Tokyo - For bank analyst Mac Salman, the Bank of Tokyo-Mitsubishi flagship branch in Tokyo is so majestic that he brings friends and family there when they visit Japan.
First, there’s the brightly lit panelled ceiling, the plush peach carpet and marble counter staffed by row after row of polite, uniformed tellers unencumbered by bulletproof glass to block cheerful interactions with customers. Then there’s the crew of ushers who patrol the floor, ready to guide every customer with an eager “May I help you?”
“It’s like something out of a Bond movie,” said Salman, head of research on Japanese financial firms at Jefferies Group in Tokyo. “You certainly feel very looked-after when you go to do even the simplest of transactions.”
The luxurious branches help to explain why Japan, birthplace of the Walkman and PlayStation, falls behind even India and Nigeria in the use of mobile phones for banking. With its still-heavy reliance on cash for transactions, Japan has the lowest usage of mobile banking among 18 nations, mainly because physical outlets and automated teller machines can do more than phone apps, according to a UBS Group AG study. That may start to change as online lenders such as Jibun Bank, which is in fact a joint venture of Bank of Tokyo-Mitsubishi UFJ Ltd, try to persuade more Japanese to go mobile.
Lack of urgency
“Management commitment to mobile banking isn’t that strong in Japan compared to other countries,” UBS analyst Shinichi Ina, who co-wrote the July report, said in an interview. “There are still a lot of customers who like branches, and I think that’s part of the reason for the lack of urgency.”
That’s potentially a missed opportunity for Japanese banks to not only save the costs of running branches and ATMs but also change with the times. Mobile banking users worldwide are expected to more than double to 1.8 billion people by 2019, Juniper Research and KPMG data show in a separate report compiled with UBS. Younger clients in particular are more inclined to use phones for banking.
The Japanese preference for branches is in stark contrast with China, where long queues at crammed branches have driven people to portable devices. China ranked No. 1 in the UBS survey, with 63 percent of customers using their phones for banking, compared with only 16 percent in Japan.
Mitsubishi UFJ, which operates Japan’s biggest bank, has the largest number of Internet and mobile customers, according to Hirotaka Toeda, head of retail business promotion at the company’s main lending unit. He declined to give the total.
“We offer pretty much all the products and services our customers need at the moment,” Toeda said in an interview. While many customers just aren’t interested in mobile, the bank ensures that “convenient and stress-free” functions are available anyway, he said.
In Japan, ATMs allow users to transfer money to people and update transaction records by inserting their passbooks, making them more popular than branches, according to an April study by Fujitsu Research Institute. About two-thirds of customers use the machines at least once a month, while 21 percent visit branches, the report shows. Fujitsu found even fewer Japanese using their phones for banking than UBS’s survey: 13 percent.
Cash system
“Customers are satisfied with using ATMs and cash at the moment,” said Hiroaki Ishiyama, who wrote the report. “Japanese consumers want to continue with the cash and passbook system with banks that they’ve trusted for decades.”
That’s expensive for banks. The cost of conducting transactions at ATMs globally is up to 13 times higher than through a mobile phone, according to Javelin Strategy & Research and KPMG analysis cited in the UBS study. Transactions done at branches cost up to 43 times as much, the data show.
Face-to-face banking requires more employees to handle transactions. Japan’s three largest banks - operated by Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group - had about 2.4 billion yen ($20 million) in deposits for each staff member at their main lending units at the end of March, calculations by Bloomberg show. The country’s six Internet banks, which primarily concentrate on online banking, have 6.2 billion yen per worker.
Jibun Bank
The most app-focused of the six is Jibun Bank, Bank of Tokyo-Mitsubishi’s joint venture with wireless operator KDDI Corporation. Jibun has attracted 2 million accounts since it started in 2008 and is adding about 350,000 a year, said Toru Yoshikawa, head of corporate planning. Deposits expanded 17 percent in the year that ended in March, more than the 3.9 percent increase at all Japanese banks.
“Everything we do begins with mobile,” Yoshikawa said in an interview at Jibun’s Tokyo headquarters, where a tablet-like glass phone is all that greets visitors who connect to their host by tapping the screen. “Every transaction we offer can be done through the mobile banking app.”
Among the bank’s innovations is software that allows customers to open an account by uploading a photo of their driver’s license. Yoshikawa said his bank was first to release the technology in December 2012. Mizuho has followed suit.
Katsuya Itou, a 39-year-old agricultural consultant from Tokyo, used Jibun’s imaging system to get started with online banking. While he still keeps money at Bank of Tokyo-Mitsubishi, Itou uses his Jibun account, where “interest rates are good”, to save for his wedding, he said.
“Jibun Bank is taking a forward-looking approach,” UBS’s Ina said. Still, the company will struggle to shake up the industry because it risks cannibalising its parent, he added.
Both Bank of Tokyo-Mitsubishi and Jibun Bank’s apps carry 3.5-star out of 5 ratings on Google’s app store.
“I don’t see any reason why the mobile banking sector won’t continue to grow,” said Bank of Tokyo-Mitsubishi’s Toeda. “But we still want customers to come to our branches.”
* With assistance from Jun Luo in Shanghai
BLOOMBERG