Capital Markets Insights

Japan banks set to pour hundreds of millions into Fintech startups.

The abolition of a law that prevented banks from owning more than 5% of technology companies in Japan is set to open the investment floodgates into financial technology (fintech).

Highlighting fears in Tokyo that Silicon Valley could disrupt Japan’s banking sector as it has other sectors, there is a national effort to push Japanese institutions to push for innovation. The result is that Japan is poised to become a big new source of funding for start-ups in fintech, especially those based in Asia. From investment crowdfunding, peer to peer lending, blockchain to robo-advisors, and artificial intelligence.

The regulators in Japan are considering additional legal changes that would make it easier for fintech companies to engage in regulated financial activities, which is a similar concept recently announced in Singapore, Hong Kong, and Thailand. This “sandbox” model allows more technological advances from outside participants.

While the rumblings of these industry changes were paramount at the FinSum conference organized by FSA and Nikkei, there is a clear push to nurture homegrown fintech ventures and for banks to go abroad in search of technology to acquire. Rakuten, the popular Japanese Ecommerce group, has launched a $100 million fund to invest in fintech while SBI holdings raised a $299 million fintech venture fund earlier this year.