Japan wants to make it easier for banks to buy stakes in fintechs

Written by Ruby Hinchliffe
7th May 2020

Japan is planning to ease its investment rules to make it easier for banks to buy stakes in fintech firms, in a bid to prompt incumbent lenders to adopt new technologies, Nikkei Asian Review reports.

The move follows the success many fintech financiers have experienced during the coronavirus. Tokyo-based online lender Money Forward Fine says it saw a 30% surge in contracts for loans that utilise accounting data in February, compared to its December figures.

Currently banks have to get approval when buying stakes above 15% in any non-financial companies

The reason for this surge is down to the fact these fintech alternatives can offer loans in a matter of days, whilst the government’s record $1 trillion stimulus bill has taken a lot longer to get off the ground.

Money Forward Fine’s chairman Akira Ieda told the Japan Times that small businesses are using fintech-based loans to obtain stop-gap funds before they receive loans from government-directed credit programmes.

Now Japanese regulators want to allow banks to invest in fintechs like Money Forward Fine without requiring them to apply for approval from the Financial Services Agency.

The country’s Liberal Democratic Party (LDP) is currently compiling a proposal

Currently banks have to get approval when buying stakes above 15% in any non-financial companies, but in future the plan is for banks to report their investments only.

The deregulation will also make it easier for banks to spin off new services using their customers’ data, and allow banking and brokerage units within the same banking group to share customer data.

Rules require Japanese banks to obtain customer consent to do this, and they also require systems development and advertising subsidiaries to generate at least half their sales from bank-related operations.

Lifting these rules would mean developers could sell products to a much wider range of customers, and advertising units could sell ads to mortgage borrowers.

According to Nikkei, the country’s Liberal Democratic Party (LDP) is currently compiling a proposal, with the aim of incorporating it into a national growth strategy to be published in June.

This will then be submitted for revision to the banking act in a parliamentary session convening in January next year.