Download Japan Net Bank

Japan Net Bank
“Japan’s First Internet Only Bank”
Hayriye Gönenli & Melike Yılmaz
20 May 2010 – Boğaziçi University
Japan Net Bank
• AGENDA:
I.
II.
Introduction
Company Background
a.
b.
c.
d.
III.
Profiles of Shareholders
Business Principles
Services
Organization and IT System
Industry Background
a.
b.
c.
IV.
The US Online Banking Experience
New Banking Regulations in Japan
Consumer Banking in Japan
Targets and Competitors
a.
b.
V.
Results and Targets
Competitors
Strategic Issues
a.
b.
Alliances
Scalability vs Investment
VI. A thorny Path to a Golden Land
VII. Questions and Answers
Japan Net Bank
I. The Introduction:
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Yoshiyuki Miyai wanted to establish a completely
new standard of banking in Japan – that of
Internet-only banking.
As president of JNB, the first Japanese online
bank with no physical branches, Miyai
emphasized that customer satisfaction should be
the focus of JNB’s business
The customers should enjoy convenient access
to accounts, competitive rates, customisation
and secure transmission of information over the
web.
Japan Net Bank
II. The Company Background:
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July 1999, Sakura Bank, a major Japanese Bank,
and Fujitsu, an electronics giant, announced
their plan to create an Internet-only bank
Sept 2000, JNB was established with capital of
US$167 mio.
Oct 2000, JNB began its operations
The senior management of JNB consisted of 5
directors, including the president, Yoshiyuki
Miyai.
Japan Net Bank
II. The Company Background:
a. Profiles of Shareholders:


Sumitomo Mitsui Banking Corp. (60%stake): The
result of merger btw. Sumitomo Bank and Sakura
Bank, SMBC is among the largest banks in the world
with commercial and investment banking services
Fujitsu Limited (10%stake): The company is one of
Japan’s top two PC makers and a leading maker of
servers, software, storage devices and peripherals
such as printers and scanners. Its IT services include
systems installation and management.
Japan Net Bank
II. The Company Background:
a. Profiles of Shareholders:


Nippon Life Insurance Co.(10% stake): The world’s
third largest insurance company. Its products include
individual and life insurance products.
Mitsui & Co. Ltd.(5% stake): Japan’s largest general
trading company and act as a go-between for buyers
and sellers who imported and exported goods. One of
its subsidiary is Curiocity Internet Shopping Mall and
DoCoMo AOL, an internet access provider with
500.000 subscribers.
Japan Net Bank
II. The Company Background:
a. Profiles of Shareholders:



Nippon Telegraph and Telephone East Corp.(5%
stake): NTT East is the regional telephone companies
in Japan. The parent company NTT Corp. İs the largest
telecommunications company in Japan.
NTT DoCoMo, Inc. (5% stake): NTT’s wireless
subsidiary with paging, maritime and in-flight phone
services and wireless internet service, i-mode.
The Tokyo Electric Power Co.,Inc. (5% stake): World’s
largest private electric power company also with
telephony and Internet services.
Japan Net Bank
II. The Company Background:
b. Business Principles: An Internet specialised bank
with customer centric principle. JNB characterizes its
financial services by 4C’s:
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
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Convenient: Seamless financial functions and 24/7
accessibility. Multiple access channels with ATMs and imode
Competitive: Attractive interest rates and fees
Customised: Every customer has her own specific info
page in the web. They can receive email notifications of
transactions details.
Confidential: JNB customers’ private info is strictly
secured, it can’t be used w/o customer’s agreement. Info
transferred through the network is encrypted. The
database and servers storing the info are protected by a
firewall and an access surveillance system.
Japan Net Bank
II. The Company Background:
c. Services: JNB’s staple services include ordinary
deposit, term deposit, money transfer, small-size
consumer loan, cash card and credit card.
It’s access channels include the Internet, dial-up,
mail order, telephone, ATMs and i-mode mobile
internet service.
The only physical channel is the JNB Head Office
in Tokyo. Deposits and withdrawals of cash can
be carried out through ATMs or the Head Office.
Japan Net Bank
II. The Company Background:
d. Organisation and IT System: JNB maintains a
flexible, team-like structure. It has a very low
cost base.
3 departments: Planning, IT and sales
Flexible and open IT system with Fujitsu. It can
be divided into 3 parts, as normal banking IT
system, like an accounting and loan system;
management information system, including
customer relationship management; and
multiple channel customer interface.
Japan Net Bank
III. The Industry Background:
a.
The US Online Banking Experience:
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March 2000, 97 US Banks had fully transactional Web sites.
October 1995, the first internet-only bank in the world, Security
First Network Bank, was started in US.
Pure Internet start-ups were expected to have lower operation
costs because they didn’t need to have physical branches and
they save operating costs by reducing inefficiencies of paper
drawn transactions, mothyly statements, credit card statements
and bills.
But they were lacking brand recognition and physical presence
In early 2000s, net-only banks weren’t doing well ,they had only
200.000 customers. Only 9.4 mio people had ever banked
online, and of those 3.1 mio had discontinued the service mainly
due to too time consuming to use and poor customer service.
They also suffered from massive advertising feesand finally
some had been incorporated into banks that initially established
them, while others teamed up with other banks.
Japan Net Bank
III. The Industry Background:
b.
New Banking Regulations in Japan:

1997, Japan government began the famous “Big Bang”
deregulation of the financial market; one of the resulting
measures was that non-bank companies could become
significant partners in financial ventures.

Prior to that, the country had not issued a new bank
licence for almost half a century.

Among the new banks that appeared as a result were
those that only had an internet presence and JNB was first
of its kind to start operations.

Sony Group and the retail giant, Ito-Yokado, were due to
open Net Banks in mid 2001.

New banks in Japan were required by the authorities to
make a profit within 3 years. JNB planned to meet the
requirement through acquiring 1 mio accounts in three
years.
Japan Net Bank
III. The Industry Background:
c.
Consumer Banking in Japan:
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Average deposit per person as $47000
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125 million people living in Japan
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Low interest rates :
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0.02 % - ordinary deposits
0.1 % - term deposits
Low credit card usage because of
– Culture
– Inflexible payment terms
– Poor marketing
Japan Net Bank
III. The Industry Background:
c.
Consumer Banking in Japan:
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Customers prefer payments by cash or money transfers
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Therefore ATMs are very important
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Less than 50 % Internet penetration as compared to USA
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High popularity of i-mode: internet service allowing
internet functions to be carried out via handsets
Japan Net Bank
IV. Targets and Competitors:
a.
Results & Targets:
Japan Net Bank
IV. Targets and Competitors:
a.
Results & Targets:
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Main source of profits as interest on loans
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Has very challenging targets
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Confident since it will not repeat the failures of its
US counterparts with the help of
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Widely distributed ATMs
Efficient and advanced money transfer system in Japan
Japan Net Bank
IV. Targets and Competitors:
b.
Competitors:
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Brick and Morter Banks
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Traditional ones with dealing customers face to face
Favored by conservative culture of Japan
Variety of value-added services
More and more ATMs and online banking options
High operating costs
Sony Bank
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Internet-only bank
Shareholders as Sony Corp, SMBC and JP Morgen Chase&Co
Very similar strategies with JNB
Japan Net Bank
IV. Targets and Competitors:
b.
Competitors:
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IY Bank
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Internet-only bank based on ATM usage
Alliances with Ito-Yokado supermarkets and Seven Eleven
convenience stores- ATMs there
Ito-Yokado business group as a major shareholder
Benefiting from the customer base of that group
Alliances with major commercial banks in Japan for the ATMs
eBank
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Internet-only bank
Specialized in payments for small value purchases
Charges lower commissions
Japan Net Bank
V.
Strategic Issues:
a.
Alliances:
Japan Net Bank
V.
Strategic Issues:
a.
Alliances:
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As Miyai explained it by saying that
“It could be possible without alliances, just to start the bank
itself... But it would have been difficult to broaden or
expand the business by leveraging the alliances’
customer bases”
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Important for
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Increasing customer bases
Low marketing expenditure
Japan Net Bank
V.
Strategic Issues:
b.
Scalability vs Investment
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Unpredictable customer behavior on the Internet
Successful marketing may boost demand
Customers still expecting high service quality
Leading to need for:
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Scalability
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Accurate demand forecast
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Wise investment
Japan Net Bank
VI. A Thorny Path To A Golden Land
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Competition from traditional banks as well as
other new comers
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Need for IT systems and HR that are ready for
demand flactuations
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Make use of its alliances
Japan Net Bank
VII.Questions and Answers:
– Question 1: Explain the IT system of Japan Net
bank.
– Answer 1: The IT system of JNB is flat and open. It
can be divided into 3 parts, as normal banking IT
system, like an accounting and loan system;
management information system, including
customer relationship management; and multiple
channel customer interface.
Japan Net Bank
VII.Questions and Answers:
– Question 2: Explain why scalability is an important
issue for internet-only banks as well as other
online companies?
– Answer 2: Customer behavior on the Internet is
unpredictable. Demand may increase dramatically
in a case of good marketing campaign or good
company news. Company’s IT and HR structures
may have difficulties in coping with the increasing
demand and customers may still expect high
quality service. To prepare for such a scenario
company’s operations should be scalable.
Questions?
Thank you !!