GMO and Aozora Announce Plans to Enter the Japanese Internet Banking Market

A leading Japanese internet group, GMO Internet, and Aozora Bank, are exploring a prospective strategic partnership, having identified opportunities to jointly operate an internet banking service.

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GMO Group, the owner of the namesake internet services company, already boasts a raft of products and services ranging from internet infrastructure, online advertising and media to software and app development, as well as being the largest FX trading services provider for retail investors in Japan and the fourth largest securities trading services provider.

GMO’s established and comprehensive infrastructure would provide the technical foundations for a joint venture with Aozora Bank. The Japanese commercial bank is the successor to the Nippon Credit Bank, which was nationalised in 1998 after it collapsed under the weight of bad loans. Following its privatisation in 2001, it changed its name to Aozora Bank.

The talks with GMO are another indication of a stabilized and strengthened institution. Aozora just today announced that it has finished repaying the government bailout of 1998, seven years ahead of the planned 2022 deadline.

The joint venture internet banking service would allow the two companies to better exploit Japan’s mature retail banking market, which faces a number of headwinds; a sluggish economy, downward pressure on returns, a heightened regulatory environment and an exodus of foreign banks. As such, the new service would seek to evolve the retail banking model in a bid to improve suboptimal customer experience, which requires innovative, multi-channel business models for banks to remain competitive going forward.

In a press release, the two companies identified further trends in support of their idea; namely, the significant growth of smartphone users in Japan (which is expected to reach 89 million by 2017) and the expansion of the e-commerce market. Their conclusion: there are a “greater diversity of needs that are no longer being met by traditional banking services”.

Accordingly, the two companies seek to harness their capabilities to take advantage of the identified opportunity to provide internet banking services, vowing to continue talks to discuss the details and eventual roll-out of the joint venture.

“The Internet bank service is expected to operate under Aozora Bank wholly-owned subsidiary, Aozora Trust Bank Limited, and GMO Internet will also consider investing in Aozora Trust Bank Limited”, according to an online statement.

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