According to official statistics, nearly all elderly Japanese individuals still prefer using cash for transactions. According to official statistics released by the Japanese government, cashless transactions in Japan reached a staggering total of ¥126.7 trillion ($885 billion) in 2023, comprising an impressive 39.3% of overall national spending. The federal government aims to reach a quantity of 40 percent by 2025.
Japan’s authorities have launched an initiative to promote cashless transactions, with support from a Tokyo-based startup offering an app and services simplifying the switch to digital payments for consumers.
Shota Horii, CEO of SmartBank, founded the company in 2019 alongside his twin brother Yuta Horii, CTO, and Jun Taketani, CXO, having previously grown their previous venture, Fablic, into a successful entity that was acquired by Rakuten in 2016. As they explored the usage of Fablic, the founders discovered that a significant number of clients continued to rely heavily on cash for everyday financial dealings. The company’s founders conceived SmartBank as a response to a pressing challenge within the Japanese consumer finance industry.
SmartBank’s primary target audience is young adults in their 20s and 30s seeking to manage their personal finances, as well as married couples looking to coordinate theirs. The corporation claims to have exceeded one million downloads, yet provides no insight into the number of unique users.
The company’s primary offering is a pay-as-you-go card and a finance management app that enables users to maintain a deposit account. The Pay As You Go playing cards offer a range of options tailored to individual lifestyles: the B/43 My Card, designed specifically for singles, featuring Visa’s branded fee card functionality; the B/43 Pair Card, ideal for customers to manage their funds alongside their companions; and the B/43 Junior Card, catering to teenagers’ financial needs.
“Our core customer base, previously comprised of B/43 My Card holders, has evolved to become the B/43 Pair Card customers – a crucial shift, as Japanese banks do not typically offer joint account services.”
The startup announced on Tuesday that it has secured 4 billion JPY (approximately $26 million), comprising 1.1 billion JPY (around $7.2 million) in debt financing and a further 2.9 billion JPY (nearly $18.8 million) from equity investment by its existing backer, International Mind. The fairness capital comes from a fund established in partnership with SMBC, one of Japan’s largest banks. By the end of April 2024, SmartBank had garnered a cumulative total of approximately ¥5.93 billion (equivalent to $38.5 million) through equity funding and secured ¥1.1 billion in debt financing since its establishment. The startup plans to leverage its newly acquired capital to scale up its workforce from 49 employees in October to approximately 100 by 2025; half of this expanded team will comprise engineering professionals, according to SmartBank CFO Yuta Shimogawara in a rare conversation with TechCrunch.
The latest infusion of funds arrives approximately two and a half years following the previous allocation. Since then, the startup has expanded its personnel and product offerings with the goal of transforming into a comprehensive financial platform, akin to a financial institution, providing a range of financial services to customers in the future.
Last month, SmartBank leveraged generative AI technology to transform its app into a cutting-edge AI-driven financial advisor, according to Chihaya Akaike, Director of Enterprise Operations. This feature enables customers to better manage their finances, streamlining and automating financial processes, thereby allowing users to utilize, conserve, and invest their funds effectively, according to Akailke’s interview with TechCrunch.
In Japan, client-facing fintech companies have been slow to adopt AI; yet, our mission is to become the leading AI fintech company in the country, said Akaike.
On top of this, the corporation has recently introduced an innovative feature allowing users to link their credit cards and banking accounts to B/43 for a comprehensive overview of their finances. “To enhance customer accessibility, we’re introducing an option for non-card holders to utilize our B/43 service from day one, simply linking existing bank cards and accounts, thereby expanding our revenue streams.”
Three years ago, SmartBank secured a licence allowing customers to withdraw their deposits in cash through a cash transfer system, enabling convenient access to their funds. The company further solidified its position by obtaining a pay-as-you-go fee instrument license in April, thereby empowering it to securely manage customers’ deposits. The licenses facilitate services offered by corporate supply providers, including fund management and peer-to-peer transactions.
While companies like MoneyForward and Zaim struggle to safeguard customer deposits, their inability to do so hinders their ability to effectively support customers in managing their personal assets, including financial savings and investments, aligning with their stated corporate objective.
The five-year-old company, which primarily relies on interchange revenue fees (IRFs), is looking to diversify its income streams beyond this single source. With its IRF capabilities, the company has successfully implemented a range of financial services, including purchase now pay later options, subscription models like B/43 Plus, and referral programs, according to Akaike.
