Japanese fintech leader Smartpay first launched the next phase of digital consumer finance through open banking
Launch of Smartpay Bank Direct, Japanese first digital payment service that offers installments directly from users’ bank accounts
TOKYO, 26 December 2022 /PRNewswire/ — Japan-based fintech Smartpay has launched Smartpay Bank Direct, the country’s first digital consumer finance service that allows customers to pay for installment purchases online directly from their bank accounts. Smartpay Bank Direct emphasizes user security while delivering convenience for the consumer, through a network of 67 partner banks across Japan[1]. Smartpay is Japanese first digital consumer finance company to use Japanese open banking system.
Smartpay was founded in June 2021 of experienced industry professionals who previously held leadership roles at Instagram, Standard Chartered Bank, Facebook, Stripe, Adyen and Mastercard across Asia Pacificand Middle Eastand North Africa (MENA) regions. The founding team has worked in digital payments, banking and fintech which gives the company the right talent to transform the digital consumer landscape for users seeking reliable financial products and payment solutions. They also have experience working with regulators and central banks, which is essential for building a financial ecosystem.
While Japan is still the third richest country in the world, it has one of the highest credit cards penetration prices in Asiawith over 60% of transactions carried out in cash[2].
Smartpay’s application has been widely accepted by consumers and merchants who prefer beautiful uncomplicated digital payments, supporting the transformation of a cash-based society into a digital one. The company’s strategy was built in two phases. The first phase was focused on financial inclusion, and helping those without access to credit join the BNPL digital economy. It also solved the problem of cash usage and created a platform and an ecosystem to move towards a paperless payment system that would be more efficient.
Smartpay is entering the next phase of its digital consumer finance journey, which is focused on targeting middle and high income users and offering them smart financial solutions that are safe, convenient, fast and create real value for the entire ecosystem.
Smartpay’s founder and CEO Sam Ahmed said, “We believe we are driving digital consumer finance to the next stage of its maturity. ‘Buy now, pay later’ has had to grow up from the perspective of a business model, profitability and consumer value proposition.”
The company’s adaptive UX, accessible technology, eKYC (electronically know your customer), reliable security features and sound business model are built for users who need effective digital financial solutions, which will transform markets with similar conditions, high inflationary pressure on consumer psychographics and demographics.
High-income consumers who want to expand their monthly cash flow with smart, digital tools for purchasing cash flow, and who want to have better control over their monthly spending, have been most receptive to Smartpay’s digital solutions.
Its aspirational feel and product features appeal to the high-income segment that has disposable income and wants to adapt to smart digital UX brands. UX has been put together after much consideration, and its design features make consumers feel trusted and accepted for their unique individual characteristics, rather than being lumped into a mass-produced product that doesn’t differentiate between customers. By targeting this segment of society, Smartpay’s unit economics work well as these are low-risk, high-value customers with an average transaction value of USD 200, non-performing loans (NPL) of less than 1%, and who want to avoid a bad credit rating and non-payment of debt obligations. The monthly repeat rate for these consumers has already reached about 20%.
This combination of high-income users and high-value design makes Smartpay a premium fintech company. Smartpay’s founder and CEO Sam Ahmed said: “We knew we were on the right track when our key reseller, TRiCERA CEO Tai Iguchi, received feedback saying: “You are the Apple of digital consumer finance, your user experience is beautifully designed and makes the consumer feel trusted them. , and respect who they are. This is in a market where other consumer finance companies have made customers feel untrusted and undervalued.'”
While currently the focus is on JapanKSA and UAE markets, in the medium term Smartpay will look towards Singapore, South Korea, Taiwanand other markets in Southeast Asia and MENA. These markets all have the five common factors that are central to Smartpay’s business model:
- Specific consumer psychographics that include a technologically savvy population, smartphone and internet access, high disposable income, increased consumption and high levels of technological adaptation
- An economy undergoing a digital transformation
- Marketers who need help accelerating a successful digital transformation
- Legacy banks that have been disrupted by digital first solutions that have removed their relevance and limited access to important consumer data
- Authorities and regulators who want to work with established digital financial solutions that have existing global partnerships (proof of quality and security) and credible local partners (proof of local interests)
What sets Smartpay apart from other fintech companies is that it works with the existing legacy banks instead of against them. Established banks have been disrupted by financial digital transformation companies that have taken customers’ relevant details and data. These banks need help to recapture these consumers with payment innovation and high quality digital UX. Over the past decade, legacy banks have fallen behind the innovation curve in payments, often focusing on wealth management and insurance products aimed almost exclusively at high-net-worth individuals. However, payments represent the fundamental basis of a bank’s day-to-day relationship with the consumer.
When fintechs took over payments, they not only took away the transaction values, but also the critical data that had guided banks’ customer acquisition strategy for decades. Without this insight, the legacy banks had to rely on high acquisition costs for insurance and wealth management, which affected their profitability because they lacked the key relevant data to offer the right products and services at the right time. Smartpay is able to address this imbalance and seamlessly integrates with legacy banks to re-establish the relationship with the right customer through a beautifully designed digital UX.
The third side of this stable pyramid is the merchant. In high-growth e-commerce markets, sellers need help driving e-commerce revenue. In general, merchants have struggled with high drop-off rates at the checkout due to clunky and slow checkout at purchases, which does not help consumers with cash flow options. At a time when merchants need to increase their website revenue to survive financially, seeing high churn numbers is potentially disastrous, especially when considering high-value consumers with high average order values.
Finally, there are governments and regulators who want to help banks and merchants accelerate their digital transformation, but need high-quality technology companies that have existing global partnerships and global standard security to protect their consumers. Regulators want the older banking industry to also benefit from the digital transformation and move towards a cashless society.
Smartpay has spent three years analyzing the success of “buy now, pay later” in homogeneous markets and building systems that will be scalable and commercially sustainable. Its engineering and product teams have built the elements required for continued success in consumer finance. This insight includes finding the right consumer and connecting them with the most appropriate merchant. It has also focused on the legacy banks that needed help recovering payment and consumer data from high-income consumers and wanted help with digital transformation in a much faster time window than the four-year period they could deliver to. Finally, the appropriate authorities and regulators have been identified. These are the ones who need the technology, user experience and value propositions that will help the ecosystem succeed in a profitable, controlled system, as opposed to the boom-and-bust cycles that have adversely affected the industry.
There are clear signs that governments need help to fulfill their cashless society agenda and want to help their legacy banks regain some of their power and undergo digital transformation. However, these authorities will only want to work with companies that have designed, built and executed high-quality technology solutions, with global recognition from the key players in the ecosystem such as Adyen, Stripe and Shopify.
Smartpay has realized that the ideal customer is a high-income consumer who wants control over their monthly budgeting and wants to expand their monthly cash flow without paying fees and interest. These customers want to engage with a brand that is tailored to their use, rather than a one-size-fits-all approach that is for consumers who actually want to borrow money. Instead, Smartpay a brand designed for their income group, and designed for smart money management, versus “non-savings” money management.
Since its inception, Smartpay has attracted globally recognized strategic investors that include Global Founders Capital (Europe), Matrix Partners (Silicon Valley) and SMBC VC (Japan).
The plan is to build on this strong foundation and with the right technology and back office support, each market provides a better overall ROI due to shared costs and higher total return, a high tech business with low asset operation. Smartpay’s founder and CEO Sam Ahmed added, “We have started discussions with potential banking partners in other similar markets, such as KSA and Korea, to roll out our learnings and robust business model.”
Regarding the company’s business strategy and future plans, Smartpay’s founder and CEO Sam Ahmed said: “We are delighted to be the first in Japan to offer digital consumer finance services that support both credit cards and direct debit through a fully automated, one-click UX at the point of purchase. Our passion is to help consumers manage their cash flow in a smarter way, with a quick, safe and secure click. There are no additional fees or interest for consumers. Since the launch of Smartpay just over a year ago, which Japanese first BNPL credit card payment solution, we have continued to grow our partner ecosystem with new merchants and an expanding customer base with revenue growth of over 200% in the last three months. It is interesting that we have lifted the seller’s average order value by more than 30% in four different seller categories. We attract higher value consumers to the merchant through our eKYC process.
About Smartpay
Smartpay is a technology company that aims to improve monthly budget control and people’s financial well-being through smart solutions. We give people the right tools for their financial growth and freedom, by offering the first all-in-one payment experience and interest-free BNPL solution built to solve Japanese consumer payment problems and improve merchant conversion rates. For more information, please visit https://smartpay.co/about/
Media contact
MSL Japan (PR agency)
Yoshifumi Pal
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SOURCE Smartpay
