Emergence of online banking and new types of banksThe spread of commercial internet services in the 1990s paved the way for the first Japanese bank, Sumitomo Bank, to launch an online banking service in 1997. Following the deregulation of the banking sector, so-called new types of banks emerged in the 2000s. One of them was Japan’s first direct bank, Japan Net, Ltd., which started operations in 2000. Banks like Japan Net Bank, later renamed PayPay Bank, are categorized as other banks. This category includes direct banks which do not operate any physical branches and banks established by large retail groups such as AEON, Seven & i Holdings, and Lawson that mainly offer their services online and operate a large network of ATMs in their stores.
Since the outbreak of the coronavirus (COVID-19) pandemic, online banking has grown in importance in Japan’s banking industry. With consumers avoiding physical bank branches and increasingly turning to digital channels to access banking services, online banks have seen their customer base expand over the past years. In 2020, Rakuten Bank, a subsidiary of e-commerce group Rakuten, was the first direct bank to surpass 10 million bank accounts. Rakuten Bank and SBI Sumishin Net Bank, Japan’s largest online banks by assets, both went public in 2023.
Challenge for traditional banksThe recent development poses a challenge for traditional banks that have been rather slow to adapt to the new digital age. In contrast to direct banks, they bear the cost of operating a large network of branches in an environment of low interest rates and profitability. In response to the increase in customers turning to digital services, traditional banks have accelerated their digital transformation efforts, reducing the number of physical branches and promoting new digital services. MUFG Bank, Japan’s largest bank, recorded 9.3 million online banking users in the fiscal year 2022.
Alongside these efforts, traditional banks have invested in or launched their own digital banking projects. In May 2021, Japan's first digital bank, Minna Bank, began operations. Established by Fukuoka Financial Group, Minna Bank was the first bank in Japan to offer banking services exclusively via smartphones.