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Japanese Lender to Launch a Fintech Venture

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May 26, 2017

Traditional financial service firms are playing catch-up. The world is changing around them thanks to fintech revolution and the firms are trying to hold on. The solution for many has been to be part of the revolution, rather than just watch it go by. The Japanese lender, Mizuho Financial Group, is the latest to throw its hat in the ring.

 

Launching a fintech venture to keep up

 

Japan’s second-largest lender by assets told the venture will start next month. Its aim is to create new fintech businesses, using blockchain technology and artificial intelligence in innovative ways. According to Reuters’ reporting, the lender already has around 20 projects in the pipeline.

 

There aren’t yet many details of the fintech venture – indeed, even the name of the project is still unknown. However, Daisuke Yamada, Mizuho’s chief digital innovation officer, will perform as the president and the lender will provide other staff to kickstart the project. According to Yamada, the venture wants “to deepen cooperation not limited to finance to increase partners and to set the de facto standard for fintech services”.

 

According to Yamada, the fintech venture will try to perform an export trade transaction sometime next month. It would use blockchain technology, ensuring all parties will receive the necessary documents online.

 

Overall, the lender wants the new venture to create $894 million in added value. It has set this target for 2020.

 

Fighting against technology and culture

 

Interestingly, Yamada has admitted the firm is not just fighting against the new technologies but also the Japanese culture of not taking risks. Japan’s financial sector is known for conservative, risk-averse behaviour and this can cause challenges in an industry where risks are rather abundant.

 

The new fintech venture will limit the risks for the lender, as Mizuho will only have a less than 15% stake in the new venture. In an interview, Yamada said, “If we try to pursue business innovation within the bank, we have to ask around for permission from people in risk management, compliance and others. It takes forever.” By limiting the stake, the lender is hoping to just suffer from labour costs instead of financial costs if things go sour.

 

Catching up with European and American rivals

 

For many Asian financial service firms, the catch up is not just with the local fintech innovation but European and American fintech innovation. The two are considered to be ahead of the game, especially in terms of traditional financial service firms adopting these new technologies.

 

US firms, such as Goldman Sachs, have been investing in fintech innovation. Furthermore, in the UK, Barclays just recently launched a big fintech hub to boost development. Therefore, being part of the revolution is an important survival strategy for Asian financial service firms.

 

The nascent technology can help traditional firms reduce costs and streamline some of the most burdensome processes. Fintech can help with international payments and securities settlements – by succeeding with the use of blockchain, for example, firms could increase their ability to expand around the globe.

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