Japan's FinTech, Starting with FINOLAB Inc.

FiBC held in English

Hasumura: Over the past year, the term "FinTech" has started being used domestically. When did you first encounter this term, Mr. Ito?

Ito: Personally, I first became aware of it around 2010. I started paying attention when I heard that FinTech startups in the US were beginning to offer services that traditional financial institutions didn't provide.

Hasumura: The first "Finovate" event started in the US in 2007. ISID, where Mr. Ito works, was the only Japanese company participating from the very first event.
In 2012, you held Japan's first FinTech event, the Financial Innovation Business Conference (FiBC).

Ito: Yes. FiBC has been held annually since 2012, making this year the fifth iteration. For the first event, we investigated whether Japan had any companies that could be considered FinTech startups. We visited them to explain the event's purpose and asked if they would be willing to speak.

Five years later, the term FinTech has become widely recognized, and the number of speakers has increased. While the financial industry is often said to move more slowly than others, it has gained significant media attention since last year, and FinTech-related events have multiplied.

This year's FiBC will be held on February 25th at Marunouchi Building (Chiyoda-ku, Tokyo). Reflecting these environmental changes, rather than simply increasing attendance, we aim to cultivate it into a global event. Therefore, we've decided to conduct the entire event in English.

Hasumura: So the main events, like the pitch contest (short presentations), will be in English, and we'll upload them to YouTube for global viewing, right? When you say "all in English," I hesitate a bit—is it truly all in English?

Ito: We will provide simultaneous interpretation for Japanese attendees.
FinTech is poised to become global infrastructure. By conducting pitches in English and uploading those videos, we aim to promote Japanese startups to the global market, positioning Japan within the broader context of Asia.

Hasumura: There are said to be anywhere from 40 to 100 FinTech startups in Japan. Haven't most of them already presented at previous FiBC events?

Ito: While we've had over 60 companies apply cumulatively and many active Japanese startups participate, I wouldn't say it's almost all of them.
We also hope to see the number of startups increase significantly. In the UK, it's said there are over 1,000 FinTech companies. Considering the market size, Japan still has relatively few.

Furthermore, it would be great to see startups emerge with valuations exceeding $1 billion—these are called "unicorns."

Japan's First FinTech Hub: FINOLAB Inc.

Hasumura: And on February 1st, "Fino Lab" opened in the Otemachi area, the heart of Japan's financial district.

Ito:FINOLAB Inc. was created as a physical space where people who want to build a FinTech "business ecosystem" (Note 2) in Japan can gather. Continuous efforts are needed, not just annual events like FiBC.

(Note 2) A concept likening the connections between multiple companies to an ecosystem. A mechanism where numerous entities—investors, entrepreneurs, etc.—connect and coexist and prosper efficiently.
 

Hasumura: In January, I visited key locations within London's FinTech ecosystem and met with key players alongside Mr. Ito. One such facility was "Level 39," an incubation office located on the 39th floor of One Canada Square, a skyscraper in London's emerging financial district, Canary Wharf. This is precisely what FINOLAB Inc. aims to achieve.

Ito: That's right. Regarding the establishment of FINOLAB Inc., we met several times with Eric van der Kley, who founded Level 39, and received his advice. We were inspired by his passionate conviction that London must build a FinTech business ecosystem.
Furthermore, Eric and others involved in the UK FinTech industry were all very busy, yet they openly discussed ideas with us. This reaffirmed the importance of open innovation.

Hasumura: Last December, the Liberal Democratic Party established its own FinTech Promotion Parliamentary League. Then in January, a pro bono organization called "FINOVATORS" was founded by key figures in the FinTech industry. Activity in the FinTech sphere has really picked up. It would be great if Japan could see similar public-private initiatives progressing, like those in the UK.

Significantly improving cash flow for SMEs

Hasumura: A major paradigm shift occurred between the pre-internet era and the post-internet era. What kind of transformation will FinTech bring?

Ito: I believe individuals and SMEs will benefit most from FinTech. Imagine a world where small businesses in regional Japan or individuals running small businesses can sell their services or goods directly to customers worldwide. Cross-border payments and collections become simple and reliable for anyone. For example, FinTech enables the creation of such systems.

Hasumura: So the mechanisms for money flowing in and out are undergoing continuous transformation.

Ito: When IoT technology (technology that enables objects to communicate) and FinTech converge, it enables real-time digital control of logistics. Smart warehouses can automatically pick goods from shelves, and money transfers can occur simultaneously with shipment.
Aligning the flow of goods with the flow of money could minimize deposits to suppliers and dramatically improve cash flow.

Those unable to adapt to this transformation will simply be left behind.

Hasumura: It's remarkable that individuals can enter the global market without the infrastructure of large corporations. Will this impact the activities of major companies going forward? What role will FinTech play for existing financial institutions?

Ito: FinTech won't cause large corporations' businesses to dwindle or banks to disappear.
The words of Eddie George, head of the global FinTech network New Finance, whom I met in London, were quite memorable.
"If you don't embrace innovation, FinTech will simply bypass you. Companies and nations unable to adapt to this evolution will be left behind in the market."

In other words, whether you're a large corporation or a small business, if you can't provide what users demand, you won't survive.

Hasamura: What exactly is it that users want?

Ito: The crucial thing here is to return to the fundamentals and consider what finance truly is. The circulation of cryptocurrency raises fundamental questions: What is money? What is the purpose of banks?

When IT technology enables direct matching between individuals across borders, there's no longer a need for banks to act as intermediaries in money transfers. It also raises the fundamental question: Is it even necessary to provide services using physical cash?

Hasumura: So we need to consider the more fundamental aspects.

Ito: Currently, we have physical cash and cryptocurrencies like Bitcoin. Before this framework, we already had "prepaid cards," "mileage points," and "reward points." These hold exchangeable value and, in the digital world, their distinction from real money is diminishing. Beyond this, we see the new services FinTech will bring.

Simply put, the transformations seen in the music and publishing industries—like digital music distribution and e-publishing—will occur in the financial sector too. Why must you study mortgages just to buy a house? Why can't similar payments be made overseas and domestically? FinTech will resolve these issues, making them commonplace.

Hasumura: So, FinTech will fundamentally change how we interact with money going forward. Both finance and IT are infrastructure. I look forward to an era where we can use these systems more conveniently, without even consciously thinking about their underlying mechanisms.
Thank you for today.