British fintech giant Wise has achieved a significant milestone by becoming the first foreign financial company to gain direct access to Japan’s payment clearing network. This move marks a pivotal step for Wise, enabling the company to enhance its services in the Japanese remittance market, a sector traditionally dominated by local banks.
Wise’s direct access to Japan’s interbank payment system, known as the “Zengin” system, allows the fintech to process payments without the need for intermediary banks. This development is expected to reduce fees and shorten processing times for cross-border payments, potentially challenging established Japanese financial institutions, including megabanks such as Mitsubishi UFJ (8306.T) and smaller players like SBI Shinsei and Sony Bank.
Japan’s remittance market is notably one of the most expensive among G7 countries when it comes to cross-border payments. According to World Bank data from the first quarter of 2024, the average cost of sending $200 from Japan stands at 6.94%, the highest in the group. However, with Wise’s average global transaction fee at just 0.59%, the company’s new position within Japan’s payment infrastructure could significantly disrupt the local market by driving down fees.
In the financial year 2023, Japan saw a record 1.54 trillion yen ($10.3 billion) in remittances, representing a 14.4% increase over the previous year, according to Bank of Japan data. With the rising demand for remittance services, Wise’s entry could reshape the competitive landscape, making it easier and cheaper for both personal and business customers to send money internationally.
Wise’s recent achievements also underline its growing global presence. The company reported a 20% rise in cross-border volume in its most recent quarter. For the 2023 financial year, Wise moved approximately £120 billion, accounting for 5% of personal remittances and 1% of small and medium business remittances globally.
In Japan, Wise has seen a surge in its customer base, with a 35% increase in both personal and business users over the past financial year. The company’s ability to offer faster, cheaper international transfers is likely to appeal to an increasing number of Japanese consumers and businesses looking for alternatives to traditional banking channels.
As Wise continues to expand its footprint in the Asia-Pacific region, this breakthrough in Japan could signal a broader shift in the way cross-border payments are handled, with foreign fintech firms like Wise challenging traditional banking models.
Key Highlights:
- Wise is the first foreign financial company to gain direct access to Japan’s “Zengin” payment clearing system.
- This access enables Wise to bypass intermediary banks, reducing fees and speeding up cross-border transactions.
- Japan has the highest remittance fees among G7 countries, but Wise’s lower-cost model may change that.
- In 2023, Japan’s remittances hit a record high, reaching 1.54 trillion yen ($10.3 billion).
- Wise’s customer base in Japan grew by 35% in the past year, reflecting its growing influence in the remittance market.
With these developments, Wise is well-positioned to lead a transformation in the Japanese financial sector, as more customers seek faster and more affordable remittance services.