TOKYO -- The Japanese government aims to make it easier for businesses to partner up in financial technology by leveling the regulatory playing field for different industries, hoping to prompt innovation that helps make financial services less costly.
Such enterprises as banks, e-money businesses and credit card companies are now subject to different laws according to their industries, even for the same services. The Financial Services Agency sees this compartmentalization as stifling competition.
The FSA aims to reorganize legislation around services rather than businesses, making it easier to create computer- or smartphone-based financial services. Being subject to the same laws for given operations would make it easier for banks and fintech enterprises to partner up.
Japan's current banking laws do not let the financial institutions themselves take part in such operations as digital payments and e-commerce. Revisions that took effect in April lifted a ban on bank holding companies investing in operating companies. But the activity restrictions extend to the investment targets as well, making external tie-ups difficult.
Nonbank businesses have it easier in several ways, including that they can simply enter such operations via a registration system. In the future, such enterprises will face more precise rules for operating, and laws for launching a new business will be made clearer as well.
In cross-industry efforts, enterprises will be held to the same requirements regardless of scale, giving consumers reason to feel more secure using their services. Fintech businesses will also be positioned to benefit from using banks' customer and account information.
Banks hold an effective monopoly on remittance and settlement operations, which are seen as overly costly. Sending money overseas for companies can cost as much as 5,000 yen ($44), for example, owing to commissions on business with foreign banks. Using net-based fintech could lower fees for remittances and let them be done at any hour of the day.
The prospect of more banks entering fintech raises the possibility of enterprises with shallower pockets not being able to stand up to the might of Japanese megabanks and their ilk. Ensuring that nimble nonbank businesses can easily participate will be an issue to tackle.
The FSA aims to draw up plans for new legislation this fiscal year and to have the new framework adopted as early as fiscal 2018.