Rakuten Group Inc. is emerging as the first real digital contender to Japan’s traditional lenders, using its Amazon.com like e-commerce dominance to steer users to its online bank.

New digital bank accounts with the internet conglomerate better known for its online shopping services expanded by 20% last year and recently topped 10 million, the most among the country’s online lenders.

Deposits grew by about 50% over the same period to more than ¥5 trillion, putting it on par with Japan’s mid-sized regional banks.

Rakuten allows its more than 100 million members to collect loyalty points by using a swath of services including its bank, which can then be spent like money through its array of businesses from its travel agency to its movie and TV show app.

Part of last month’s deal to collaborate with Japan Post Holdings Co. on cashless payments and insurance also saw investment from Tencent Holdings Ltd., the Chinese technology giant that’s helped revolutionize China’s payments market through its WeChat Pay.

“Many of our customers are users of other Rakuten services,” said Kosuke Takeuchi, part of the strategic planning team at Rakuten Bank, in a recent interview. Last year’s growth in new accounts has continued into this year, fueled by clients of Rakuten’s brokerage service, he added.

After a slow start, Japanese consumers are beginning to embrace online transactions — which saw a surge in demand in many countries during the pandemic.

While the huge so-called megabanks have dominant positions in mainstream finance, it’s a wake-up call for smaller regional lenders that have remained under severe pressure since the onset of COVID-19 depressed activity.

“I think Rakuten Bank is a force to be reckoned with for traditional banks,” said Mia Nagasaka, analyst at Morgan Stanley MUFG Securities in Tokyo. Rakuten “has customers and an ecosystem. The customer base that has been built upon e-commerce has overwhelming strength,” she said.

Others are also seeing an opportunity. Fukuoka Financial Group, one of Japan’s largest regional bank groups, is preparing to launch a digital bank in May, targeting younger people by offering financial services on smartphones.

PayPay Bank, formerly Japan Net Bank and the country’s oldest online bank, saw growth in betting for sports such as horse racing and motorboat racing that lured more people to open bank accounts, according to Satoshi Morifuji, the bank’s head of corporate planning.

While Rakuten Bank declined to comment on targets, the firm said it was aiming to further increase the number of user bank accounts by harnessing consumer data analysis from its wider web of businesses on customers’ personal interests.

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