourism, with QR code payment standardization and international partnerships (e.g., PayPay & Ant Group).
5. New Developments in BaaS (Banking as a Service)
BaaS adoption is evolving beyond embedded finance. Examples include digital banks partnering with energy and crypto firms to create new financial products. More innovation is expected in 2025.
6. Implementation of Digital Currencies
Japan is exploring CBDCs alongside global central banks, though no immediate launch is planned. Stablecoins and deposit tokens are gaining traction, with increasing real-world use cases.
7. Diversification of Digital Securities
The market for blockchain-based digital securities is growing, expanding beyond real estate into green bonds and entertainment financing. Asset-backed digital tokens are expected to gain popularity.
8. Personalized Insurance (Insurtech)
AI-driven data analysis enables more customized insurance offerings, such as wellness programs and employee benefits linked to health metrics from wearable devices.
9. Expansion of SME Financial Services
New fintech solutions cater to small businesses, including alternative lending models and digital accounting services to improve SME financial inclusion.
10. Rise in Online Financial Crimes
With digital finance expanding, cyber threats such as fraud and hacking are increasing. Stronger security measures and AI-based fraud detection are becoming essential to cope with tech-savvy fraudsters.
Conclusion
Japan faces significant challenges, including a declining workforce, making it imperative to improve efficiency across society. In the financial sector, expectations for emerging technology—especially generative AI—are high. 2025 is likely to be a critical year for fintech, as its true capabilities will be tested in addressing these pressing issues.
（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:
Payment history
Ratio of credit usage to credit limits
Length of credit history
New credit accounts
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:
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.”
Improving Financial Literacy: It is crucial to ensure that people understand what credit scores represent and how they affect borrowing.
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.
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.
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