/CORRECTED REPEAT/ECONOMY-JAPAN: First On-line Bank Takes on Financial Giants

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Jan 25 2001 (IPS) - Yoshiyuki Miyai, the 49-year-old head of Japan’s first Internet bank, does not represent the typical banker in this country.

“I am probably the youngest and lowest paid head of a bank,” quips the youngish-looking Miyai, who often declines to wear a necktie or don the traditional businessman’s black suit that is traditional must in Japan’s conservative business world.

Before he set up Japan Net Bank in December, Miyai was developing the Centre for Ageing and Environmental Studies, a section he had set up at Sakura Bank. Having worked with the bank since the seventies, he was recruited by its top directors to head the new on-line bank.

Sakura Bank’s decision to launch the on-line bank places is “a crucial move in Japan’s rapidly growing Internet scene,” Miyai explains.

Miyai and Japan Net Bank, which currently boasts of 38,000 customers and a small full-time staff whose average age is 35 years, are the products of the country’s so-called ‘Big Bang’ deregulation of its economy.

“International pressure for Japan to open up its financial sector has resulted in a vast array of new business ventures led by a younger breed of men and women, who are a far cry from the older straitjacket-type Japanese,” explains Akiko Sakamoto, on- line banking analyst at Informational Technology Research Institute.

Sakamoto points to Japan’s huge personal savings, estimated to be 1,300 trillion yen (12,130 billion U.S. dollars), as an important incentive for on-line banks to emerge and compete with the traditional financial system.

In addition, public anger over non-performing loans in major banks has boosted the attraction to investing in new and smaller banks, point out analysts.

Japan Net Bank is owned 50 percent by Sakura Bank and a string of high-profile Japanese companies, including Sumitomo Bank. It also involves Fujitsu NTT Docomo, the leading mobile phone company in Japan, whose participation represents a first-time partnership with non-bankers.

The bank operates on-line accounts for individual customers as well as handles money transfers, card loans and securities tradition at less than a quarter of the commission charges at regular stock brokerages.

Customers can access their accounts through automated teller machines at Sakura Bank and at 24-hour convenience stores.

Miyai calls the new bank a breakthrough for both business and customers, as financial deregulation gathers momentum. “We can survive by selling the concept that we offer a cheap and convenient service compared to traditional banks,” he explains.

The Japan Net Bank offers customers services that are one-sixth the charges of other banks. On average, its deposits offer double the dismal 0.2 percent interest rates available in regular banks. This higher savings interest rate is possible due to low operating costs, says Miyai.

In addition, Japan Net Bank’s commission fees hover around 100 yen (93 U.S. cents) for each transaction. This is a real deal for the Japanese public that is forced to fork out between 400 and 600 yen (3.7 to 5.6 dollars) for simple, one-deal transactions between accounts.

When it comes to convenience, Miyai also promises major benefits for customers.

Deposits and withdrawals are made through computers. Likewise, Japan Net Bank’s automated teller machines are available everyday for 24 hours — unlike the regular banks’ machines which are closed on Sundays and early evenings on weekdays.

As expected given the new bank’s on-line nature, more than 60 percent of its customers are below 40 years old. Most transactions take place after 10 p.m., well outside regular business hours mostly as a result of cheaper telephone rates for on-line transactions at that time.

Experts see the appearance of Japan Net Bank as the beginning of a newer and tougher competition in Japanese banking.

They explain that low interest rates in traditional Japanese banks has forced conservative Japanese investors to look for better options, which is a major incentive for on-line banks.

Already, two other virtual banks — including one by Sony Corp, which is awaiting a banking license — are expected to enter the market soon.

Miyai acknowledges that competition will become tougher. “Keeping ahead of competitors lies solely on how well we can serve the customer,” he explains.

Beyond Japan Net Bank, however, the entry of more players would boost the development of on-line banking in Japan and give the public options to the traditional financial system and products.

However, Sakamoto says the going will be slow since Japanese customers are still largely cautious about on-line trading. “Most people will keep their savings in traditional deposits such as postal savings accounts, because Japanese culture shies away from anything that looks like risk,” she explains.

Sakamoto expects on-line banks to stick to small investors such as younger people, the size of whose personal assets cannot be compared with that of their elders.

But, she hastens to add, the trend to break tradition is Japan, whether in the financial system or other sectors of the economy, is catching on in the country. No doubt, she says, there will be a growth in the on-line banking business in the next few years.