Globally, the banking and financial services industry is undergoing a dramatic transformation, as more and more countries adopt digital banking practices and new players in the market launch a range of exciting, cloud-based banking products.
Somewhat surprisingly Japan, renowned for a lifestyle that revolves around high-tech innovation, has to date not joined the digital banking revolution that is occurring in many other countries across the Asia-Pacific region and Europe.
The reason for this is twofold: firstly, Japan remains a largely cash-based society, and secondly, traditional legacy Japanese banking systems are relatively antiquated.
Change is on the horizon however, with the Japanese regulator looking to offer digital banking licenses‘ sometime in the future’.
While there is no specified timeline for this as yet, the Japanese market is poised to capitalise on these regulatory changes that will open up the market to attract new entrants and allow existing banks to offer innovative new digital products.
This puts the Japanese financial services industry in an exciting position, with regulatory changes around the corner which will see the market completely transformed.
Also Read: Digital banking in Asia Pacific: What we can expect to happen in 2020
At Mambu, we expect to see Japan do something of a ‘fast follow’ based on the aggressive approach taken by Hong Kong, where the Hong Kong Monetary Authority (HKMA) was quick to approve and issue digital banking licenses to a range of incumbent banks as well as more ‘disruptive’ fintech.
With Japan’s track record in digital innovation in other areas, we anticipate the transition to a more cloud-based, digital banking industry will be an enormous success.
While traditionally the journey to launching new financial services products or entering new markets has been a long one, the days of lengthy and expensive core implementations are numbered, with new cloud-based banking services offering a speedy and cost-effective solution.
Rather than having to purchase, develop and maintain a collection of poorly connected systems or components, an API-enabled composable banking architecture lets institutions leverage solutions built on a flexible cloud infrastructure, completely managed and provided as a service by a trusted provider.
The right technology can give institutions the agility to constantly enhance the customer experience, streamline operations and create opportunities to diversify and differentiate. This could range from launching a digital banking spinoff to quickly launching products and testing new markets, all with the built-in ability to scale and grow.
The technology also provides a quicker time to market and the ability to create and illustrate the business value in months instead of years.
Also Read: Think like a fintech company: How banks can capitalise on the digital banking revolution
These could lead to alternative revenue streams, particularly for institutions that have achieved success utilising in-house technology but have reached a point where their ability to grow and scale is now critically limited by that same technology and internal capacity for development.
On a global scale, financial technology has evolved to provide a vehicle that quickly responds to changing customer demands and market pressures, helping institutions navigate an ever-evolving market.
Once Japanese regulators give the green light for digital banking to proceed in Japan, those organisations that remain reluctant to change will quickly find themselves left behind by competitors and customers.
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