Nomura Real Estate and JR East jump into Japan's banking segment

Property developer Nomura Real Estate Holdings and East Japan Railway have joined a growing list of Japanese firms entering the banking business to expand their base of loyal customers.

These firms are partnering with existing banks, considering that it is easier to acquire a license as a bank agency business than to gain a banking license.

"Real estate brokering often ends with a single transaction," stated a representative at Nomura Real Estate Solutions, the property broker group company under Nomura Real Estate Holdings. "We seek to maintain medium- to long-term contact with clients."

Next month, Nomura Real Estate Solutions will roll out Nomu.com Neobank, an app that provides savings accounts, payment services and home loans for users. Partner SBI Sumishin Net Bank will provide the Banking as a Service (BaaS) platform for the venture.

Furthermore, Nomura Real Estate Solutions has teamed with Tokyo fintech startup Milize to develop a service that simulates future asset portfolio values. Due to be available around June, the suite of services would include suggestions for allocating assets. These offerings are expected to assist maintain the relationship between Nomura Real Estate Solutions and its clients.

East Japan Railway, the Tokyo-area train operator commonly known as JR East, will roll out JRE Bank next year using infrastructure provided by Rakuten Bank. JR East group company Viewcard will serve as the bank agency in charge of the new business.

JRE Bank would have an app, where users can save money and take out home loans while receiving reward points in return.

Last December, Japan's largest wireless carrier NTT Docomo launched "d smartbank," using MUFG Bank's BaaS platform. It provides savings account services where users receive reward points by paying Docomo phone bills using the d smartbank account, or by setting up paycheck direct deposits to the account.

These new businesses share the common thread of targeting the consumer market to establish long-term relationships with clients. Most of the new firms look to generate synergies that benefit the mainline operations and the group, more so than reap profits from the banking services.

Prior to revised legislation in 2006, the bank agency business was the exclusive domain of bank subsidiaries. Some non-financial companies, like the retailing giant Aeon, were able to acquire bank licenses and launch their own banking arms in the early 2000s, but those efforts took time.

Now the bank agency role is open to commercial entities, and in recent years, the new businesses have offered banking solutions and financing. Tie-ups with established banks have smoothed out entry into the banking business.

Since 2020, SBI Sumishin Net Bank has provided banking services to Japan Airlines, consumer electronics retailer Yamada Holdings, department store chain Takashimaya and others. Customer firms including those in the works already exceed 10, with plans to increase to 20 or more by the end of March 2025.

"Ultimately, we expect 50% of pretax profit to come from the BaaS business," stated SBI Sumishin President and CEO Noriaki Maruyama.

A growing number of banks are looking to expand their BaaS operations, including Rakuten Bank, MUFG Bank and Minna no Ginko, a subsidiary of Fukuoka Financial Group.

U.K.-based Juniper Research predicts the global BaaS market will raise to $38 billion in 2027, more than triple its size in 2022.

The number of non-financial entrants in the sector is increasing, but the extent to which such banking services lead to the opening of new accounts stays unknown. Some customers who already have multiple bank accounts may not want to add any more. Creating point or benefit systems linked to their main businesses will be vital if these new players are to set themselves apart.