Online securities firms in Japan are fighting for survival by diversifying services in the wake of a sharp drop in stock broker fees following their full liberalization 20 years ago.
“The time when we could compete by lowering fees is over,” said Rakuten Securities Inc. President Yuji Kusunoki.
Brokerage fees were fully liberalized on Oct. 1, 1999, as one of the final steps in Japan’s financial system shake-up that was dubbed the “Big Bang.”
The reduction in fees then accelerated as online securities firms jumped into the market with the spread of the internet.
In the year ended in March, the proportion of stock brokerage fees securities firms received stood at 0.03 percent of the Tokyo Stock Exchange’s total trading value, which is one-tenth the 0.36 percent ratio posted in the year ended in March 1999, before liberalization took place.
SBI Securities Co., the largest online brokerage, had 4.71 million trading accounts at the end of June, which is comparable with the number at Nomura Securities Co.
“We’ve improved the quality of our services while making fees overwhelmingly low” for individual investors, said Yoshitaka Kitao, president and chief executive officer of SBI Holdings Inc., the parent of SBI Securities.
In September, Shimane Bank announced an agreement to accept a capital injection from the SBI group.
About 10 other regional banks have approached the SBI group with a similar objective.
“We’re seeking to expand our customer base, from individuals to large-lot customers” such as institutional investors, Kitao said.
Rival Rakuten Securities will allow points provided to users of the Rakuten group’s online shopping site to be used for buying domestic stocks. It will also create a system in which customers can consult independent financial advisers.
“We hope to tap into demand from middle-income earners who are struggling to manage their assets effectively,” Kusunoki said.
Among other rivals, Monex Group Inc. sees a future in Facebook Inc.’s proposed cryptocurrency, Libra. Expecting higher demand for small-lot cross-border money transfers, Monex has already applied to join the Libra operating group.
Kabu.com Securities Co. has developed an artificial intelligence-based consultation system to improve the yields of customers’ assets.
Matsui Securities Co. has given important posts to employees familiar with AI, hoping to improve operations drastically.
While online brokerages are winning over customers with convenient services and low fees, they are facing challenges in dealing with elderly customers and in terms of earnings capabilities.
SBI Holdings’ consolidated net profit was ¥11.6 billion in the April-June quarter, or about 20 percent that of Nomura Holdings Inc., parent of Nomura Securities. In fact, five of the major online securities firms, including SDI, Rakuten and Monex, had a combined ¥27 trillion in client assets under management, far below the ¥113 trillion at Nomura.
It is no longer unusual to see seniors using personal computers and smartphones, and Rakuten Securities is offering its elderly customers consultation services through independent advisers.
Kabu.com is considering a new service in which customers interact with each other on the internet, with experienced investors providing advice. It plans to ask for technical support from telecommunications carrier KDDI Corp., which has a stake in it.
SBI Holdings is seeking to become a comprehensive financial services provider in cooperation with regional banks. In October, it announced a financial services tie-up with Z Holdings Corp., owner of Yahoo Japan Corp.
Through the collaboration, SBI Holdings aims to offer a service in which customers collect financial information on Yahoo’s website and trade shares with SBI Securities.
A majority of the some ¥1.8 quadrillion in individual financial assets in Japan are parked in bank accounts.
With large intergenerational asset transfers expected in line with an anticipated increase in inheritance as Japan’s shrinking society continues to gray, online brokerages are facing the challenge of tapping new demand through easy-to-use services.