Japan to revise law to help fintechs


The Financial Services Agency in Japan is looking to help non-financial companies tap into the fintech industry by creating a new legal framework.

The emergence of artificial intelligence (AI), big data and recent cybersecurity threats have left financial agencies and governments across Asia scratching their heads over how to best adapt and regulate an industry that is constantly developing. With fintech on an unstoppable up, the Financial Services Agency (FSA) in Tokyo will now create a framework for authorities to supervise IT companies that act as intermediaries between banks and customers.

The FSA – a subsidiary of the Japanese government began discussions on a regulation shift last week, with the group expected to determine the direction of the development of the new laws by the end of 2016. Following this, a proposal of a review of amendments will be shared. Within the overhaul, the FSA will aim to target the increasing number of intermediaries providing cash management services to the public, using smartphones as a communication and delivery platform.

Japan is yet to address these intermediaries in law or provide adequate legal protection for them. Equivalent services across much of Europe and the USA have the ability to issue remittance instructions to banks on the request of users, while the lack of a legal framework in Japan means that intermediaries operating with no protection may end up struggling to find footholds in the fintech sector.

Banks in Japan are not allowed to have more than a 5 per cent stake in an intermediary, with a revision to banking law also set to appear the rules. Unregulated intermediaries are popular with Japanese citizens, with Tokyo-based start-up Money Forward boasting a customer base of more than 3.5 million users.

The FSA will hand down findings for the new amendments at the beginning of 2017.