FINOLAB: driving innovative startups in fintech
Before joining FINOLAB, Makoto Shibata, Head of FINOLAB, CCO at the business, had worked in banking and finance for many years. “I have spent almost 20 years in digital banking, digital innovation and financial services. I joined FINOLAB in April 2019 with the aim of leveraging my years of experience within the digital banking and innovation space to support startups and corporate members within FINOLAB,” says Shibata.
“When I started my career in the industry, online banking had just started. I have seen how online banking and mobile banking have evolved over the years, in particular how smartphones have changed the ways in which customers interact with their banks, and the ways in which new entrants into the sector look to penetrate the market and build relationships with their customers.”
Shibata describes FINOLAB as a fintech incubation office that supports 56 startups with 17 corporate members. “We not only support startups, but we try to connect those startups with corporate members, so that they can pursue their open innovation initiatives,” says Shibata. “I believe that we are unique because we are located in the heart of the financial district, making us very accessible for all, including large financial institutions, financial people and startups. FINOLAB was created in 2016, and has had the support of Dentsu Group, the biggest advertising group in Japan and Mitsubishi Estate, the biggest real estate company. “From these two groups, ISI Dentsu and Mitsubishi Estate have become our shareholders, they have made the investment for making FINOLAB sustainable to support startups and corporate members on a long term basis. So, while we are an independent public company, we are supported by two large companies.”
Currently within Japan, “the Fintech industry is growing”, states Shibata. “In 2017 fintech investments into startups in the nation was US$105mn, in 2018 it rose to US$542mn, which is about 1% of the global figures and it is continuing to grow. There is also a big appetite for these financial institutions to promote digital transformation, something which I believe we still have room to grow within Japan,” adds Shibata.
To drive this growth FINOLAB has been collaborating with startups and large financial institutions to accelerate innovation. “There are many disruptive initiatives happening within Japan at the moment. For example, there is a big drive towards a cashless economy, in which the government is promoting the use of digital transactions. FINOLAB supports these initiatives by partnering with startups who use cashless solutions, as well as working with institutions who are looking to collaborate with cashless startups. We also work as an enabler to promote disruptive initiatives within the financial industry.”
Since becoming independent, Shibata explains that the company has been adopting digital solutions from multiple startups to become the case study for startups to make their operations more efficient with their digital solutions. “For example, when it comes to identity management, accounting, payments or invoice management, we have been adopting these solutions from startups, and by constantly adapting these solutions we are trying to make our own operations a testbed for them. At the same time we maintain transparency to all startup members so that they can learn from what we have been using in our daily operations.”
Currently, FINOLAB has limited use cases of innovative technology, however some it uses include cloud and artificial intelligence (AI). “We learn from different cases within our community, for example we are using cloud, which we have partnered with Amazon Web Services, which provides consulting services to our startups. Meanwhile for AI, we have several startups within the community, we share ideas and experiences with our startups to apply big data and robotic process automation to other areas. We have access to major plays within these emerging trends and have been accumulating case studies within our ecosystem.”
Since its establishment, FINOLAB has helped startups to raise funds and provide them with a work environment. “As part of our support we provide office environments and facilities so that startups can come in and start their business. In addition to physical support, we connect startups with suppliers and professional advice. We have a mentor group called FINOVATORS, this group consists of lawyers, bankers, venture capitalists, ex government officials and technological experts to connect startups with different stakeholders.” One example of collaboration was between our strartup member CAULIS and our corporate member Seven Bank. They together collaborated with The Kansai Electric Power to implement "Fraud Detection for Account Opening Using Power Supply Information.”Since many fraudulent accounts are opened at banks using empty house address, they came up with the idea to use power supply data to judge whether the address used has a resident or not. The idea was developed, and they applied for the regulatory sandbox as it was not clear whether an electronic power company can provide information of individual households. And after testing in the sandbox, they were legally granted to implement. It was one of the early cases of making use of sandbox and FINOLAB and FINOVATORS supported their collaboration process.
Reflecting on the company’s operations, Shibata believes its biggest strengths are its geographical locations in the heart of the financial district that connects all of its stakeholders to the fintech industry. “I think our biggest success has been the recognition that FINOLAB has received within the FinTech industry in Tokyo.”