Retailer Rakuten beats Japanese lenders at digital banking game

Rakuten Group is gaining ground on traditional banks, while banks are pushing back by launching their own digital services. — AFP

Rakuten Group Inc. is emerging as the first real digital contender to Japan’s traditional lenders, using its like e-commerce dominance to steer users to its online bank.

New digital bank accounts at the internet conglomerate that’s better known for its online shopping services expanded by 20% last year and recently topped 10 million, the most among the country’s online lenders. Deposits grew by about 50% over the same period to more than 5 trillion yen (RM190.45bil), putting it on par with Japan’s mid-sized regional banks.

Rakuten allows its more than 100 million members to collect loyalty points by using a swath of services including its bank, which can then be spent like money through its array of businesses from its travel agency to its movie and TV show app.

Part of last month’s deal to collaborate with Japan Post Holdings Co. on cashless payments and insurance also saw investment from Tencent Holdings Ltd., the Chinese tech giant that’s helped revolutionise China’s payments market through its WeChat Pay.

"Many of our customers are users of other Rakuten services,” Kosuke Takeuchi, part of the strategic planning team at Rakuten Bank, said in a recent interview. Last year’s growth in new accounts has continued into this year, fueled by clients of Rakuten’s brokerage service, he added.

After a slow start, Japanese consumers are beginning to embrace online transactions that saw a surge in demand in many countries during the pandemic. While the huge so-called megabanks have dominant positions in mainstream finance, it’s a wake-up call for smaller regional lenders that remain under severe pressure since the onset of the coronavirus depressed activity.

"I think Rakuten Bank is a force to be reckoned with for traditional banks,” said Mia Nagasaka, analyst at Morgan Stanley MUFG Securities in Tokyo. Rakuten "has customers and an ecosystem. The customer base that has been built upon e-commerce has overwhelming strength, ” she said.

Others are also seeing an opportunity. Fukuoka Financial Group, one of Japan’s largest regional bank groups, is preparing to launch a digital bank in May, targeting younger people by offering financial services on smartphones. PayPay Bank, formerly Japan Net Bank and the country’s oldest online bank, saw growth in betting for sports such as horse racing and motorboat racing that lured more people to open bank accounts, according to Satoshi Morifuji, the bank’s head of corporate planning.

While Rakuten Bank declined to comment on targets, the firm said it aims to further increase the number of user bank accounts by harnessing consumer data analysis from its wider web of businesses on customers’ personal interests. – Bloomberg

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 46
Cxense type: free
User access status: 3

Next In Tech News

Aeva announces customer deal; shares rise even after results disappoint
Fisker finalizes deal with Foxconn to make EVs in U.S. starting in 2023
Elon Musk on crypto: to the mooooonnn! And back again
Airbnb bookings jump 52% as vaccinations spur vacation rental demand
Disney streaming growth disappoints, earnings beat forecasts
Hyundai to invest $7.4 billion in U.S. by 2025, with electric cars in focus
Analysis: Elon Musk wants a greener bitcoin. Has he got a plan or a pipedream?
AMC cashes in on Reddit-trading frenzy with $428 million share sale
Global IPOs breach all-time record on U.S. SPAC boom, flurry of tech listings
Chat app Discord to test ticketing, make audio events easier to find

Stories You'll Enjoy