Leading segments of the FinTech sectorThe FinTech sector encompasses a variety of segments, including digital payments, alternative finance, and digital investment, among others. Digital payments and remittance services form the core of Japan’s FinTech market. Driven by the impact of the coronavirus pandemic and government efforts to increase cashless payment usage, digital payments have recently gained popularity among Japan’s cash-oriented consumers. Cashless payments accounted for 29.7 percent of the final consumption expenditure in fiscal 2020, with a small but rapidly growing share of QR code-based payment services. The value of money transfers via non-bank fund transfer providers doubled in the same year. The government has eased regulations in this segment, facilitating the entry of new players by lowering the capital requirements for market participants. The smart cashless payment market was forecast to grow significantly over the coming years. Likewise, the cryptocurrency market and alternative finance, including the lending service market have seen steady growth in recent years.
FinTech sector in Japan and startupsIn 2016, the Japanese government made the promotion of FinTech and the creation of a FinTech ecosystem a key policy measure of its revitalization strategy. Since then, it has taken a series of measures and regulatory adjustments, to promote the growth of the FinTech sector. Tokyo, the world’s biggest city by gross domestic product, has formulated the digitalization of finance through the use of FinTech as one of the key measures to achieve its goal of becoming a global financial city. This includes improving the startup ecosystem, attracting FinTech companies, and promoting cashless payments in the city.
Major players involved in FinTech include Rakuten and Z Holdings with its smartphone-based payment services PayPay and Line, which boast a large customer base and offer a variety of online and mobile financial services, including banking, payments, securities trading, and insurance.
In 2021, big international players entered the Japanese FinTech market through acquisitions of startups. PayPal’s acquisition of Buy Now, Pay Later (BNPL) startup Paidy became the largest FinTech investment deal in the Asia-Pacific region in 2021, while Google was reported to acquire payment and settlement startup Pring. Other major FinTech startups include cloud accounting service provider Freee, online asset management and robo-advisory provider WealthNavi, Money Forward, Kyash, Moneytree, and Zaim, among others.