Mizuho: Co-creating the next-generation of digital banking
Image; Rex Features
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Mizuho: Co-creating the next-generation of digital banking

Charles Parisek — November 2017
Daisuke Yamada, chief digital innovation officer (CDIO) at Mizuho Bank, describes how the Japanese financial services giant is looking to new and existing tech partners to bring about transformational change right across its operations.

The rise of new financial services business models, enabled by such technologies as blockchain, AI, cloud and big data, is turning up the heat on the sector’s long-established players. But according to Daisuke Yamada, chief digital innovation officer and managing executive officer of both Mizuho Financial Group and Mizuho Bank, the traditional banking industry needs to appreciate that digital disruption is not a single event — it is here to stay, he says, and banks need to respond to the new imperative for continuous innovation.

“Is it a threat or an opportunity? My answer is that it is neither,” states Yamada. Fintech is a natural progression of technological development. Just as when people moved from horse and carriage to automobiles, he says, today’s customers not only accept the convenience of new applications such as online banking and mobile payments, they have come to expect a fast pace of innovation in the financial arena.
Daisuke Yamada, Mizuho Bank

But Yamada is looking at a much wider digital horizon than just retail banking. “We might pursue crowdfunding, social lending, clearance by blockchain, biometric authentication, microfinance, digital money, agritech and perhaps auto-banking,” he says. “Anything is possible.”

To nurture such goals, the financial services giant plans to forge a series of joint ventures and partnerships. In June, Mizuho joined forces with Silicon Valley-based venture capital company World Innovation Lab (WiL) to form Blue Lab, with Yamada taking on the roles of president and CEO in the new venture. Its mission, according to its founding statement, is as broad as it is ambitious: “The creation and commercialization of next-generation business models through fintech initiatives such as the creation of a global settlement platform, the development of software to automate operational tasks using AI and big data, and the optimization of supply chain management and trade finance through the commercialization of blockchain technology, as well as through IoT-related advancements.

“With new ventures, mistakes are the price of success. We can be more flexible, more creative.”

Mizuho  intends to run Blue Lab as a separate entity so the start-up embodies more of an experimental, entrepreneurial approach. “This way we can be more flexible, more creative,” says Yamada. “At a megabank like Mizuho, a single mistake can result in a massive loss, while with this kind of new venture mistakes are the price of success.”

Mizuho will also involve existing strategic technology partners in the venture, including global ICT company Fujitsu. According to Yamada, the venture’s collaboration with Fujitsu will help with:
•    A new clearance method using blockchain
•    Online biometric authentication using bio-identification
•    The automation of accounting processes 
•    Enhancing the customer experience using augmented reality.
Fintech across frontiers
Yamada singles out the potential of blockchain technology (the distributed digital ledger of economic transactions) in different industries as a way to replace many labor-intensive processes such as those used for cross-border clearance in export-import finance. He provides an illustration: “Let’s say a Brazilian company sells coffee beans to a Japanese trading company. The beans are first shipped to Japan by a transportation company. The shipment is insured by a Japanese insurance company. A bank then issues clearance of the deal. When all the paperwork is ready, the bank can finally clear the transaction. Currently, this is really complicated, with far too much paperwork. Blockchain allows clearance in one shot. There is a possibility to reduce a 20-day trading deal to a one-day transaction.”

The Mizuho executive also sees the increased adoption of biometrics in financial applications to increase the security of online transactions, most notably through the use of ocular or facial recognition technologies. This heightened security will allow complicated transactions involving large sums to be completed safely and quickly. And when combined with the information pool available from big data, financial institutions and even consumers will be able to launch sophisticated transactions from mobile devices.

“It’s time for banks to break the mold and discover this new world of digital disruption.”

On a more immediate level, Blue Lab has already teamed up with short-term accommodation marketplace Airbnb to offer a range of high-end service add-ons, from room-cleaning to festival access, to people staying at vacation rentals in Japan. At the same time, Mizuho plans to offer Japanese property owners and service providers various financing packages.

The conservative nature of banks seems almost at odds with the scale and rapidity of the changes that fintech will bring, says Yamada, but they cannot avoid the sector’s transformation — and that means embracing change. “We have legacy systems that have been in use for decades,” Yamada highlights. “It’s hard for us to say goodbye to such systems and to old processes but if we want to apply fintech to the daily business of banking, we have to adjust those systems and processes to the new technology, or replace them with brand new systems and processes.” And he poses the question: “Are we brave enough to do this?”

Disruptive changes are coming, says Yamada, and sooner rather than later. And the bank’s partnerships with technology companies — old and new — plus its accurate reading of trends, is a mark of that.

“When everybody carries a smartphone — essentially a high-performance computer — in his or her pocket, we have the infrastructure for fintech and new technologies for the financial industry already in place,” concludes Yamada. “This paves the way for new ways of doing things. For banks, it’s time to break the mold and discover this new world.”

• Daisuke Yamada was a keynote speaker at Fujitsu Forum 2017 in Tokyo (Portrait: copyright Mizuho Financial Group).

• Download an in-depth report on The Digital Transformation of Banking Services

First published November 2017
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