TOKYO REPORT: Japanese Megabanks Roll Out New Services for SMEs

Tokyo, Sept. 14 (Jiji Press)–Japanese megabanks have successively launched new financial services designed for small and midsize enterprises, seeking to tap their funding demand and expand earnings following the Bank of Japan’s interest rate hikes. Sumitomo Mitsui Banking Corp. has introduced a service that provides account opening, payments and accounting operations in an integrated package online. Mizuho Bank has also started services targeting SMEs. AI Screening for Loans In May last year, SMBC launched Trunk, a financial service primarily for small and midsize companies. The service improves convenience by allowing users to handle accounting tasks such as invoice payments efficiently via smartphones. It also features a function in which artificial intelligence informs users about subsidies from the national government and other sources. In July this year, SMBC announced that, in addition to cutting fees for money transfers to other banks, it would add a function allowing companies in Tokyo to apply for loans guaranteed by credit guarantee associations. The number of Trunk accounts had already exceeded 90,000 as of July, putting SMBC ahead among Japan’s megabanks. Mizuho Bank launched Upsider Bank, a financial service for SMEs, in June. The service allows corporate users to open accounts within the day of application at the earliest. It set fees for money transfers to other banks at 100 yen, the lowest in the industry. The service’s strength lies in its ability to use AI in loan screening and provide support tailored to companies from the startup stage through the growth phase. In the Upsider Bank service, Mizuho aims to achieve a cumulative 500 billion yen in loans executed and acquire 100,000 accounts by fiscal 2030. “A considerable proportion of workers are employed by SMEs or slightly larger companies. Unless growth in these segments is supported, there will be no growth for large companies either,” Masahiro Kihara, president of Mizuho Financial Group Inc., said, emphasizing the significance of the new service. In July, MUFG Bank announced the launch of a service to support back-office operations at SMEs. It is also looking to start digital financial services for SMEs by March 2027. Huge Market Of companies in Japan, SMEs account for about 99 pct. Japanese banks’ outstanding loans to SMEs stood at about 460 trillion yen as of the end of March, making up 70 pct of the total. This is a huge market equivalent to 2.5 times the amount of lending to large corporations. This sector of the loan market had long been dominated by regional banks and “shinkin” banks. But megabanks have become able to provide detailed services without deploying large numbers of sales staff by utilizing digital technologies such as AI. Lending rates are on an uptrend. According to the BOJ, the average interest rate on new loans extended by Japanese banks in March came to 1.813 pct, the highest level since July 2007. Megabanks have mainly focused on transactions with large corporations, but they now aim to increase lending further and expand interest income by setting their sights on the broad base of SMEs. If megabanks acquire more corporate accounts from SMEs by using the convenient new services as an entry point, they can also expect to earn fee incomes in the future, such as those from mergers and acquisitions advisory services and business succession support. Amid intensifying competition to attract deposits that serve as the source of lending, megabanks also appear to be hoping for an increase in “sticky” deposits that are less likely to flow out to competitor banks. END [Copyright The Jiji Press, Ltd.]