Rakuten has always been about disruption. Whether it’s the unique marketplace model it introduced to Japan in 1997, or the SoraRaku drone delivery service, the company has always sought innovative ways to change the status quo. One business that is making significant waves now is Rakuten Card, the group’s credit card business.

Rakuten Card was established in December 2001, just 15 years ago. In that time it has achieved the extraordinary feat of becoming the third largest credit card company in Japan by transaction value, according to the Nikkei Sangyo Shimbun. Along the way it’s also become a major pillar of the Rakuten group, with gross transaction volume (GTV) totaling ¥4.2 trillion in FY2015.

So, what is behind that success? In a recent interview with The Consumer Credit Monthly and at the Rakuten Investor Conference held in Tokyo earlier this month, Masayuki Hosaka, Representative Director, Vice Chairman of Rakuten, Inc. and president of Rakuten Card, provided some insights on the growth path of Rakuten Card.

Part of something bigger

Key to Rakuten Card’s success is its position within the Rakuten Ecosystem, a diverse collection of 70 internet services and more than 100 million members registered in Japan.

Hosaka, who joined the finance arm of Rakuten in December 2003 from Orix Credit Corporation, says that being part of a larger group has given Rakuten Card insights that other credit card companies simply do not have, with one good example being sensitivity to changes in patterns of internet usage. While internet-focused services like the Rakuten Ichiba e-commerce marketplace were quick to notice the shift from PCs to mobile devices, card industry players were slower. After observing Ichiba’s mobile strategy, Rakuten Card was able to follow their lead by quickly developing its own smartphone app for its online cardholder service Rakuten e-NAVI.

“If we were just a card company, we probably wouldn’t have felt the need as urgently as we did to respond to the shift in internet use from PCs to mobile,” Hosaka commented.

To a surprising extent, Japan remains a cash-based society, with only 18% of consumption settled by credit card in comparison with more than 50% in other major economies.

Japan remains a cash-reliant society, with only 18% of consumption settled by credit card.

Rakuten Card also benefits from more direct synergies with other group companies, such as the ability of card users to earn Rakuten points when using their cards for shopping on Rakuten Ichiba. Since January this year, Rakuten has been further bolstering this synergy with its Super Point Up (SPU) campaign, by which Rakuten Ichiba users earn even more points depending on how many other Rakuten services they use.

As Hosaka explained at Rakuten Investor Day, these programs are paying off. One metric that Rakuten tracks is how customers’ usage of Rakuten Ichiba changes when they sign up for a Rakuten Card. Naturally, usage of Rakuten Ichiba has tended to increase after a customer starts using a Rakuten Card – and now, after the introduction of the SPU campaign, the increase is at more than 200% on average. That is, when an existing Rakuten Ichiba user starts using a Rakuten Card, their usage of Ichiba more than doubles.

Rakuten Card is also driving growth by working with group companies to generate new synergies in related fields, such as settlements. To a surprising extent, Japan remains a cash-based society, with only 18% of consumption settled by credit card, according to the MM Research Institute. In the US, this figure is 54%, so there would appear to be great potential for growth. To tap this potential, Rakuten is now offering payment services not just for online merchants, but for offline merchants, too, with a system called Rakuten Smart Pay that allows payments by credit card to be made anywhere—via smartphone devices. The service essentially provides a low-cost means for off-line vendors to start accepting credit card payments – and it offers various avenues for synergy with other businesses such as Rakuten Delivery and Rakuten Travel for hotel bookings and Rakuten Bank for money transfers.

Quality through constant, steady effort

Still, despite the benefits stemming from synergies with Group companies, Hosaka insists there is another important factor behind Rakuten Card’s success, and that is diligence and effort.

He returned to the example of the Rakuten e-NAVI app. With the number of smartphone users growing rapidly, it became paramount to provide the very best possible experience on mobile platforms. Thus the development team poured over records of how the web-based smartphone site had been used, looking for areas where customers had tended to leave the site and making improvements accordingly. They also simplified the process for entering information into the app, making it possible to use with just one hand. “The coloring, letter size, order of item display, almost everything evolved on what felt like a daily basis,” Hosaka noted. “It is the years of improvements that have got us to where we are today.”

Rakuten Card’s success has surprised many in the fintech industry – not least of all those who have been disrupted by it. And while the company’s position within the Rakuten Group has clearly provided an advantage, it is far from the whole story. We look forward to seeing where the diligence and effort Hosaka refers to take the company next.


For more on Rakuten’s activities in the fintech sector, be sure to tune into the live-stream of the Rakuten FinTech Conference, which will be held in Tokyo on Sept. 28, and follow Rakuten.Today for live tweets and session reports.