The FinTech industry in Japan has seen significant growth over the past few years, especially fueled by the pandemic. With an ever-evolving technological landscape the industry has continued to innovate and push boundaries in Japan.

As we move into 2023, it's essential to take stock of the past year and make predictions for the future.

In this blog post, Milos Cavic, Director, Enterprise & Consumer Technology and Adam Plarisan, Team Leader, FinTech, will recap the major developments in the Japanese FinTech industry in 2022 and examine the trends and predictions for the year ahead. Additionally, we'll look at the hiring trends in FinTech in Japan, providing insights into the types of roles and skills that will be in demand in 2023.

Whether you're a seasoned industry professional or just starting in FinTech, this post will give you a comprehensive overview of what to expect in Japan's FinTech industry in the coming year.

If you are interested in opportunities in Japan’s FinTech industry, get in touch.

2022 Recap

What were some of the major FinTech trends in Japan in 2022?

We saw a few different trends in Japan’s FinTech market over the last year. The first thing that comes to mind are BNPL (Buy Now Pay Later) businesses. Sparked by PayPal’s acquisition of Paidy, Japan’s leading BNPL service, in October 2021 a variety of foreign BNPL companies entered the Japanese market in early 2022.

In Europe and North America BNPL is already a saturated market while in Japan there were only 1 or 2 players at the time. In early 2022 a number of foreign BNPL companies entered the Japanese market trying to expand quickly and grow market share. However, most of these new players, companies like Atome, Klarna or Pace, had to withdraw from Japan towards the end of the year due to the global tech recession and bad business results. The only successful new BNPL service that I can think of is Smartpay.

Another thing we have witnessed in Japan last year were big ups and down all across the crypto market. Cryptocurrencies were very volatile and that affected companies in Japan to some extent but not as much as overseas. The Japanese crypto market is highly regulated, leading to a relatively stable crypto landscape. Japan was one of the earliest countries with crypto thefts and hackings so they were quick to implement those regulations. Even big global players like FTX or Binance only had a very small presence in Japan. We have seen companies in Japan stop hiring and resume hiring all throughout last year. We have also seen a drastic reduction of new coins and the NFT market tanked as well.

As for the payments industry, companies expanded rapidly in Q1 and Q2 and hired a lot of people but then stopped hiring from Q3 and even laid off people later that year due to the global economic downturn in tech. What’s different from BNPL is that payments companies have been around for longer and have a proven business model with a clear ROI so they weren’t forced to close down operations in Japan. They still have hiring needs in Japan but are currently in cost saving mode.

We have also witnessed the emergence of a new sub-industry in FinTech, payment fraud detection, which will become more and more important due to the shift to e-commerce and cashless payments. Companies like Forter or Riskified are starting to penetrate the Japanese market.

How does the Japanese FinTech industry compare to other markets? Is it true that Japan is a couple of years behind?

It really depends on which sector we are talking about. Like mentioned earlier, BNPL is a few years behind and it’s not as big in Japan, yet. Experts also believe it won’t see similar growth in Japan as it did in the US or Europe where it’s taking away market share from multiple-payment options offered by credit cards. In Japan, 92.2% of credit payments in 2020 were lump-sum payments, so there is not much to take away from.

Crypto on the other hand is not behind in Japan. People were quick to pick it up and Japan is one of the better regulated crypto markets in the world. It has arrived in the mainstream and there is a lot of blockchain development going on in Japan.

If we go back 20 years, Japan was actually a leading country when it comes to cashless payments with the introduction of IC cards like Suica or Pasmo. These are prepaid cards that were initially introduced to pay for train or bus fees but soon after you could use them to make purchases at convenience stores or vending machines. These didn’t really exist in other countries at that time but then the evolution of payment tech has slowed down in Japan.

In general Japan is still a cash first society where the majority of payments is made in cash. Many people think cash is a more secure way for payments and there are a lot of smaller shops or restaurants that don’t accept credit cards or other cashless payments. In 2021 only 32.5% of payments were cashless which lags behind other Asian countries like South Korea (93.6%), Singapore (83%) or China (60.4%). However, the rate of increase for cashless payments has picked up since the pandemic, especially payments using barcodes and QR codes, and this trend is likely to continue. METI is aiming to increase the ratio to 40% in 2025 and to 80% in the future.

How did the global tech recession and layoffs affect FinTech in Japan? Did you see similar things here in Japan?

The FinTech market in Japan was severely affected by the global tech recession in the later half of 2022. From Q3 we could see that hiring practices started to change. Companies were not transparent anymore and a lot of processes took longer than they used to. They didn’t officially say they stopped hiring but found ways to reject most applicants.

Then in Q4 the official hiring freezes started as well as layoffs in some cases. As mentioned earlier a lot of foreign BNPL companies had to leave Japan during that time as well. Most notably, it seemed like only foreign companies were affected by the global downturn. Domestic companies were fine and are still hiring. This trend continues so far this year.

2023 Outlook

What are some of the predicted future developments for FinTech in 2023?

2023 will be a big year for InvestTech and digital asset management in Japan. To give some background, personal investment in Japan has always been low. People would keep money at home or in their bank accounts. This was OK because Japan traditionally has almost 0 inflation, so savings wouldn’t lose value. Furthermore Japanese consumers tend to be more risk averse than in other countries. That’s why many people still view it as some kind of gambling.

That changed last year though. December 2022 saw an annual inflation rate of 4%, the highest inflation rate in Japan in 41 years. The cost of living increased noticeably in Japan throughout 2022 and people see that their savings will lose value as well.

This forces people in Japan to think more about investments and we see a lot of companies moving into this space. Their goal is to make investing easy and accessible for everyone. Companies like Habitto or Toranotec really decrease the hurdles to invest, especially for younger people who can start with a few hundred yen.

We believe that crypto will also recover this year. When we look at the Bitcoin price, we can see that it already went up over 50% since the beginning of the year. People are using cryptocurrencies as investment vehicles again. We have also seen some new crypto players entering the Japanese market recently. However, we don’t see crypto becoming a widely used, decentralized currency any time soon in Japan.

Payments and gateways will also continue to grow in 2023. More and more people use mobile payments when making purchases not only online but also in brick and mortar shops. Also, mobile payment providers like PayPay or RakutenPay constantly offer cashback campaigns to increase usage of their services. From a consumer point of view mobile payments are cheaper than cash payments because most services offer at least a 0.5% cashback in points that you can re-use with their service. This increases customer retention. We don’t see any major technological jumps but a constant growth rate.

What are some of the biggest challenges facing the Japanese FinTech industry in 2023?

This is not specific for 2023 but regulations in Japan’s finance sector by METI are always a big challenge for FinTech. Strict regulations function as a bottleneck in Japan and slow down the growth of the FinTech industry. On the other hand, it makes the industry more secure, so it’s not all negative.

A major challenge for FinTech companies is to find talented people in Japan. The industry is fairly new but companies coming to Japan require people with payments experience for example. So this makes the pool of potential candidates very small. In our opinion companies should be more open to talk to candidates without payments experience.

Another thing all foreign FinTech companies need to keep in mind when entering Japan is to have a tailored go-to-market strategy. Consumers in Japan are very risk averse and are not well educated in terms of FinTech solutions. The general public rather trusts established big players than newcomers in the market.

A lot of new companies, especially in B2C, underestimate this part. They come to Japan, they have a great product, they hire a B2C marketer and try to sell directly to Japanese consumers. This approach doesn’t work in Japan. You have to find established partners with whom you can sell you product. This can be telecommunications providers like Softbank for example. They can help you bundle and promote your product and the Japanese consumer trusts them. Partner sales is key in Japan.

FinTech Jobs in 2023

How is the job situation in Japan? Are FinTech companies hiring right now?

The overall job situation in Japan’s FinTech industry is still pretty bad. Most companies are not hiring. We see some improvements compared to the end of last year but the overall situation is bad. If we had to estimate we’d say only 15% to 20% of FinTech companies in Japan are hiring people right now, and many of them don’t have agency budgets. So they are trying to find talent themselves without using recruitment agencies to keep cost down. The hiring need is there but they are in “wait and see” mode.

Similar to other tech sectors, domestic FinTech companies are still hiring. Japanese companies seem to not be affected much by the global tech recession. Companies like PayPay for example are still actively hiring, mainly for technical positions though.

What are some of the most in-demand roles in FinTech in 2023?

For foreign companies entering the Japanese market, the most in-demand people are sales people. These companies have an existing product and need business people to penetrate the Japanese market.

If we look at payments for example, an essential hire is for merchant acquisition. This is a B2B sales / business development role to secure the supply side for the service. Once they have enough merchants, they can roll out their service to the consumer side. For this they need a marketing person who can generate new users for the payments service.

After scaling in Japan and acquiring customers they would hire technical people so they can offer localized customizations as well as a higher level of technical support to larger Japanese enterprises.

Domestic companies on the other hand hire a lot of technical people. Japanese companies traditionally work with a lot of partners and they all require different customizations. So they constantly make changes to the product, add new features and build custom add-ons for specific partners or customers. That’s why they hire a lot of engineers, devops, product managers and designers.

What are some of the biggest challenges in finding qualified people?

The biggest challenge we can see is finding people who have experience in selling to merchants, especially sales to e-commerce. FinTech is a fairly new industry so the pool of experienced people is very small and every company is after the same people. Another factor for foreign companies is that they want bilingual people, who speak native Japanese to talk to customers and business level English for internal communication. If you look for bilingual people with FinTech experience, the candidate pool gets even smaller. Some companies have slightly unrealistic expectations.

How do FinTech companies attract and retain top talent?

In payments for example, a big selling point is the opportunity to sell your product to a wide variety of merchants. A lot of companies need a payment system, so any kind of B2C business they can imagine could become their client like OTAs, healthcare, pretty much anything. That is really attractive to people because they can sell to different industries.

When looking a FinTech salaries they are average tech salaries. You won’t get paid like in an investment bank but you’ll have a good salary. Usually foreign companies tend to pay higher salaries and the top players in the industry like Stripe pay the highest salaries. But this is the same in most industries.

Culture fit is also a big factor when finding good people. Employees these days have very clear expectations towards work style and work-life-balance but again that is nothing FinTech specific. I is what we see across all industries.

Thank you for your time Milos and Adam.

If you have any further questions, you can reach out to Milos or Adam any time on LinkedIn. They are always happy to help and talk about FinTech in Japan.

If you’re looking for a job in Japan’s FinTech industry, get in touch with us.

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Milos Cavic
Director, Enterprise &
Consumer Technology

LinkedIn

Adam Plarisan
Team Leader, FinTech

LinkedIn