"We want to deploy a payment service for the Japanese. Can you help us?" asked an executive from Alipay, a Chinese payment service operator, at a Mizuho Bank Ltd. branch in central Hong Kong, a leading Asian financial hub. This was summer 2017, and with Alipay looking to make deep inroads into the Japanese market, the company wanted help in the form of access to Japanese bank accounts.
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Alipay is available in Japan, but currently only to Chinese visitors. In a bid to reach a goal of 2 billion users, the firm's executive was in Mizuho's Hong Kong branch that day intending to utilize the high creditworthiness of a major Japanese bank.
Mizuho's answer was "No." Mizuho Financial Group Inc. and SoftBank Group Corp. were jointly launching a loan service for individuals using artificial intelligence (AI) in September of that year, and the project would be in direct competition with Alipay's planned project. "If Alipay got a hold of payment information in Japan, we would have to buy that data in the future," said Daisuke Yamada, Mizuho's senior managing executive officer in charge of digital innovation, apparently eager to challenge the Chinese service. "We must accumulate data on our own and link them to business."
Japan's banks have plans to expand their businesses as major "platformers" as Alipay's operator, Amazon and Google are encroaching on the home market. Mizuho Financial is considering an AI-based loan service targeting small- and medium-sized companies, and preparing to issue its own e-money.
Sumitomo Mitsui Financial Group Inc., meanwhile, has a different approach. "We will create value through data analyses, and improve our earning power," explained Katsunori Tanizaki, a group director and senior managing executive officer. In line with this policy, the group is set to build a payment platform with an online payment service provider.
In the case of Mitsubishi UFJ Financial Group Inc., its Mitsubishi UFJ Trust and Banking Corp. envisions establishing an "information bank" that collects personal information such as age, physical characteristics and assets from individual customers and provides the data to businesses for a fee.
All of these financial groups have a common strategy of following and analyzing the cash flow of customers and utilizing the output for new businesses. Their implementation methods, however, are divergent. There is particularly fierce competition among varying payment methods, such as the electronic money systems like Suica operated by railway companies, credit cards, and other formats. This situation is far from ideal for users who must juggle so many options, while in China payment methods are being narrowed down to three options: Alipay, WeChatPay, or UnionPay credit cards.
Yotetsu Hayashi, who led efforts through July to spread cashless transactions in Japan at the Ministry of Economy, Trade and Industry, said, "Payment service providers have to cooperate to a certain extent to create common rules on transaction methods and treatment of relevant information." If the current situation continues, too much competition may result in Japanese banks failing to make any headway.