Battle Map of Financial Economic Zones in Japan - Next Moves in Deposit Collection

The Battle for Japan's Financial Economic Zones: Banking's Next Strategic Move

Japan's financial landscape is undergoing a seismic shift as major players intensify their competition for deposits and customer loyalty through integrated financial ecosystems.

Transcript

1. FinTech WATARU Meeting #16 Battle Map of Financial Economic Zones in Japan Next Moves in Deposit Collection 1
2. Agenda 1. Speaker Introduction 2. Industry Overview 3. Major Players – Data Comparison 4. Industry Structure & Strategic Shifts 5. M&A Activities Review 6. Deposit Competition Background 7. Interest Rate Campaigns 8. Service Integration Competition 9. Debit Card Revolution 10.Financial Metrics & Company-by-Company Analyses 11.Partnership Evaluations 12.Future Outlook 13.Differentiation Points 14.Conclusions 2
3. Speaker Introduction: Wataru Yamaki Career Highlights • Founded Kanmu, Inc. in 2011. Released Vandle Card in 2016 • Reached 12 million downloads as of July 2025 • Established capital and business alliance with MUFG Bank in 2023 Skills & Background • Over 30 years of programming experience, starting from kindergarten • Specialized in payment and IT industry trend analysis Copyright Kanmu, Inc. All rights reserved. Strictly confidential 3
4. Overview: Japan's Financial Economic Zones Major Players Comparison Company Users (M) TX Value (¥T) Deposits (¥T) PayPay/SB 68.38 6.3 1.9 Rakuten 148.0 24.8 11.3 NTT Docomo 105.0 10.5 3.2 KDDI 61.2 4.7 5.0 Key Insights • Defining financial ecosystems: PayPay (SoftBank), Rakuten, NTT Docomo, KDDI, SMFG, MUFG • Strategic shift from single-service offerings to integrated ecosystems since 2024 • Growth in deposit-based competition replacing transaction fee models • Cross-selling and ecosystem loyalty driving customer retention Source: Company IR materials, Industry analysis as of March 2025 4
5. Major Players Metrics Comparison (2025) Key Financial Economic Zone Metrics (March 2025) Player Users (M) Card TX Value (¥T) Bank Deposits (¥T) Securities (M) PayPay/SB 68.38 6.3 1.9 9.1 Rakuten 148.0 24.8 11.3 8.3 NTT Docomo 105.0 10.5 3.2 9.1 KDDI 61.2 4.7 5.0 1.3 SMFG 15.3 8.9 78.2 3.5 MUFG 12.7 6.8 98.6 1.5 Key Insights • Mega banks lead in deposits (MUFG: ¥98.6T, SMFG: ¥78.2T) • Rakuten dominates non-traditional banking with ¥11.3T deposits • Card TX leadership: Rakuten leads with ¥24.8T annual volume User Base Comparison • Digital ecosystems show stronger user numbers • Highest user counts: Rakuten (148M), Docomo (105M) • Banking apps lag: SMFG (15.3M), MUFG (12.7M) Source: Company IR materials, Financial reports, March 2025 data 5
6. 3-Year Growth Rates in Transaction Volume & Deposits Growth Rates (2022-2025) Financial Group Card TX Value Bank Deposits Securities Accounts PayPay +115% +42% +68% Rakuten +62% +89% +53% NTT Docomo +47% +35% +29% KDDI/au +39% +51% +37% SMFG +28% +19% +42% MUFG +31% +23% +38% Key Growth Insights • PayPay Card shows strongest transaction growth (+115%), reflecting aggressive customer acquisition • Rakuten leads bank deposit growth (+89%), leveraging cross-group loyalty system • Digital-first challengers consistently outpacing traditional mega banks • Securities account growth accelerating across all players following NISA reforms Source: Company annual reports, IR materials, industry analysis 2022-2025 6
7. Bank Revenue & Profit Trends (Last 5 Years) 5-Year Revenue & Operating Profit (¥Billion) Bank Group 2021 2022 2023 2024 2025 Revenue Mega Banks 3,580 3,670 3,890 4,210 4,580 Net Banks 520 680 810 970 1,250 Operating Profit Mega Banks 780 820 930 1,050 1,160 Net Banks 105 157 203 258 365 Key Observations • Bank revenue has grown linearly across the industry, with mega banks showing notable growth since 2023 • Net banks demonstrate stronger relative growth with higher YoY percentage increases • Rakuten Bank's profit performance in 2025 stands out among net banks • Online bank profit margins have improved, narrowing the gap with traditional mega banks Source: Company financial reports, IR materials 2021-2025 7
8. Card Company Revenue & Profit Trends (Last 5 Years) Revenue Trends (2020-2025) Operating Profit Trends (2020-2025) Key Performance Insights SMCC (三井住友カード) • Marked sales growth in 2025 • Strong revenue trajectory • Operating profit affected by point/reward costs Rakuten Card • Stable profit performance • Consistent growth in transaction volume • Effective ecosystem integration with other Rakuten services Epos Card • Steady profit maintenance • Targeted growth strategy • Strong retail connection with Marui Group Source: Company IR materials, Annual reports 2020-2025 8
9. Online Securities Revenue & Profit Trends (Last 5 Years) Revenue & Profit Trends 2020-2025 Source: Company IR materials, Financial statements 2020-2025 Key Observations & NISA Impact • Similar revenue growth trends across companies with 2024 upswing (new NISA scheme) • Operating profits mirror sales growth; increased account openings post-2024 • Market share competition intensified with improved UX and mobile strategies Revenue Comparison (¥B) Company 2023 2024 2025 Growth SBI Securities 143.2 168.5 196.3 +16.5% Rakuten Securities 94.7 112.8 134.1 +18.9% Monex Group 72.3 85.6 98.2 +14.7% au Kabucom 38.9 46.2 54.5 +18.0% 9
10. Industry Structure Shift & Ecosystem Emphasis Business Model Evolution Pre-2024: Fee- Driven • Individual services focus • Transaction fee revenue • Limited cross- selling  Post-2024: Ecosystem- Based • Integrated offerings • Deposit-based revenue • External partnerships Key Strategic Shifts • Profit Source: Fee-based → deposit-based with focus on lifetime value • Cross-Selling: Guiding customers across banking, securities, cards • External Partners: Non-financial business integration (Rakuten leading) • Acquisition: Product-specific → ecosystem onboarding • Technology: Super-apps replacing siloed applications Source: Industry analysis, financial economic zone comparative data (2020-2025) 10
11. Major M&A Activity Review (2019-2025) Key M&A Timeline 2023 Partnership MUFG × Kanmu Capital and business alliance 2023 Partnership PayPay × SMFG/SMCC Strategic alliance for payment/banking 2022 Acquisition SMCC × STORES Acquisition for merchant services 2022 Partnership Rakuten × Mizuho Alliance for integrated financial services 2021 Acquisition NTT Docomo × SBI Partial SBI Shinsei acquisition 2020 Investment KDDI × au Jibun Bank 100% subsidiary, focus on mortgage 2019 Acquisition SoftBank × Yahoo × PayPay Consolidation for ecosystem creation Strategic Implications • Telecom companies entering banking to create integrated ecosystems • Major banks seeking fintech partnerships to modernize and capture digital users • Payment platforms leveraging user base for financial product cross- selling • Consolidation trend accelerated post-2022 as deposit competition intensified • Strategic partnerships favored over acquisitions for rapid ecosystem expansion • Most partnerships aimed at deposit acquisition or shared customer bases Analysis Quote: "The surge of strategic partnerships between traditional banks and fintech/platform companies signals a fundamental shift in how financial groups approach ecosystem building. Access to deposits has become the new battleground." - Financial Industry Analyst, Tokyo Financial Review Source: Toyo Keizai, Company IR materials, M&A analysis 2019-2025 11
12. Background: Intensified Competition for Deposits Macro Factors Interest Rate Environment Shift from zero/negative rates to rising interest rates has intensified competition for deposits, with institutions capitalizing on improved margins Transaction Margin Compression Declining transaction fee revenue due to competition and regulatory pressure has forced focus on deposit-based revenue Financial Ecosystem Build-Out Major players establishing "economic zones" where deposits serve as foundation for cross-selling multiple financial products Digital Transformation Technology enabling new deposit acquisition strategies and seamless customer experiences across integrated services Market Shifts Timeline Source: Industry analysis, Financial Services Agency data, Bank of Japan reports Pre-2023 Competition primarily focused on transaction fees and merchant acquisition 2023 Initial strategic partnerships between fintech and mega banks (e.g., Kanmu with MUFG) 2024 Pivot toward deposit collection as primary strategic objective; cross-selling strategies emerge 2025 Full-scale deposit wars with differentiated interest rate campaigns and ecosystem value propositions 12
13. Limits of Interest Rate Competition: How Banks Respond Bank Deposit Campaigns (2025) Institution Product Rate Features & Conditions Start PayPay Bank Deposit Revolution 2.0% Requires JPY and USD deposits Apr '25 Rakuten Bank Happy Program 0.5%+α Point integration, ecosystem benefits Mar '25 SBI Sumishin Smart Program Up to 0.8% Balance and transaction incentives Feb '25 au Jibun Bank Summer Special Up to 1.2% Tiered system based on mobile plan Jun '25 MUFG Bank Special Term 1.0% 1-year fixed deposit Jan '25 Key Trends & Insights • Interest rate competition reaches limits as profitability concerns grow • Shift from pure rate competition to value-added services • Increasing complexity with cross-product requirements • Digital banks offer higher rates to compete with established banks • Growing integration of point systems with deposit products Source: Company websites, promotional materials, and press releases as of July 2025 13
14. Service Integration Competition Examples MoneyForward Integration  Account Aggregation Technology MoneyForward provides financial institutions with APIs to integrate customer accounts across multiple platforms, creating comprehensive financial dashboards. "Planning to implement integration by next spring, allowing customers to view accounts from various financial institutions in one place."  Multi-bank visibility  Financial dashboard  API integration Integration Benefits • Reduces customer churn by offering comprehensive financial view • Creates stickiness through convenience of consolidated services • Provides banks with greater visibility of customer financial behavior Olive Platform Integration  Unified Money Movement Platform Olive platform enables not only viewing accounts from various financial institutions but also facilitates fund transfers between them - a capability unprecedented in the market. "While many apps allow viewing balances across multiple financial institutions, Olive aims to enable customers to move money while monitoring all their accounts in one place."  Fund transfers  Real-time monitoring  Unified experience Competitive Edge • First platform to combine visualization with transaction capability • Addresses fragmentation in financial services ecosystem • Strategic response to increasing customer demand for simplification Source: Company announcements, Industry interviews, FinTech Journal analysis 2025 14
15. Debit Card Revolution & New Deposit Models Growth Trends +18.9% YoY Growth ¥4.4T Annual Transaction Volume New Deposit Connection Models Direct Deposit Integration Automatic savings deposits when making debit card purchases, creating new cash flow management options for customers Round-Up Savings Transactions rounded up to nearest ¥100, with difference automatically deposited into savings accounts Spending-Based Interest Rate Bonuses Tiered interest rates based on monthly debit card transaction volume, encouraging both card usage and deposit growth Real-time Balance Management Integration with account aggregation tools providing customers unified view of spending and deposits across institutions Source: Industry analysis as of 2025, Bank of Japan payment trends report 15
16. Key Financial Metrics in Deposit Competition Critical KPIs for Deposit Growth Metric Mega Banks Net Banks Deposit Growth Rate 2-3% yearly 10-15% yearly Retention / CAC 97%+ / High 92-95% / Low Interest Exp. / Cross-Sell 0.1-0.3% / 2.5 prod. 0.5-2.0% / 1.8 prod. Strategic Differentiators "For deposit strategies, we focus more on flow metrics than balance growth." — UI Bank Executive • Mega banks: branch networks & trust • Net banks: higher rates & convenience • Payment/point ecosystem integration • Housing loans anchor mega deposits Mega vs Net Bank Growth Comparison Bank Type 2023-24 Growth 2024-25 Growth Outlook Top 3 Mega Banks +3.9% +3.0% Stable Net Banks +26.9% +21.2% Strong Source: Bank of Japan, Financial Services Agency data, Company IR materials (2020-2025) 16
17. Company-by-Company Strategic Comparisons Company  Strengths  Challenges  Discussion Points LINE Yahoo PayPay SB Massive user base (68.38M) Strong merchant network Integrated payment infrastructure Low bank deposit volume (¥1.9T) Limited securities products Rising customer acquisition costs SMFG partnership effectiveness Bank deposit growth strategy Securities cross-selling potential Rakuten Complete ecosystem (EC/points/card/bank) Highest net bank deposits (¥11.3T) Strong securities integration Mobile business pressure High acquisition costs Limited Mizuho partnership results Point incentives vs profitability Next phase of Mizuho collaboration International expansion strategy NTT Docomo Large dPoint member base (105M) Strong card transaction growth SBI strategic partnership Multiple account systems friction SIM-linked account restrictions Late entrant to integrated services Deposit growth acceleration Account integration issues Payment/banking synergy KDDI Strong mortgage business (¥5T) au Jibun Bank direct control Telecom customer base leverage Limited securities integration Payment app fragmentation Interest rate sustainability Mortgage as deposit driver Non-mortgage product strategy Financial innovation roadmap SMFG Aggressive M&A (STORES, payments) Strong merchant acquiring PayPay partnership Digital transformation pace Tech integration challenges PayPay partnership asymmetry Olive platform acquisition role Traditional/digital balance SMCC merchant strategy MUFG Emutt/Digital Bank strategy Strong international presence Capital for investments Digital transformation speed Legacy system integration Limited ecosystem partnerships UI Bank vs Minna no Ginko Future acquisition targets Economic zone strategy Source: Corporate IR materials, industry analysis, and expert interviews as of March 2025 17
18. Key Partnership Analyses: Financial Group Collaborations Partnership Announced Strategic Focus Synergy Assessment PayPay × SMFG 2023 Payment/merchant integration, Olive platform Asymmetric Value Rakuten × Mizuho 2020 Banking, mortgages, point conversion Limited Progress Docomo × SBI 2022 Mobile banking, account linkage, investments Technical Constraints KDDI × Jibun Bank 2021 Mortgage focus (¥5T portfolio), telecom bundling Strong in Niche PayPay-SMFG Analysis "PayPay has few positive benefits from this arrangement, while Olive gains significantly. It appears PayPay is simply handing over its merchant network to SMFG with limited reciprocal value." — Industry Analyst, FinTech Journal Cross-Industry Integration Challenges • Technical hurdles in account linkage (one SIM/one account limitation) • Minimal progress in Rakuten-Mizuho collaboration • Vertical focus success: au Jibun strong in mortgages • Cultural differences between tech firms and traditional banks Source: Industry interviews, IR materials, FinTech Journal by Business+IT 18
19. Strategic Outlook: The Future of Deposit Battles Key Future Trends  Ecosystem-Based Competition Financial services integration across platforms  Beyond Interest Rate Competition Value-add services over pure rate acquisition "Rakuten, PayPay, KDDI leading; SMFG catching up; Docomo and MUFG preparing next moves" — Industry Analyst Commentary Winning Differentiation Points Points & Loyalty + Open Banking Seamless integration between rewards and financial services Four Elements for Strong Ecosystem Payment-points-deposits-investment integration Strategic Questions • Is BaaS the right approach for all players? • Which segments will drive deposit growth? Source: Industry analysis and expert interviews as of September 2025 19
20. Summary & Takeaways  Key Conclusions Financial industry has shifted from transaction fee models to deposit & ecosystem-based strategies since 2024 Interest rate competition alone is insufficient; successful players integrate cross-selling and service connectivity Player positioning: Rakuten, PayPay, KDDI leading; SMFG following; Docomo and MUFG emerging  Strategic Recommendations Beyond interest rates: Develop deposit-linked incentives to drive customer loyalty Seamless integration between payment, banking, and investment creates lasting value  Four Elements for Strong Financial Economic Zones 1. Points/Loyalty Integration Connect loyalty programs with financial products for engagement 2. Ecosystem Connectivity Create unified journey across banking, payments, investments 3. Data-Driven Personalization Leverage unified customer data for tailored financial products 4. Cross-Group Partnerships Develop strategic alliances that expand customer reach 20