Case Study

Jibun Bank thrives without a branch network

By Research

Bank of Tokyo-Mitsubishi UFJ and local telco, KDDI, joined forces to create Jibun Bank, a mobile-only bank that has become the largest and most profitable mobile bank in Japan.

Jibun Bank stands out in a sea of mobile-integrated financial services. One of the differentiating factors of the bank from its inception in 2008 is the 50-50 joint venture between Bank of Tokyo-Mitsubishi UFJ (BTMU) and a mobile network operator, KDDI. Instead of competing BTMU and KDDI agreed it was more sensible to create a separate bank pursuing the complementary goals of the two different organisations.

“BTMU being a very traditional financial institution, is strong in the senior customer segment and may not be relevant to a younger group of people,” admits Makoto Shibata, Principal Analyst from the Digital Innovation Division of BTM. “We wanted to have a new offering to new potential customers, and these people tend to use mobile devices quite extensively”.

Meanwhile, KDDI sought to strengthen the integration and utilisation of mobile phones in the everyday lives of customers. To differentiate itself from competitors such as NTT DoCoMo and Softbank, KDDI pursued customer retention by offering a data-related, convenient financial service in the form of a bank.

A stand-alone entity

BTMU acknowledges that although its business has secured the older and corporate demographic who prefer traditional banking channels, its grip on the younger market segment seems weak. In response to the mobile trend and the emergence of “netbanks”, BTMU and KDDI formed Jibun Bank, which operates on mobile devices. Jibun Bank offers commercial banking services (ordinary and time deposits) as well as payment services (such as transfers). Payments are coursed through three channels: mobile, internet, and telephone (IVR/operator).

In its decision to spin off Jibun Bank, BTMU took into consideration the limitations posed by the scale and cross-integration of its own back-end systems, which gives less room and time to innovate. Thus, Jibun Bank has a different core banking system from its parent bank. Jibun Bank has more flexibility in developing new products and services. Its cost of operation is also much lower because it does not have a branch network, and has limited staff.

“BTMU has a huge core banking system. If we are to create something totally new within this framework, it would have slowed down the process of creating new offerings to our customers. We wanted to achieve a certain speed especially to penetrate the mobile user space, and we tried to come up with new services for these target customers fast enough to meet their expectations,” said Shibata.

Since the target consumers, Generation Y, do not consider bank branches as a practical mode of banking, Jibun Bank was created on their most important touchpoint: mobile phones. Taking advantage of the extensive network of KDDI, Jibun Bank initiated proactive online and offline marketing strategies such as advertisements on KDDI’s websites and product catalogues. It likewise offered incentives for using Jibun Bank products.

Merging mobile and financial expertise
Since its establishment in 2008, Jibun Bank has kept customers a priority. And in the rapidly evolving mobile space that is consistently threatened by the sophistication of malware, security remains at the core of its product development. KDDI takes care of updating the mobile-only bank with the latest technology as well as developing a customer-friendly user interface, while BTMU provides financial expertise in product development.

In June 2015, Jibun Bank introduced “Smartphone Authentication Service,” to prevent illegal money transfers via internet banking, through a reinforced security system equipped with transaction authentication function. The bank followed up in October 2015 with “automatic fixed-amount transfer service” wherein fixed amounts of funds from accounts
in other banks can be gathered monthly in one registration. This way, customers avoid time-consuming money transfers from one account to another.

In December 2015, Jibun Bank launched its “housing loan” service, the first in Japan to enable customers to complete all procedures, from application to generating
a contract, via the internet and within at least 10 days. The characteristics of this service are convenience and speed of procedures.

Most recently, the bank has also initiated “Jibun Bank toto” which integrates the popularity of sports promotion lottery such as “BIG” and “toto” in their app. Through this new feature, customers can purchase the tickets directly from the dedicated app.

Business impact
The bank accumulated more than 500,000 new customers on its first year. In 2015, the bank reported the highest number of mobile banking accounts in Japan—2 million—for a compound annual growth of 11.15% (Figure 1). 

Jibun Bank is steadily expanding its customer base

Since the start of its operations, Jibun Bank has aimed to target Generation Y, the main users generally of mobile phones. In just less than a decade, the bank has indeed established its relevance in the younger market, with 29% of its customer base is in their 30’s, 28% are in their 40’s and 20% are in their 20’s (Figure 2).

Jibun Bank has penetrated the younger segment

The surge in account openings also resulted to positive growth in deposits in 2015 to ¥747 billion ($6.8 billion); and asset size of ¥807 billion ($7.4 billion)(Figure 3). In fact, the deposit volume of Jibun Bank has grown to a size that is comparable to that of a mid-tier regional bank—all without the help of a branch footprint. Jibun Bank’s netbank peers have been operating since the early 2000s. In 2015, Jibun Bank’s asset volume surpassed that of the oldest internet bank, Japan Net Bank (Figure 4), showing the impressive expansion of Jibun Bank in less than a decade.

Deposits and assets of Jibun Bank have grown without the need for physical branches

Jibun Bank has caught up with established internet banks

Moreover, data on the share of login access by channel shows that Jibun Bank has kept its function and promise as a mobile only bank with 80% of its internet banking access is made through smart phone devices (Figure 5). This is notable as other net banks in Japan are primarily accessed from personal computers.

In its early days of launching new financial products and services, Jibun Bank’s average cost-to-income ratio was at 90%. Although this is high, Jibun Bank, as the first mobile-only bank in Japan, had reached profitability in just less than 5 years. Starting 2012, the bank has gradually exceeded the break-even point (Figure 6). Meanwhile, other internet banks in Japan have reported volatility in terms of performance despite being a mature market.

In terms of productivity, the bank is able to cater to its 2 million customer base with about 200 employees and through automated banking transactions. In 2015, the modest workforce was able to generate a revenue of ¥23,646 million ($218 million), resulting to a high revenue per employee, which exceeds that of the Mitsubishi UFJ Financial Group (MUFJ) and a bank from a mature market, as well as the established mobile-only Hello Bank! and online bank ING Direct (Figure 7).

Jibun Bank’s income has been steady over the years even in its growth stage

Jibun Bank overtakes other banks in mature markets in terms of productivity

The rise of mobile phone usage over the years has propelled banks to overhaul their traditional operations to accommodate new trends in customer behaviour and preferences. Although other banks have also launched their own mobile-only bank, such as Hello bank!, launched in 2013 by BNP Paribas; and although other banks have ventured into partnerships with mobile network operators such as Telenor Pakistan with Tameer Microfinance Bank to launch EasyPasia (2009), Jibun Bank remains as the only mobile bank that is backed by a 50-50 partnership between a bank and a mobile network operator.

In its feat of expanding its customer base and deposits in a short period of time, Jibun Bank has successfully shown that a bank that fits in the hand of its customer need not compromise on quality of services and functionality.

Categories: Banks We Like, Core Banking, Mobile Banking, Retail Banking, Technology & Operations
Keywords: Jibun Bank, BTMU, KDDI, mobile bank, NTT DoCoMo, Softbank, core banking, loans, Japan Net Bank,
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