Unfair ownership laws hinder Japan’s fintech drive

Author: Brian Yap | Published: 8 Feb 2017

Japan has made an all-out effort to strengthen its fintech space amid perceived threats from Silicon Valley, but different ownership laws have created unfairness.

The Diet, Japan’s parliament, passed a law on May 25 last year to allow domestic financial institutions to acquire tech-driven start-ups, with the new legislation expected to take effect on April 1.

Seeking to protect the country’s banking industry from competition posed by Silicon Valley, lawmakers also agreed to scrap a five percent ownership cap imposed on banks looking to invest in tech companies.

But counsel in Japan point to vastly different rules governing the operation and ownership of banks by non-financial parent companies. The current banking law permits non-banks, such as Sony and e-commerce firm Rakuten, to operate financial services with a licence. This has led to major conglomerates running banks as part of the group, enabling them to offer lending services to...