Asia Banks Spotlight

Japan’s Minna Bank: Backcasting to create the bank of the future

Japan’s digital natives account for around 30 per cent of the country’s working-age population, but will reach more than 60 per cent in 2030. As part of a digital transformation strategy, Fukuoka Financial Group (FFG), Japan’s largest regional financial group, decided to build a future banking system from scratch.

As Japan’s ‘first digital bank’, Minna Bank’s services are designed to cater to the needs and sensibilities of digital natives – a segment traditionally underserved by the financial services industry.

Koji Yokota is the president of Minna Bank, the first digital bank in Japan. Since 1982, he has had a wealth of experience and achievements in management and executive positions at The Bank of Fukuoka and Fukuoka Financial Group for about 40 years.

Here Yokota explains to The Fintech Times about the decision to backcast from the future bank image to create Minna Bank – obtaining a new banking licence and building the latest technology system, operation and organisational culture on a zero basis to break the shackles of existing banks.

Koji Yokota is the President of Minna Bank
Koji Yokota is the president of Minna Bank

Amazon and Netflix didn’t win the digital revolution because they figured out how to sell goods and services on the internet. They won with data, connectivity and customer experience.

Non-financial services companies are wanting to seamlessly weave financial services into their customer experiences. For companies like Walmart that are pushing the boundaries of digital transformation, this is not a simple desire but an inevitability.

Banks that can forge alliances with such companies to unleash the value in their data, provide flexible connectivity, and co-develop applications to deliver superior customer experiences will be the winners of the digital banking revolution.

Shifts in customer behaviour

Millennials, Gen Z, Digital Natives. The expectation for digital experiences is gracefully delivered hyper-personalized authentic value. No tolerance for friction or fluff. Welcome to the age of ‘digital-first’.

Japan’s digital natives currently comprise a third of the working-age population and will double to more than 60 per cent by 2030. More than 80 per cent say their banking experiences are inferior to that of other industries. Losing the hearts of digital natives means losing the customer base.

The bank of the future will be an integral part of daily life, transparently delivering financial services as digital experiences. The winners will harness the power of data to deliver timely insights and recommendations. The losers’ apps will simply be uninstalled.

Competencies of the bank of the future

Design, data analytics, marketing, and application development will be the primary skillset of the bank of the future. Agile development and DevOps, cloud infrastructure, flexible APIs, data analytics and AI will constitute the technology platform. An agile, resilient, and innovative organisational culture will be instrumental to continuously deliver the best customer experiences.

Japanese core banking systems

Japanese banks have built the most robust, accurate, and redundant core banking systems in the world. The downside of these systems is their rigidity and high cost. Additionally, Japanese regional banks have consolidated and outsourced the development and operation of their systems to major system integrators, resulting in no retention of IP or expertise in-house.

Bringing these systems in-house, migrating them to the cloud, then digitally transforming their operations and customer experiences would probably take a decade, give or take a few years – far too long to stay relevant in these turbulent times.

A two-pronged approach to digital transformation

Fukuoka Financial Group is composed of three regional banks with more than 100 years of history, ¥27.5trillion in assets, a mainframe core banking system and more than 400 subsystems, five million consumer and 300,000 business customers, more than 400 branches with 8000 employees. The digital transformation plan for this tried and true banking institution is to spend the required time and diligence to get it right the first time.

Conversely, Minna Bank is the bank of the future, designed using a backcasting approach. With the benefit of having no legacy baggage, Minna Bank built its bleeding-edge systems, operations, and organisational culture from the ground up, and acquired a banking licence in a mere year and nine months.

The digital bank developed from scratch

Commercial off-the-shelf software tends to include much unnecessary functionality yet lacks some critical functionality. Its black-box source code forces vendor lock-in. This was not the answer for Minna Bank.

We chose to partner with Accenture. It had the technical expertise to create a core banking system on a microservices architecture – a first for a Japanese bank. It was open to joint development, allowing us to retain the source code and development expertise in-house. Automated operation, a flexible API architecture, all running on the cloud was a perfect fit for our vision of the first Japanese digital bank.

Our strategy was to take a lean startup approach. In order to quickly iterate and scale, going full cloud was the only viable approach. We chose to partner with Google Cloud for our core banking system as BigQuery and Cloud Spanner provided unique functionality to operate the bank safely and efficiently without compromising our focus on data, connectivity, and customer experience.  For our other systems, we took a multi-cloud approach leveraging AWS, Azure and Oracle.

The launch of Minna Bank

Minna Bank’s services are delivered exclusively and entirely on smartphones, with a unique design language, minimalist functionality and services, and a modern app with a frictionless user interface. It recorded 150,000 downloads of its smartphone app and 70,000 new accounts opened in just 40 days from launch. It is well received by its target audience of digital natives.

Additionally, Minna Bank has reached agreements with two companies as its banking-as-a-service partner. Minna Bank’s mission is to ‘deliver valuable connections to everyone’. As Japan’s first digital bank, Minna Bank is redefining the banking industry and setting the standard for the bank of the future.


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