FinTech in Japan: Innovation driven by foreign founders and strategic alliances

Japan Today

15 hours ago

By John Amari
Japan's fintech industry is undergoing a transformative period, marked by significant acquisitions, evolving national priorities and the role of foreign founders.
The recent acquisition of MoneyTree by MUFG Bank in 2025 is testament to this shift, signaling a maturing ecosystem where collaboration between innovative startups and traditional financial institutions is becoming the norm.
This trend is led by entrepreneurs such as Russell Cummer, whose ventures, from fintech platform Paidy to blockchain initiative AltX Research, highlight the unique opportunities — and challenges — within this fast-growing and dynamic market.
Russell Cummer, co-founder, AltX Research (formerly, co-founder, Paidy)
The impact of foreign founders
The 'foreigner factor' is increasingly acknowledged in Japan's startup scene, including industries such as video games and the so-called gig economy. Cummer has been instrumental in shaping parts of Japan's fintech landscape.
Cummer's earlier venture, Paidy, a pioneer in the Buy Now, Pay Later (BNPL) space that was established in 2008, was acquired by PayPal for a reported $2.9 billion in 2021.
This acquisition, alongside MUFG's reported 10 billion yen purchase in 2025 of Moneytree, which also has foreign founders, underscores a growing trend of strategic investments and M&A exits between entrepreneurs from overseas and Japanese investors.
Importantly, it also suggests diversifying pathways for startups beyond traditional IPOs. According to Cummer, in the U.S., 80 percent of exits are M&A and 20 percent are IPOs, whereas in Japan, it has historically been the reverse.
Some Japan analysts argue that M&As, as opposed to IPOs, may offer founders the flexibility to move on to their next venture, thereby creating a generation of serial entrepreneurs that enrich the ecosystem.
Cummer notes that Paidy's success was rooted in addressing Japan's strong preference for cash, an important target for fintech entrepreneurs. He remembers that it was initially challenging to build trust with merchants because the startup offered a new payment method without a proven track record.
However, Japan Inc.'s openness to innovative, value-adding solutions proved advantageous in later stages. Paidy simplified online payments by offering an 'instant credit line' with just an email and phone number, mirroring the simplicity of daibiki (cash-on-delivery) but with the flexibility of a credit card.
Its growth from small fashion merchants to major partners like Amazon and Apple demonstrates how an innovative solution can gain traction by understanding and adapting to local consumer behavior.
Cummer has now embarked on a new endeavor, AltX Research, with a focus on sovereign blockchain and Web3 technologies. His new project aims to build 'solid foundational tech that should last decades' by combining 'Ethereum-level capabilities with strong data protection and sovereignty,' making institutions and regulators comfortable, he shares.
FINOLAB: a catalyst for collaboration
Finolab, a fintech community and space in the Otemachi district of Tokyo
Image: FINOLAB Inc
At the heart of Japan's evolving fintech ecosystem is Finolab, a fintech community and physical office space located in Tokyo's Otemachi financial district. Makoto Shibata, the head of Finolab and Chief Community Officer at INCJ, highlights Finolab's role in fostering interaction between its startup and corporate members as well as industry groups.
Shibata, with nearly 20 years of experience in digital banking at Mitsubishi UFJ Financial Group, notes that the collaboration between fintechs and financial institutions is maturing.
He says that large corporations have gained 'know-how on how to work effectively with startups,' moving past initial proofs-of-concept to genuine partnerships, as evidenced by recent deals like the Moneytree acquisition.
Strategic investments by Japanese megabank SMBC in MoneyForward, a financial services provider, WealthNavi, which provides robo-advisory services, and Upsider, which offers inter-company payment products, are revolutionizing the ecosystem here, he adds.
FinTech in Japan: opportunities and contrasts
Makoto Shibata, head of Finolab and Chief Community Officer, Innovation Network Corporation of Japan
Image: FINOLAB Inc
Shibata says Japan's fintech sector is driven by several national priorities -- the shift to a cashless society, encouraging a move from savings to investment and addressing the challenges of an aging population.
While the cashless payments space is becoming crowded, and investment tools are seeing growth, Shibata points to the aging society as an area with significant untapped potential for innovative ideas and services.
There's a pressing need for digital services that are truly user-friendly for seniors, especially given that many elderly individuals live alone and may lack family assistance for digital engagement. Financial institutions also face the challenge of assessing the financial decision-making capacity of older individuals.
The Japanese venture market, while growing, is still at a relatively early stage compared to its economic standing. However, Japanese banks are playing an increasingly active role, breaking their traditional conservative stereotype by participating as corporate venture capitalists, investors in venture capital firms and acquiring ventures directly.
Shibata notes that they are motivated by both financial returns and strategic benefits, such as client relationship management, expanding business lines through partnerships and complementing their fintech strategies. This is a contrast to the U.S., for example, where banks might have larger in-house tech teams that drive innovation internally.
Indeed, Japanese banks historically relied on outsourced IT, leading to smaller internal software developer teams compared to their U.S. counterparts, suggesting a limited bandwidth for launching new tech initiatives independently. Despite this, their involvement in domestic venture deals is strong, with bank participation accounting for a record 47 percent of deal value in 2023.
The landscape is also seeing the emergence of non-bank players in financial services, embodying the 'banking as a service' (BaaS) trend. Examples include railway companies like JR East launching JRE Bank with Rakuten, Keio Corporation creating Keio NeoBank, and even housing and power supply companies entering the financial services space.
Japan First: a future for transplanted entrepreneurs
Despite the challenges, the opportunities in Japan's fintech sector remains bright, especially for entrepreneurs willing to tackle unique local problems. The increasing openness of large Japanese corporations to collaborate with startups, coupled with the diversified exit options through M&A, creates a more favorable environment than ever before.
Cummer's current focus is on building blockchain technology for institutional and regulatory comfort. He is aiming to solve 'bigger, more structural problems' in his new project, AltX Research.
His optimism for the future of innovation in Japan is palpable, and this spirit of tackling complex, foundational issues is what will likely continue to drive the growth and evolution of the industry.
This long-term vision, coupled with the evolving and supportive hubs like Finolab and increasing corporate engagement, paints a promising picture for aspiring fintech entrepreneurs in Japan, including those from overseas, who can solve pressing local problems.
As of this writing, AltX Research had launched the 'Kaigan' testnet for Japan Smart Chain (JSC), a compliance-first, Ethereum-compatible blockchain to be validated by domestic industry leaders, the company shared. Alongside the testnet, AltX unveiled a preview of the Mizuhiki Suite, "a modular identity and compliance tool," marking a key step toward its 2026 mainnet launch.
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