TOKYO -- Mitsubishi UFJ Financial Group plans to turn a credit card unit into a wholly owned subsidiary and position it as a hub for new financial services such as virtual currency payment.
The Japanese megabank holds an 85% stake in card issuer Mitsubishi UFJ Nicos and is expected to pay tens of billions of yen (10 billion yen equals $87.9 million) for the remaining 15%, now owned by agricultural lender Norinchukin Bank.
The transaction will take place as early as this year. An announcement is expected soon.
MUFG's move is driven by the prospect that cashless payment methods -- such as digital wallets and virtual currency -- will proliferate in Japan as financial technologies evolve. Nicos has already taken steps in this direction, making its credit cards compatible with Apple Pay in December. The group increasingly saw the need for a dedicated company to handle payment platforms, a company official said.
The megabank is considering issuing its own virtual currency MUFG coins. One MUFG coin would carry a value equivalent to 1 yen, but remittance fees would be minimized by tapping the blockchain technology behind bitcoins. MUFG expects Nicos to manage the core system when virtual currencies take root widely.
Nicos plans to spend roughly 150 billion yen to integrate the systems behind its DC, MUFG and Nicos card brands by fiscal 2021. This is expected to result in around 20 billion yen in annual cost savings. System investments weighed Nicos down to a 40.9 billion yen loss in the year ended March 2016.
MUFG teamed with Norinchukin Bank in 2005, and three years later handed over a stake in Nicos to the bank. This partnership has let Nicos offer JA Cards -- credit cards issued by agricultural cooperatives nationwide -- with about 2 million members at the end of March.
The megabank will maintain its partnership with Norinchukin Bank after turning Nicos into a wholly owned unit. The two intend to create a new joint company, with Norinchukin owning a majority, to run the JA Card business.