Fintech and Robo Advisors: Booming in Japan

by Eiichiro Yanagawa, August 29, 2016
Industry Trends
Asia-Pacific

Abstract

This report addresses trends in Fintech, with a focus on the burgeoning robo advisor industry and the unique attributes of Japan’s market. This report examines pioneering robo advisor efforts, technology, business areas ripe for development, and the outlook for the Fintech boom.

Four trends can be distilled in the global wealth management sector:

  • Retail services fragmentation.
  • The emergence of next-generation investors.
  • A shift to passive investing.
  • Digitalization.

Against this backdrop, it could be argued that the confluence of these trends made the emergence of automated investment programs largely inevitable.

At the same time, Japan differs from other markets in terms of the diversity of individual asset holdings, the retail investment environment, and the level of financial literacy. Despite this vastly different business environment there is immense potential — a blue ocean — for robo advisor services. This report introduces a spate of recent, innovative initiatives in Japan, identifying technology and business areas ripe for development and challenges that will require attention.

After reviewing the essential and universal functions of financial systems, this report considers the direction of Fintech today as well as its outlook.

“Robo advisor services will have many positive effects. On the demand side these include supplementing investor literacy and enhancing the accuracy and transparency of information for asset management products, such as risk information. On the supply side, these services will mitigate incentive problems that interfere with business and disrupt the domination of value chains by a few companies,” says Eiichiro Yanagawa, a senior analyst with Celent’s Asian Financial Services practice and author of the report.

This 34 page report contains 16 figures.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

 

Key Research Questions

1

Fintech Megatrends

4

 

The Significance of Fintech Defined

4

 

What Is All the Fuss About?

4

Fintech in Japan

7

 

Trends in 2015

7

 

Key Initiatives in Japan

7

Global Trends in Wealth Management

10

 

Automated Advice

10

Japan’s Wealth Management Market

14

The Future of Robo Advisor Services: Pioneering Unexplored Areas

17

 

Megabanks

17

 

Startups

18

 

Dedicated Online Securities Broker

20

 

Technology and New Business Frontiers

22

 

Sell Side Business Model

22

 

Retail Investor Appetite

24

 

Specter of Negative Interest Rates

25

The End Destination of the Fintech Boom

27

 

Financial System Functions: Continuity and Change

27

 

Modularization and Change

27

 

Robo Advisor Services: The Road Ahead

29

Leveraging Celent’s Expertise

33

 

Support for Financial Institutions

33

 

Support for Vendors

33

Related Celent Research

34

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