Internet banking slow to take root in nation where branches offer friendly face time



For bank analyst Mac Salman, the Bank of Tokyo-Mitsubishi flagship branch in Tokyo is so majestic that he brings friends and family there when they visit Japan.

First, there’s the brightly lit paneled ceiling, the plush peach carpet and marble counter staffed by row after row of polite, uniformed tellers unencumbered by bulletproof glass to block cheerful interactions with customers. Then there’s the crew of ushers who patrol the floor, ready to guide every customer with an eager “May I help you?”

“It’s like something out of a Bond movie,” said Salman, head of research on Japanese financial firms at Jefferies Group in Tokyo. “You certainly feel very looked-after when you go to do even the simplest of transactions.”

The luxurious branches help to explain why Japan, birthplace of the Walkman and PlayStation, falls behind even India and Nigeria in the use of mobile phones for banking. With its still-heavy reliance on cash for transactions, Japan has the lowest usage of mobile banking among 18 nations, mainly because physical outlets and automated teller machines can do more than phone apps, according to a UBS Group AG study. That may start to change as online lenders such as Jibun Bank Corp., which is in fact a joint venture of Bank of Tokyo-Mitsubishi UFJ Ltd., try to persuade more Japanese to go mobile.

“Management commitment to mobile banking isn’t that strong in Japan compared to other countries,” UBS analyst Shinichi Ina, who co-wrote the July report, said in an interview. “There are still a lot of customers who like branches, and I think that’s part of the reason for the lack of urgency.”

That’s potentially a missed opportunity for Japanese banks to save the costs of running branches and ATMs and to change with the times. Mobile-banking users worldwide are expected to more than double to 1.8 billion people by 2019, Juniper Research and KPMG data show in a separate report compiled with UBS. Younger clients in particular are more inclined to use phones for banking.

The Japanese preference for branches is in stark contrast with China, where long lines at crammed branches have driven people to portable devices. China ranked No. 1 in the UBS survey, with 63 percent of customers using their phones for banking, compared with only 16 percent in Japan. The U.S. was 13th, with 35 percent.

Mitsubishi UFJ, which operates Japan’s biggest bank, has the largest number of Internet and mobile customers, according to Hirotaka Toeda, head of retail business promotion at the company’s main lending unit. He declined to give the total.

“We offer pretty much all the products and services our customers need at the moment,” Toeda said in an interview. While many customers just aren’t interested in mobile, the bank ensures that “convenient and stress-free” functions are available anyway, he said.

In Japan, ATMs allow users to transfer money to people and update transaction records by inserting their passbooks, making them more popular than branches, according to an April study by Fujitsu Research Institute. About two-thirds of customers use the machines at least once a month, while 21 percent visit branches, the report shows. Fujitsu found even fewer Japanese using their phones for banking than UBS’s survey: 13 percent.

“Customers are satisfied with using ATMs and cash at the moment,” said Hiroaki Ishiyama, who wrote the report. “Japanese consumers want to continue with the cash and passbook system with banks that they’ve trusted for decades.”

That’s expensive for banks. The cost of conducting transactions at ATMs globally is up to 13 times higher than through a mobile phone, according to Javelin Strategy & Research and KPMG analysis cited in the UBS study. Transactions done at branches cost up to 43 times as much, the data show.

Face-to-face banking requires more employees to handle transactions. Japan’s three largest banks — operated by Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. — had about ¥2.4 billion in deposits for each staff member at their main lending units at the end of March, calculations by Bloomberg show. The country’s six Internet banks, which primarily concentrate on online banking, have ¥6.2 billion per worker.

The most app-focused of the six is Jibun Bank, Bank of Tokyo-Mitsubishi’s joint venture with wireless operator KDDI Corp. Jibun has attracted 2 million accounts since it started in 2008 and is adding about 350,000 a year, said Toru Yoshikawa, head of corporate planning. Deposits expanded 17 percent in the year that ended in March, more than the 3.9 percent increase at all Japanese banks.

“Everything we do begins with mobile,” Yoshikawa said in an interview at Jibun’s Tokyo headquarters, where a tablet-like glass phone is all that greets visitors who connect to their host by tapping the screen. “Every transaction we offer can be done through the mobile-banking app.”

Among the bank’s innovations is software that allows customers to open an account by uploading a photo of their driver’s license. Yoshikawa said his bank was first to release the technology in December 2012. Mizuho has followed suit.

Katsuya Itou, a 39-year-old agricultural consultant from Tokyo, used Jibun’s imaging system to get started with online banking. While he still keeps money at Bank of Tokyo-Mitsubishi, Itou uses his Jibun account, where “interest rates are good,” to save for his wedding, he said.

“Jibun Bank is taking a forward-looking approach,” UBS’s Ina said. Still, the company will struggle to shake up the industry because it risks cannibalizing its parent, he added.

Both Bank of Tokyo-Mitsubishi and Jibun Bank’s apps carry 3.5-star out of 5 ratings on Google Inc.’s app store.

“I don’t see any reason why the mobile-banking sector won’t continue to grow,” said Bank of Tokyo-Mitsubishi’s Toeda. “But we still want customers to come to our branches.”

  • Matthew Kamden Barbee

    I don’t completely agree.
    People don’t use mobile banking in Japan because most banks don’t offer online banking ( . )
    If they actually offered it, believe me this mobile-centered country would use it.
    I often can’t believe how slow to progress Japanese banks are. I still have to fill out a paper form in triplicate to wire money to the US at the Japan post bank. Some banks here are more advanced than this, but not by much.
    And sure, the customer service is great at the branches, but there is hardly a smile and who wants to have to go to a branch or an ATM for every transaction.
    I can’t even get a checking account linked debit card in this country. Debit cards here work like credit cards and just happen to be attached to your “checking” account. I use that term loosely because there are no checks here and most stores don’t accept bank cards.

  • J.P. Bunny

    There are still many old fart Luddites that would not use any online banking even if it were offered. Being one of the aforementioned, I still prefer cash, passbooks, and ATMs.

  • Liars N. Fools

    I actually like “low labor productivity” in Japan and the shop ladies (there are hardly any “girls” left) and the reception crew at bank branches. And I don’t understand the obsession for multiple documentation, but I find it friendly enough, with the concomitant polite surprise that I can converse pretty well in practical Japanese.

    There are other things that are far more irritating in this world than archaic Japanese service.

  • ICJ Tokyo

    I will tell you why internet banking is so slow to catch on in Japan.

    First, to get internet banking at some banks, you need to fill out a complicated paper form, stamp it with a personal seal, mail in the form, and wait for the bank to send you the information you need to set up and log into your account.

    Once you receive this information, you log into your account by entering the branch code, then your account number. Then you need to enter your ATM pin code, and then a password, and then finally you need to enter in a one-time code which usually comes on a card issued by the bank.

    After you are signed in, then you can make an online payment. How do you do that? First, you need to enter the name of the receiver’s bank, then you need to enter the branch name. This may not be as easy as it sounds; for a country the size of California, Japan has hundreds of national and regional banks, and there can be many branches with very similar names, and it is easy to choose the wrong one. Once you have entered the branch name, you need to enter the type of account the holder has, and there are no less than 4 types. Once you have the correct type of account, you need to enter the account holder’s name. There may more may not be a space between the account type and the first digit of the name, and if you add or omit the space, the transfer will not go through. When you enter the name, it must be done in half-bit phonetic Japanese, and there may or may not be a space between the family name and given name, and if you add or omit incorrectly, the transfer will not go through.

    Once all this is done, you enter the amount you want to send, and then click “enter”. If, after all this, and you have not made a mistake, the payment will go through. If you have made a mistake, you won’t be told immediately, you will receive an email from one to three hours later telling you that the transfer didn’t go through, and then you have to figure out what you did wrong, and go through the entire mess listed above once again. Oh, and if your transfer does go through, you will be charged about $2.50 for it and every other transfer you make.

    Japan’s financial system is one of the most primitive and backwards in the world, and almost no serious business can be done online. In other countries you can open an account online, not in Japan. All documents must have hard copies, and all hard copies must have a personal seal affixed, and if you are a business person, you need to have a certificate to verify the seal is yours, and this certificate is good for only 90 days, which means you have to update it at the city office regularly. The cost of seals, certificates, and the time it takes to travel to banks and offices in person to apply seals, and then shuffle the papers from place to places is incredible. Time is the most valuable thing people possess, and in America and Europe we have modernised out banking systems to reduce how much of our valuable time we possess. But in Japan this is not the case. I spend a significant number of hours every month shuffling paper, paper which would not exist in other places.

    If the Japanese banks want more people to do their banking online, they will have to bring their banks into the 20th century. But it seems time in Japan stopped back in 1990.