Japan net bank

Japan Net BankJapan’s First Internet-Only Bank

Our Group

Omer ShahzadMB-12-08

Zeshan AhmadMB-12-09

M. SaleemMB-12-23

Khizer BhuttaMB-12-33

Ali AsgharMB-12-34

Babar HussainMB-12-54

Points to be discussed:

• Aim

• Shareholders

• Business Principles

• Services

• Organizational Structure

• System at JNB

Points to be discussed:

• Targets

• Competitors

• Comparison with USA

• Alliances

• Scalability v/s Investment

• Conclusion

Overview

• Idea was given by YOSHIYUKI MIYAI

• The first internet-only bank of JAPAN

• Had no Physical Branch

• Established on September 26, 2000 with capital of ¥ 20 Billion

• Had 5 Directors and 1 President in Senior Management

• Had a Flexible, Flat and Team-like structure

• Mostly supervised by IT department staff

• Also became the official bank of Yahoo! Japan

President Profile

• Was the manager at Sakura Bank Headquarters

• Worked to plan mass-retail corporate business promotions and construction of DBMS at Sakura Bank

• Became the president of JNB on September 2000

• Was the youngest and lowest paid president in Japan Banking Industry

Focus of JNB

• Customer Satisfaction

• Convenient access to accounts

• Competitive rates

• Customization

• Secure transmission of information over internet

• Team-like structure and small workforce

• Aim to build up its own Brand name

Shareholders Profile

50%

10%

10%

10%

5%

5%5% 5%

Sakura Bank Summitomo Bank

Fujitsu Ltd. Nippon Life Insurance

Mitsui & Co. NTT East

NTTDoCoMo Inc. Tokyo Electric Power Co.


60%

10%

10%

5%

5%5% 5%

Sumitomo Mitsui Banking Corp.

Fujitsu Ltd.

Nippon Life Insurance

Mitsui & Co.

NTT East

NTTDoCoMo Inc.

Tokyo Electric Power Co.


Sumitomo Mitsui Banking Corp.

• Was formed by a merger between Sakura Bank & Sumitomo Bank

• Assets exceeding to $940 Billion

• Deposits amounting to $590 Billion

• Had 27 million accounts, 578 branches & 7600 ATMs

Fujitsu Limited

• Japan’s top PC maker company

• Also involved in making information systems and electronic components

• Had revenues of ¥5.48 trillion till 2001

• Had 517 consolidated subsidiaries in more than 100 countries


Nippon Life Insurance

• World’s 3rd largest insurance company

• Revenues ranged to $82 billion

• Was a partner with Deutsche Bank & SMBC

• Had almost 13 million clients

Mitsui & Co.

• Japan’s largest trading company

• Had a global network of 549 subsidiaries in Japan and Abroad

• Also owned 13.2% shares of DoCoMo Aol


NTT East Corp.

• A regional telephone company of Japan

• Hold by one of the largest telecommunication group NTT Corp.

• Had sales reaching app $98 billion

NTT DoCoMo Inc.

• Established by NTT Corp in 1991

• Had 32 million mobile phone subscribers

• Offered paging, maritime, in-flight phone services, wireless internet service

• Pioneer of 3G service in Japan

• By 2000, sales figures reached $30 billion


Tokyo Electric Power Co., Inc.

• World’s largest electric power company

• Had 26 million clients

• TEPCOs revenues reached $40 billion till March 2000

Organizational Structure President

Full-Time Staff

Planning Information Technology Sales

Part-Time Staff

Call Centre

• Flexible, Flat & Team-like structure

• Single physical office with no other branch

• Small & young workforce

• Low cost based

• Approximately 100 employees

System @ JNB

Information Systems

National Banking

Information System

Managerial Information

System

Multiple Channel

Customer Interface

Business Principles

Convenient

Competitive

Customized

Confidential

Services & Access

Services Provided

• Ordinary & term deposits

• Money transfers

• Small-size consumer loans

• Cash card & credit card

Access

• Dial-up

• Mail order

• Internet

• Telephone

• ATMs

• NTT DoCoMo’s i-mode mobile internet

Babar HussainMB-12-54

Industry Background

US Comparison

First Internet-only bank in the world was Security First Network Bank in USA

It failed to achieve its targets due to:

• Time consuming to use

• Poor customer service

• Massive advertisement fees

• Less Value-added services

Internet Banking

Advantages

• 24-7 availability

• Saves operating costs

• Reduces the inefficiencies

• Small workforce

• High interest rates

• No physical branches

• Can be accessed via mobile internet

Disadvantages

• Lack of brand recognition

• No physical presence

• Security & Privacy issues

• Time consuming

Banking in Japan

• Japanese have their assets deposited with private banks and postal savings accounts

• Low interest rates were offered on ordinary & term deposits(0.02% & 0.1% respectively)

• Japanese preferred to use cash on credit so the ATMs in Japan installed approximately were 130,000

• Online banking was also available with Sumitomo Bank & Sakura Bank but to some extent

Targets

• Acquire 1 million accounts till 2002

• ¥ 1 trillion of deposits

• ¥ 84 billion of loan balances

• Earn maximum profit by 2002

• Efficient modes of money transfer

• Installation of ATMs throughout Japan

Customers Profile of JNB

Below 20 20-29 30-39 40-49 50-59 60-69 Above 690%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Distribution in terms of Age

24%

32%

44%

Distribution in terms of Access Hour

0:00-9:00

9:00-17:00

17:00-24:00

75%

25%

Distribution in terms of Sex

Male Female

Competitors

Bricks-and-Mortar Banks

• Major competitor of JNB

• Variety of Value-added financial services

• Dominant use of ATMs

• Traditional banking culture

• Limited online banking services

Sony Bank

• An Internet-only bank established in mid of 2001

• Had a greater investment ¥37.5 billion

• Strategies were of lower workforce, higher interest rates and no physical branch

• Free ATMs in Japan

• Provided online shopping service

Competitors

IY Bank

• An internet-only bank which started working in May 2001

• It had an ATM based network with 9 city banks called BANCS

• It had linked-up ATMs with Sanwa Bank, Asahi Bank, Shizuoka Bank & Yokohama Bank

eBank

• An internet-only bank which started its operations in June 2001

• It provided small-value online purchases

• Easily accessible 24/7

Banks

JNB Sony Bank IY Bank eBank

Criteria

Starting date of Operations

October, 2000 June, 2001 May, 2001 June, 2001

Major Shareholders

SMBC 60%, Fujitsu Inc., 10%, Nippon Life Insurance 10%

Sony Corp., 80%, SMBC 16% IY Bank 51%, Seven-Eleven Japan 49%

Japan Telecom, Yamato Transport, Ericsson Holding International

Starting Capital ¥20 billion ¥37.5 billion ¥20.3 billion ¥4.4 billion

Starting Services Ordinary & Term deposit, Money transfer, Small-size consumer loans, Cash & Credit card

Deposits, Card loans, Bank payments

ATM-based services Settlement of payments

Business Targets 1 million accounts, ¥1 trillion deposits, ¥84 biillion of loan balance

¥500,000 billion in 3 years, ¥1 trillion in 5 years, customers: 400,000 in 3 years and 600,000 in 5 years

¥60 billion in a year, 10 million customers per day, profitability in 2 years

No information

Strategies higher rates, lower fees, small workforce, no physical branches

higher rates, lower fees, small workforce, no physical branches

24/7 ATMs, low cost operations, loan and card business focused

No information

Survey Results 6.3% 9.8% 16.8% 3.7%

M. SaleemMB-12-23

Strategic Issues

Alliances

• Yoshiyuki Miyai had a vision.“It is possible to start a bank without alliances. But it would have been difficult to expanding the business by leveraging the alliances’ customer bases.”

• JNB had two kind of alliances.1. Shareholding Alliances2. Non-shareholding Alliances

Scalability v/s Investment

• Scalability was a major concern with JNB• Customer behavior was rather unpredictable• Demand might surge dramatically

• In order to cope with sudden demand changes• Operations should be scalable to limits for above average• Need to make accurate demand forecasts• Need to build infrastructure

Schwab-A scalability case

• Online brokerage firms illustrated scalability problem in US

• Such market leader was Schwab

• Online customer assets were $418 billion till March 2000

• Schwab suffered 4 site crashes even after upgrading its systems in 1999

• In 2001 US economy slowed down and Schwab suffered 30% fall in its trading volume

• Schwab had to layoff its staff and to senior managers have to receive salary cuts

• Company spent $800 million to upgrade the systems and to better its business

• The company was caught in the dilemma of scalability versus investment

Conclusion

• Yoshiyuki Miyai was a man of vision & believed that success cannot be achieved in days

• He kept eye on IT systems and HR to respond to ups & downs in the market

• He has to make well use of the consolidated alliances

• JNB can become successful if it grasps opportunities and overcome all the obstacles

• JNB can become the 21st century winning model of Japan only if the company faces the rise & fall efficiently

Thank You!!!

Marketing

Japan net bank