Japan FinTech Observer #89

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

And then there were only two. The race to become the Asian Finance, FinTech & Startup hub, which once upon a time featured the foursome of Singapore, Hong Kong, Seoul and Tokyo (sorry, Osaka and Fukuoka), is down to two contestants.

Hong Kong has been fading since 2012, although we did not notice for a few years. The National Security Law and Ant Financial’s cancelled IPO in 2020 then made abundantly clear that the Party comes before the economy. Tokyo is happily soaking up the HK and Mainland entrepreneurial talent.

Then, last week South Korea imploded in a move reminiscent of the 1970s and 1980s. We hope the situation gets resolved speedily, the people deserve better. However, the opposition gaining power and moving the country closer to China will make the country just a little less attractive for foreign capital.

Singapore and Tokyo stand to benefit.

Here is what we are going to cover this week:

• Venture Capital & Private Markets: MUFG Innovation Partners recently invested in Kasanare; ITOCHU Corporation has agreed to a capital and business alliance with boost technologies; Toyota Ventures invests in Holyheld; Global Brain has announced the final closing of its “Global Brain Flagship Fund IX”; GREE Ventures made a fund investment in Regrowth Capital Management; SBI Holdings is set to become the majority owner of German FinTech Solaris
• Insurance: former Sony Venture Head Gen Tsuchikawa joins hokan as Executive Advisor
• Banking: the return of inflation in Japan is pushing up loan demand; IBM Japan and Money Forward X partner on marketing analytics; Sumitomo Mitsui Finance and Leasing presented GenAI use cases; MUFG added Surecomp’s RIVO™ platform as its new trade finance multibank channel in Europe; Hokkoku Bank adopted “Authlete”for its BaaS platform
• Payments: Paytm selling its Stock Acquisition Rights in PayPay values the latter at USD 7bn; Smiles Mobile Remittance has established a direct partnership with India’s HDFC Bank
• Capital Markets: Daiwa Connect Securities and Credit Saison have launched a point investment service
• Asset Management: MUFG and asset management firm DWS Group (DWS) have launched a strategic venture for infrastructure investments
• Digital Assets: SKY Perfect JSAT and Crypto Garage will co-create web3 services targeting the creator economy; gaming blockchain Oasys is partnering with leading Marketplace as a Service (MaaS) solution for NFTs, RaribleX; Nissan Motor has launched “NISSAN PASSPORT” including Nissan-original NFTs and a unique web3 wallet
• The Last Word: Supplementary Budget Proposal

Venture Capital & Private Markets

• MUFG Innovation Partners recently invested in Kasanare through its MUFG Innovation Partners №3 Investment Partnership; Kasanare aims to make everyday work easier through its custom-made generative AI solutions, which are tailored to solve companies’ various business challenges; by leveraging its strengths in areas of LLM operations and retrieval-augmented generation (RAG), Kasanare’s SaaS product enables companies to optimize the use of generative AI across their entire enterprise through improved linkage between external data sources and their internal data systems while meeting data protection requirements
• ITOCHU Corporation has agreed to a capital and business alliance with boost technologies, which supports corporate sustainability management and the improvement of corporate value through visualization of non-financial information (ESG data) such as corporate CO2 emissions and human capital data; the size of the investment has not been disclosed
• Toyota Ventures invests in Holyheld: Holyheld’s platform and consumer Web3 debit card open up closed payment systems to crypto transactions by managing the secure, real-time conversion to fiat money; notably, the experience is seamless for merchants, who can then accept crypto payments without altering their processes; similarly, without any extra effort, crypto users can access a far greater selection of merchants that can instantly accept their crypto payments via traditional methods, like swiping or tapping a debit card or mobile device
• Global Brain has announced the final closing of its “Global Brain Flagship Fund IX” (GB-IX) at JPY 32.48 billion by the end of December; Global Brain has been actively pursuing the fundraising efforts by targeting high-net-worth individuals in Japan and overseas institutional investors and fund-of-funds in addition to Japanese institutional investors and business corporations; the establishment of the new fund will make Global Brain’s total AUM reach JPY 339.6 billion
• GREE Ventures made a fund investment in Regrowth Capital Management, a pioneering venture capital firm specializing in direct secondaries; with many VC funds in Japan approaching maturity in the coming years, coupled with delays in IPOs and stagnation in M&A exits, GREE sees significant potential in this fund
• SBI Holdings is set to become the majority owner of Solaris SE after offering the largest contribution in a current fundraising round by the German fintech; Solaris is seeking €100 million to €150 million from investors to secure funding until it expects to reach profitability in about two years; SBI already led a €96 million funding round in March
• Hong Kong-based financial management platform KPay has raised USD 55m in a Series A funding round led by Apis Partners; currently, the platform serves 45,000 merchants in Hong Kong, Singapore, and Japan
• The International Monetary Fund has published “Startups and Venture Capital in Japan”
• PitchBook has published its “Japan Private Capital Breakdown”

Insurance

• Former Sony Venture Head joins hokan as Executive Advisor: hokan has announced that Gen Tsuchikawa has been appointed Executive Advisor; Tsuchikawa has extensive knowledge of corporate management and a wide range of experience in domestic and overseas investment, IR, management, finance, etc., and hokan expects that he will be able to contribute significantly to improving the corporate value of the Group as it accelerates its business development in the future

Banking

• The return of inflation in Japan is pushing up loan demand from the country’s small and midsize firms for capital investment and digitalization, the chief executive of Japanese lender Resona Holdings said; Resona Bank’s loan balance for SMEs was up 4.9% by the end of September from a year earlier; that compared with just 1.1% growth in the 12 months through September 2023
• IBM Japan and Money Forward X have integrated IBM Japan’s “IBM Digital Services Platform for Financial Services (DSP)” with Money Forward X’s “X-Insight Marketing (XIM),” a function that automatically suggests financial products based on user needs, and has begun offering “XIM-API for DSP”, a service that supports the realization of marketing tailored to each individual; with this collaboration between DSP and XIM, financial institutions will be able to analyze this integrated data with the highly accurate algorithms developed by Money Forward X
• Sumitomo Mitsui Finance and Leasing held a media roundtable on December 3, 2024, as part of the “drive DX 2030” project announced in October 2024, to discuss the transformation and vision of SaaS products utilizing generative AI; at this roundtable, SMFL also unveiled its in-house developed generative AI tool “SakAI”
• MUFG has further strengthened its digital trade finance capabilities by adding Surecomp’s RIVO™ platform as its new trade finance multibank channel, complementing MUFG’s existing third-party channels in EMEA; the RIVO™ digital hub’s open API provides MUFG’s corporate clients with universal access to counter party importers, exporters, banks, insurers and shipping companies
• Hokkoku Bank, a subsidiary of Hokkoku Financial Holdings, has adopted “Authlete” to implement the international advanced API security standard “FAPI” for their Banking as a Service (BaaS) business; the bank announced the launch of a BaaS business in July 2024 that will provide banking functions via API to corporate-operated services, with plans to sequentially release account opening, transfer, inquiry, and authentication functions

Payments

• Bank of Japan Governor Ueda spoke at the 40th anniversary of the Center for Financial Industry Information Systems (FISC), exploring the evolving landscape of payment systems and the central bank’s role in shaping its future; his speech delves into the history of currency and payment systems, highlighting the interplay of security, efficiency, and convenience; Ueda then examines the influence of technological advancements, digitalization, and globalization on the future of payments, emphasizing the challenges and opportunities they present; finally, he outlines the Bank of Japan’s initiatives in navigating this evolving landscape
• Paytm’s Singapore arm will sell its stake — in the form of Stock Acquisition Rights (SARs) — in Japan’s PayPay for around USD 280m to Softbank Vision Fund entities; through this deal, PayPay is valued at JPY 1.06 trillion (USD 7bn) and accordingly, PayPay SARs held by Paytm Singapore are valued at net proceeds of JPY 41.9 billion (after netting off the exercise cost of SARs)
• Smiles Mobile Remittance has established a direct partnership with HDFC Bank, one of India’s leading banking and financial services companies, ensuring that customers enjoy great exchange rates and the quickest delivery times for their remittances to India
• KPMG has published its annual “The Future of Payments” with a comprehensive section on Japan

Capital Markets

• Daiwa Connect Securities, a subsidiary of Daiwa Securities Group, and Credit Saison have launched a point investment service; customers can now use Permanent Points, earned through Saison Cards and UC Cards issued by Credit Saison, for investments within the Daiwa Connect Securities platform
• Starting in January 2025, the Tokyo Stock Exchange will compile a list of companies listed on the Growth Market that wish to have more active contact from institutional investors in order to support companies that are actively promoting their IR activities; the initial list will be published on January 15, 2025, and will be updated on the 15th of each month thereafter
• Nomura has published its “Outlook for Fiscal Year 2024–25 corporate earnings”

Asset Management

• MUFG and asset management firm DWS Group (DWS) have launched a strategic venture designed to enhance their respective capabilities in underwriting and distributing infrastructure and alternative credit investments; the parties are initially targeting infrastructure and project finance transactions; through this collaboration with DWS, MUFG strengthens its ability to deliver impactful financing and distribution outcomes for its global project finance and infrastructure clients

Digital Assets

• SKY Perfect JSAT and Crypto Garage have reached a basic agreement to co-create web3 business and services targeting the creator economy; based on the agreement on the business plan, SKY Perfect JSAT and Crypto Garage will initiate a Proof of Concept (PoC) for a “creator support platform” in January 2025; this PoC aims to validate the motivations and factors that drive behavioral changes in creators and viewers; the ultimate goal is to foster sustainable creator development and drive growth in the creator economy through this demonstration experiment
• Gaming blockchain Oasys is partnering with leading Marketplace as a Service (MaaS) solution for NFTs, RaribleX, to create “Bazaar”, which provides a single marketplace for buying and selling items earned or acquired through games operating on Oasys blockchains; at launch, Bazaar will support secondary NFT trading on the Oasys Hub Layer (Layer 1) and Saakuru Verse (Layer 2), with additional Oasys L2s to follow
• Nissan Motor has launched the beta version of NISSAN PASSPORT, a digital service that aims to provide new value to customers; prior to full-scale operation, the beta version will provide new online experiences and services that will make customers feel closer to Nissan, such as providing Nissan-original NFTs (irreplaceable digital data) and a unique web3 wallet, opening a community where customers can communicate directly with Nissan, and awarding tokens (points) for participation in various programs

The Last Word: Supplementary Budget Proposal

The Ministry of Economy, Trade and Industry (METI) has published its outline of the FY 2024 Supplementary Budget Proposal, which indicates continued government support for startups, particularly in deep tech and those with global aspirations.

There are also potential indirect benefits from funding allocated to broader digitalization and advanced technology areas. FinTech companies should pay close attention to the intersections of their technology with areas like AI, blockchain, and digitalization, where government funding might create relevant opportunities.

We highlight the key spending areas.

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