The Peculiar Features of Fintech Development in Japan

Abstract

This paper shows that Japan, despite being the most technologically and economically advanced country in the Asia-Pacific region, is demonstrating slower adaptation rates of fintech. The country is currently at fintech 1.0 stage and its banking system has only partially crossed the bank 4.0 threshold. Thus, overall, fintech in Japan is catching up with the levels of other developed and emerging economies even though the speed of the catch-up has increased in recent years. The paper highlighted the fact that development of fintech in Japan remains heterogenous in terms of market segments and major financial institutions promoting fintech services. The most developed segment of fintech in Japan is digital payments; neobanking and digital investment are raising in popularity even though they remain at the pre-maturing stages. Digitalisation of the financial sector is predominantly driven by the collaboration of large banks with fintech firms, which are establishing spillover effects and encouraging banks to further adopt digital technologies. The findings of this paper demonstrate that further promotion of DX in Japan’s financial sector will require future reforms in its corporate culture and regulatory environment. The problem of double shortages (the lack of financing for ICT and the lack of digital talents) shall also be addressed. The government has a big role to play in this process and needs to proactively stimulate cooperation among the private and financial sectors and fintech firms.

Keywords

• fintech
• japan
• digital payments
• central bank digital currency
• alternative financing
• alternative lending
• market service providers