What’s behind Rakuten’s fintech success in Japan?
Rakuten first made a name for itself with e-commerce — an industry that has grown alongside the very internet itself. Today, Rakuten offers some 70 different online and offline services in Japan, ranging from mobile coverage to drone deliveries.
In recent years, Rakuten has seen incredible growth in one industry in particular: fintech. Rakuten’s fintech offerings combine digital technology with payment services, investing, banking and more, and many of those services have risen to the top of their respective markets in Japan. But how did they get there?
One in five people in Japan hold a Rakuten Card*1
When Rakuten launched its first credit card offering, credit cards were not a very common payment method in cash-loving Japan — and it was a method that came with expensive annual fees. Rakuten Card shook up the industry by abolishing fees and showering shoppers with a generous serving of loyalty points with every purchase.
The credit card’s popularity only grew as Japan made its gradual shift towards a cashless economy. In 2021, Japan’s rate of cashless transactions reached 32.5% — up from under 20% in 2015.
“Japan’s rate of cashless payments is expanding, and Rakuten Card’s industry share has exceeded 20%*2,” says Rakuten Card’s Arshal Ameen. Ameen and his team have worked tirelessly to make their service an attractive one. As a result, Rakuten Card has enjoyed Japan’s highest satisfaction rate for 14 years running*3, according to the Japan Productivity Center.
The number of Rakuten Cards issued reached over 28 million (as of the end of 2022) and Rakuten Card’s gross transaction value (GTV) surpassed 18.2 trillion yen for 2022, an increase of 25.8% year-on-year.
“In order to meet the increasing volume of transactions, we are constantly improving our operations,” Ameen says. “Each new Rakuten Card member requires a variety of back-office operations, including credit scoring, authorizations, debt collection and responding to inquiries. We seek to maximize quantity and quality by improving operational efficiency, all while utilizing AI and other technologies.”
Young investors are flocking to Rakuten Securities
The rise of Rakuten Securities is a true testament to the power of the internet and tech-driven services. After launching as Japan’s first online-only brokerage service in 1999, the platform went on to become a pioneer of app-based trading with the creation of the iSPEED® app in 2010, which has since been downloaded some 8 million times (as of the end of 2022).
Today, Rakuten Securities — a relative newcomer in the grand scheme of securities trading — is one of the largest securities brokers in Japan in terms of account numbers, with over 8.6 million general securities accounts.
The ratio of trades on the platform made via the iSpeed app is also increasing year by year and Rakuten’s services seems to be particularly attractive to younger investors — under 40s made up over 40% of all users in 2021. The platform offers a wide range of financial products and is the undisputed king of foreign exchange trading, handling over 80% of all FX trades in Japan.
Rakuten Securities’ Cao Ting has big ideas for how the platform will embrace new technologies in the future and improve functionality for traders.
“We are improving every day. For example, we introduced the industry’s first algorithmic trading function for Japanese stocks. This function automatically places an order when a predefined condition is met, greatly expanding the potential scale of trades,” she explains. “We also introduced a function that allows users to manage and trade both Japanese and U.S. stocks on a single screen. This is also an industry first and has been very popular with our customers.”
A juggernaut of the QR payments industry: Rakuten Pay
If you ever go shopping in Japan, you won’t get far without seeing the ubiquitous Rakuten Pay logo. The Rakuten Pay app can be used at over six million locations (as of the end of October 2022) around Japan, including many of the country’s major supermarket and convenience store chains.
The service was one of the first to push app-based QR code payments, which eschew the need for special chips or terminals, allowing merchants of all sizes to implement cashless smartphone payments.
Through the app, users can not only make regular payments from their smartphones but also use their Rakuten Edy e-money and Rakuten Points. This includes points accumulated from shopping elsewhere or from using other Rakuten services, unleashing the full potential of the incredibly popular Rakuten Points program.
The app is also a highly effective tool for introducing new users to Rakuten’s greater ecosystem of online services. In fact, as many as one in four newcomers to the Rakuten Ecosystem arrive through Rakuten Pay.
The team behind Rakuten Pay has been proactive in improving functionality for the app, making it into a one-stop shop for many different Rakuten services.
“Last year, we released the capability of adding mini-apps within Rakuten Pay,” explains Paulo Fernando, who serves as Senior Executive Officer and General Manager at the Rakuten Payment company. “While payments remain central to our app, the mini-apps enable seamless access to new services such as Rakuten Pasha, coupons and point investment. I think this makes the shopping experience richer and more convenient.”
Fernando is also focused on keeping the app as agile as possible to enable the swift implementation of new features.
“Another important point is that our mini-apps use HTML technology, which enables very quick development. For example, the mini-app for a Ukraine donation event went from idea to launch in just one day! We believe that by linking other Rakuten Group services with Rakuten Pay, we’ll contribute to expanding our Ecosystem strategy and to increasing the value of each business in Rakuten Group.”
*1 Calculated by Rakuten Card based on the population by age group of the October 2021 Census and the number of valid Rakuten Card members as of January 2023. Statistically, 18-year-olds include high school students, so they are excluded from the calculation. Source: October 2021 Census (Statistics Bureau, Ministry of Internal Affairs and Communications)
*2 Source: Ministry of Economy, Trade and Industry, Specified Service Industry Statistics Survey, Credit Card Industry.
*3 Japanese Customer Satisfaction Index Survey 2022, Credit Card Industry.