tokyo’s global position as a fintech hub: expectations vs ...- 2 disclaimer n the views and...

Tokyo’s Global Position as a FinTech Hub:Expectations vs Reality

ICA JapanOctober 1st, 2018

Maurizio Raffone, CEOFinetiq Ltd: www.finetiq.ioTelegram: @mraffoneLinkedIn

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Disclaimer

n The views and opinions expressed in this presentation are my own and do not reflect the views of any company I am associated with or have been associated with in the past

n This presentation is not an advertisement, is being distributed for informational and discussion purposes only and it should not be construed as legal or regulatory advice on any subject matter

n The information contained herein is not investment or financial product advice and is not intended to be used as the basis for making an investment decision

n No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation

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Your PresenterMaurizio Raffone -�� ��� ∙ ����

British Educated International ExperienceFinance Veteran

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Source: Wikicommons

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Why are we here today?Beside for the drinks …

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n FinTech acquiring larger relevance

n Japan aiming not to “miss the boat”

n Eg. Singapore saw in 2016/17 over 25% of new finance jobs thanks to FinTech

Source: FinTech Futures

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Agenda

n Terminology

n Some background information on FinTech

n Japan’s FinTech vision

n Success Factors to develop a FinTech Hub

n Tokyo’s eco-system and current initiatives

n Tokyo compared to other global hubs

n Q&A

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Terminology

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Preamble Let’s get some terms right

n FinTech isn’t Bitcoin

n FinTech isn’t Blockchain

n Form of financial innovation driven by the application of new technology to the world of finance

n Eco-system of technology, finance, investors, government and consumers

n Five major areas: Decision Making, Saving, Borrowing, Payments and Risk Management

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Introduction to FinTech

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What is FinTech used for?FinTech Applications

n Decision Making => Robo Advisory, Algo trading

n Saving => online banking

n Borrowing => crowdfunding

n Payments => digital wallets

n Risk Management => blockchain

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Brief History Lesson Why is FinTech Relevant?

n 2008 Financial Crisis

n Basel III, Solvency II, Mifid2 …

n Open Banking

Digital Business Models

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n High Speed Internet

n Mobile Data (3G, 4G, 5G)

n Microchip technology

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Brief History Lesson Why is FinTech Relevant?

Digital Business Models

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Source: SAP, “The Intelligent Enterprise”

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Japan’s FinTech Vision

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Japan’s FinTech VisionThe Premise

n In the last few years, FinTech has become a reference concept for governmental institutions to promote economic growth, productivity gains and entrepreneurial opportunities

n Changes to the Banking Act set the stage for Open Banking reform and FinTech Development- Open APIs- Financial institutions investing in FinTech Companies – removed 5% hurdle- Virtual Currencies and VC Operators

n Cashless Japan- 2027 official goal of 40% cashless transactions (from less than 20% currently)

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Japan’s FinTech VisionAnd its relevance to Tokyo

n Transversal support for FinTech development in Japan

n METI’s Vision- Comprehensive Policy Recommendations, May 2017

n Prime Minister’s Office: 2020 Plan- Focus on promoting supply system innovation and human resources development- Institutionalized regulatory sandbox approach

n Tokyo Metropolitan Government’s Global Financial City Vision- Blockchain, FinTech and New Tech accelerators, Startup Visa Program

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Japan’s FinTech VisionMETI’s Vision

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Source: METI, “Japan’s FinTech Vision“, May 2017

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Japan’s FinTech VisionPrime Minister’s Office 2020 Plan

n Institutionalization of regulatory “sandbox” to promote new technologies

n “… to improve users’ convenience, strengthen companies’ growth potential, and realize a cashless society, the government will consider how to promote use of FinTech.”

n Focus on AI, IoT, Big data, RPA

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Success Factors to develop a FinTech Hub

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Success Factors to develop a FinTech HubFour Pillars

n In a 2016 study, Deloitte identified four key factors

n How does Tokyo stack-up in those areas against other major cities?

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Tokyo FinTech Initiatives

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Tokyo FinTech InitiativesGovernment, Corporates, Grassroots

n Tokyo Metropolitan Government’s Global Financial City Vision, November 2017- Four Main Goals1. Become Asia’s Financial Hub2. Attract talent, investments and technology3. Contribution toward solving social issues4. Focus on Asset Management and FinTech

- Blockchain, FinTech and New Tech accelerators

- Startup Visa Program

- Tokyo One-Stop Business Establishment Center

- Financial One-Stop Support Service: joint consultation service with the Financial Services Agency

- Tax Reduction efforts in coordination with the central government

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Tokyo FinTech InitiativesGovernment, Corporates, Grassroots

n FinTech Accelerators: Financial Institutions supporting FinTech Development

- Cohort 1: Alpaca Japan, SmartIdea, XenoData Lab, ZeroBillBank, Knowledge Communication

- Cohort 2: AnyPay, OLTA, GoodMoneyger, CrowdReality, SIMount, Nayuta co., Robot Fund,

- Cohort 3: AndGo, MDR, Credit Engine, NNF, Factbase, Restar

Focus on six core social issues:

- Retirement-focused investment and saving solutions

- Utilization of idle real estate assets

- Create technology and experience driven investment and asset gathering solutions

- Innovation in corporate accounting and financial management

- New services that can shape work practices and business models in the future

- Smart cities

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MUFG FINTECH ACCELERATOR

NOMURA'S VOYAGER ACCELERATOR

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Tokyo FinTech InitiativesGovernment, Corporates, Grassroots

n FinTech Accelerators: Silicon Valley comes to Tokyo

- Just launched 1st Batch of “graduates” – accepted second batch- Mix of Japanese and Foreign start-ups across IoT, Mobility, FinTech and InsurTech- Silicon Valley best practices brought to Japan

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Tokyo FinTech InitiativesGovernment, Corporates, Grassroots

n FinTech Accelerators: Silicon Valley comes to Tokyo … but China remains main focus

- Just launched 1st Batch of “graduates” – accepted second batch- Mix of Japanese and Foreign start-ups across IoT, Mobility, FinTech and InsurTech- Silicon Valley best practices brought to Japan

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Tokyo FinTech InitiativesGovernment, Corporates, Grassroots

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n Other accelerators which are FinTech-friendly

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Tokyo FinTech InitiativesGovernment, Corporates, Grassroots

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n Angel investing and Venture Capital as essential fuel for FinTech Growth

n “While the Asia fintech market continued to be dominated by China and India, Japan was able to break into the region’s top venture deals list with a $63 million Series A raise by Folio.” [KMPG, ”The Pulse of FinTech 2018”]

n Softbank’s Vision Fund, $100bn global behemoth

n But also, SBI, Rakuten

n Yet, largest CVC investments are in Robotics, AI (Toyota, Panasonic, Sony)

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Tokyo FinTech InitiativesGovernment, Corporates, Grassroots

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Tokyo FinTech InitiativesGovernment, Corporates, Grassroots

n Community and Ecosystem development going strong- Plenty of conferences, events, meetups- Area of focus: blockchain

- Shared workspace dedicated to FinTech in the heart of Otemachi- Events and collaboration efforts with partner companies- Long-term Goals

- Produce a Unicorn- Develop a new globally accepted service solution

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Tokyo vs Rest of the World

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FinTech HubWhat’s the World’s perception of Tokyo?

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Source: Z/Yen, “The Global Financial Centres Index 23” March 2018

Source: Z/Yen, “The Global Financial Centres Index 23” March 2018

n General Position as a Financial Hub

n What is behind its position?

???

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FinTech HubWhat’s the World’s perception of Tokyo?

n Deloitte Global FinTech Hub Review 2017- “Japan has seen strong growth in the FinTech ecosystem in the past two years, as FinTech

startups, industry players, regulators and government have collaborated to build a sustainable and scalable environment for innovation. Tokyo has a vibrant FinTech network, and the regulators have recently launched FinTech-friendly laws around blockchain and APIs, along with initiatives to support new FinTech startups. As the third largest economy in the world, there is opportunity for both B2C and B2B players to enter the market.”

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FinTech HubChina’s Megacity taking over

n 2018 Update

n Tokyo just outside of Top 10

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FinTech HubChina’s Megacity taking over

n 2018 Update

n Tokyo just outside of Top 10

n Breakdown of rankings

n Low score in FinTech consumer Experience

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Source: Sinai Lab from Academy of Internet Finance (AIF), Zhejiang University

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FinTech HubWhat’s the World’s perception of Tokyo?

n Question: In additional to Silicon Valley, which three cities will be seen as leading technology innovation hub over the next four years?

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Source: KPMG, “The Changing Landscape of Disruptive Technologies”

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FinTech HubsWhat is the competition?

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FinTech HubsTokyo’s competitive advantage

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n High Density of Finance and Industry cluster

n Over 600 banks, almost 2,000 securities companies and almost 100 insurance companies

Source: Accenture

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FinTech HubsInternational Momentum

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n Singapore and Hong Kong hosting week-long FinTech conferences

X Partly in Japanese, with foreign speakers presenting in EnglishX Costs about 8x more than HK/Singapore

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FinTech HubsHunt for Talent

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n The Times’ World University Rankings: Top 100 Computer Sciences Universities

n 2 Japanese Universities:- Tokyo University, ranked 35- Kyoto University, ranked 51- National University of Singapore: 11 ; Hong Kong University of Science & Tech: 28

n Best countries to be a computer scientist:- Japan doesn’t make the top 10 according to HackerEarth- Median salaries are low

Source: hackerhearth.com

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The reality of doing business in JapanRed-tape and costs

n Business set up costs

n Visas

n Red-tape

n Bank accounts

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Source: World Bank

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The reality of doing business in JapanTaxes

n Taxes are a key factor in determining where to start businesses

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Source: tradingeconomics.com

n No Start-up tax framework such as the UK’s EIS and SEIS or R&D tax credits

n UK: the Patent Box scheme, where companies pay a lower rate of Corporation Tax on profits earned from their patented innovations

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The reality of doing business in JapanNot conducive for start-ups

n Compass Consulting published in 2017 a Global Startup Ecosystem Ranking

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Source: Compass Consulting

Tokyo???

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The reality of doing business in JapanTherefore no Unicorn … yet

n 18 based in the US ; 4 in Europe, 1 in South America ; 4 in China ; 2 in India

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FinTech AlumniTokyo-based success stories

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Online Asset Management Platform

Personal and SME Financial Management

Enterprise Resource Planning Platform

Cryptocurrency exchange

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FinTech Alumnifreee

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n One of the oldest start-ups in Japan, launched in 2012

n Raised USD 60m in August 2018 in Series E funding, including Line and MUFG

n Seed Investor: DCM Ventures, a Silicon-based VC with office in Tokyo

n Creating an ERP solutions eco-system in partnership with Line

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FinTech AlumniFolio

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n Larger Series A (A plus A2) financing, raising about USD 80m

n Broad participation by CVC eco-system, including Mitsui Sumitomo Ventures, Line and Rakuten

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FinTech AlumniMoney Forward

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n Also well established (set up in 2012)

n Taken a “forward” role in corporate finance: bought Klavis (solution provider for businesses), invested in Campfire’ series A and in August 2018 bought cloud-solution platform Wakufuri

n Looking at launching a crypto exchange

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FinTech AlumnibitFlyer

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n Japan’s leading crypto exchange

n Expanding into the US & Europe

n Invested in by, among others, Sumitomo Mitsui, Mizuho, SBI and MUFG

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ConclusionsWhat’s next for Tokyo?

n Strong policy push, more ground-level work needed to be done

n Olympics => catalyst for the adoption of technologies for a cashless society

n Further eco-system growth- Hackathons- Innovation Labs- Greater VC involvement, not just CVC

n Research & Development: Academic involvement

n More English-language services

n Taxes, taxes, taxes

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Q&A

Tokyo’s Global Position as a FinTech Hub:Expectations vs Reality

ICA JapanOctober 1st, 2018

Maurizio Raffone, CEOFinetiq Ltd: www.finetiq.ioTelegram: @mraffoneLinkedIn