Financial Crime World

Financial Technology and Financial Crimes in Japan: A Growing Market with Challenges Ahead

The Rise of Fintech in Japan

Japan’s financial technology (fintech) industry is booming, with a projected market size of over $10 billion USD by 2022. The country’s cryptocurrency, digital payments, and crowdfunding segments are particularly noteworthy for their growth and activity in recent years.

The Importance of Fintech

Financial technology (fintech) is an emerging industry that is rapidly developing globally, often leveraging cutting-edge technologies like blockchain. Its significance extends beyond individual use, as it has the potential to revolutionize how money is invested, transferred, and secured.

  • Growth Opportunities: The importance of fintech will continue to grow in the future with increased adoption of machine learning and artificial intelligence.
  • Global Presence: The UK and US are prominent fintech hubs, accounting for around 10% and ranking first globally respectively. However, Asia-Pacific countries like Japan are among the fastest-growing market segments.

Crowdfunding in Japan

Japan’s crowdfunding ecosystem has seen significant growth since 2016, with a market size increase of approximately 157%. Peer-to-peer loans dominate, followed by funding for goods or services and charitable donations.

  • Popular Platforms: CAMPFIRE is Japan’s largest crowdfunding site, founded in response to the 2011 Tōhoku earthquake and tsunami. Other platforms cater to individuals, small start-ups, and established firms.
  • Foreign Investment Opportunities: Foreign companies can exploit Japan’s burgeoning crowdfunding sphere with a solid business plan and marketing approach.

Digital Payments in Japan

Japan aims for 40% cashless transactions by 2025. In 2020, $36 billion USD was transacted via cashless systems, nearly four times the previous year’s figure.

  • Popular Services: PayPay is the most popular digital payment service, accounting for 43.1% of the market.
  • Cashless Payments: Despite rapid fintech growth, Japan still lags in cashless payments, with only around 30% of transactions being cashless.

Obstacles and Opportunities

Despite rapid fintech growth, Japan still lags in cashless payments, with only around 30% of transactions being cashless. The yen’s stability may also hinder cryptocurrency adoption due to volatility. However, developments like JPYCoin stablecoin and the Bank of Japan’s digital yen efforts are cause for optimism.

  • State Funding: Japan’s low interest rates may encourage investment into crypto. State funding for start-up companies is a challenge, with a 12.6% decrease in overall funding from 2019 levels.
  • Foreign Investment Opportunities: Foreign companies can benefit greatly by engaging with Japan’s fintech sector through direct entry or investment in budding Japanese firms.