When asked why global fintech companies should do business in Japan, Keiichi Aritomo said, “Because we have so many more problems that need to be solved.”
Aritomo is the Japan representative for Kensho Technologies, a U.S. artificial-intelligence company; a former partner at McKinsey; and founder of JIAM, the Consortium for Japan International Asset Management Center Promotion.
Among the challenges that Japan’s asset management industry has faced for decades, and which a fresh technological approach could improve: putting big data into research; making distribution of investment products more about consumer needs; cutting a lot of paperwork; tackling inefficient practices such as the demand that every account be reconciled to the single yen; and introducing competition into an industry dominated by two legacy tech vendors.
A place for B2Bs
With the backing of the Tokyo metropolitan government, JIAM will open Fintech Square, a exposition space and membership club aimed at getting Japan’s giant asset owners, domestic asset managers and service providers to interact with technology companies, including startups.
“We want to forge an active fintech community with asset-management firms in Japan, and accelerate the growth of local B2B startups,” said Jeffrey Tsui, JIAM’s fintech specialist.
Fintech Square will open next door to the Tokyo Stock Exchange in April.
The emphasis on asset management follows a decision by Tokyo’s governor, Yuriko Koike, to prioritize it as part of her desire to build Tokyo as a global financial center.
However, when it comes to innovation, the majority of startups are robo-advisors and other consumer-facing ventures, rather than those geared toward helping financial institutions compete.
The people behind JIAM, set up in 2016, recognize that Japan could benefit from fintech companies that have emerged elsewhere. Although there is plenty of innovation in some parts of Japanese finance (its big banks, for example, are developing blockchain-enabled digital cash solutions, with the blessing of the regulator), there is no need to try to reinvent the wheel if a company in the U.S. or Hong Kong already has a viable solution, says Tsui.
Priority use cases
JIAM highlights the kind of companies it thinks has technologies that could be adapted to Japan.
It reviews two areas in particular.
First, JIAM believes blockchain can be adapted to fund ordering, noting efforts to realize this by vendors such as Calastone in the U.K. and Fundchain in Luxembourg.
Such a solution in Japan could help reduce cost for all parties and allow for lower fees; provide a better client experience by enabling asset managers to sell directly to consumers; shorten settlement cycles; abolish cumbersome reconciliation practices; and lay the groundwork for crypto-currency funds (Japanese retail investors are among the biggest users of Bitcoin).
The second priority is client reporting, which could benefit from data cloud aggregation and analytics, as provided in the U.S. by the likes of Novus and in Hong Kong by Fundinfo.
Today in Japan, client reporting is costly and either manual or conducted in clunky legacy systems. Providing better analytics, presented in a more useful way, and via APIs directly to big asset owners would enable Japan’s huge pension, postal and insurance investment groups to analyze their external managers’ performance, while letting fund managers report back much more efficiently.