Japan’s Online-Only Banking Sector: Current State and Challenges for Future Growth

The number of online-only bank accounts has topped 10 million and is still growing. Although they are still a fragment of the market, their profile is growing slowly but surely.

This report examines the current state of online-only banks in Japan based on Celent surveys and interviews. The unique attributes of online-only banks have attracted customers and helped them to grow. Banks have offered an array of models such as linking payment, loans, and brokerage accounts and services.

Online banks have strived to define themselves and carve out a niche market with distinct offerings that are beyond the reach of major banks. This has fueled account growth. But now account numbers are plateauing, and certain future challenges have gradually been thrust into relief.

One challenge and desire cited uniformly by banks was to better emphasize their strengths. Indeed, online-only banks have their own batch of issues, including the following:

• Enhancing face-to-face advisory services.
• Clarifying and reassessing their target demographics.
• Deploying new businesses.

“It is important that online banks competing for a piece of the pie realize that digitization is not the same as technological progress,” says KyongSun Kong, an analyst with Celent's Asian Financial Services practice and author of the report. ”Rather it is the creative application of technology.”

This report includes eight figures and one table.