Special Interview 1
Interview with Minoru Niimura, Director of Hewlett-Packard Japan, Ltd.

By Japan SPOTLIGHT
The word FinTech was never heard a few years ago, but today all of us have heard about it. It isconsidered an integration of IT and finance. For example, mobile banking is now commonplace and thisinvolves financial transactions like payments, deposits, loans, etc. being done by a smartphone and notby a bank. Will banks be replaced by FinTech? This would mean a drastic change to our business cultureand economy. It would also mean a possibly significant expansion in new business opportunities infinance taking full advantage of IT. We had a chance to discuss these issues with Minoru Niimura, adistinguished IT businessman working for Hewlett-Packard Japan, Ltd. a Japanese subsidiary of the huge
IT multinational.

Introduction of Hewlett
Packard
JS: Hewlett Packard (HP) is wellknown as a global IT vendor.
However, my impression is thatyour principal business today
seems to be becoming service
oriented rather than hardware
supplier. What do you think about
the recent trend of your business?

that hardware products have becomecommodities. Thus, our business clients now
think there will be little difference amongproducts from all producers. In particular,
after the emergence of cloud computing they
are not sticking to any specific hardware in
their purchase of computers. Therefore, at
HPE we are now thinking about creating added
value by development of service operations aswell as technology to make a distinction
among all the hardware.

Niimura: At this moment, IT business has two
FinTech in Our Daily Lives
main streams. One is like a department store
JS: New financial services notbusiness selling all kinds of products andprovided by banks are now
services by integrating all kinds of businessavailable in Japan, such as Paypal
through M&A. The other is a business model
Minoru Niimura, Director of Hewlett-Packard
or “au wallet”, thanks to FinTech.
with the focus on specific types of business.
Japan, Ltd.
How far has FinTech penetrated
HP was split up last November into Hewlett
into daily life in Japan?
Packard Enterprise (HPE) engaged in enterprise operations and HP
Inc. engaged in PC and printing operations globally. We opted forNiimura: We often see news articles on FinTech today in popular
this in order to raise the speed of the decision-making process toJapanese journals, not only those for IT businessmen. There is moredeal with the two different market needs, the enterprise market andand more news on Japanese megabanks working seriously on
the consumer market. Meg Whitman, CEO of HPE, told us a long
FinTech business. For example, the news earlier this year that thetime ago that we should increase the weight of services and finallyBank of Tokyo-Mitsubishi-UFJ would issue its own virtual currency
announced in May 2016 that HPE would spin off its service
called “MUFG coin” in the autumn and start using it for settlingoperations in 2017. HP has adapted well to a system of responding
accounts attracted growing attention. Also, on Aug. 22, the Nikkei
to the market as quickly as possible by implementing effective
newspaper carried a front-page item that the Bank of Tokyoinvestment in specialized areas. Each spin-off company, though
Mitsubishi-UFJ and Hitachi, Ltd. would start an experiment for
separated into different specialties, is pursuing synergy among thesesettling accounts of electronic checks by using a blockchain in
different spin-offs.
Singapore.
I am in charge of the department that focuses on service
Looking at “settling accounts” transactions so far, since there areoperations in HPE relating to the industries of financial services,
so many entities involved in them they have never been done at highhealthcare and life science, communications, media andspeed. For example, in the case of settling accounts for stock
entertainment. It has often been pointed out over the past few years
46 Japan SPOTLIGHT • November / December 2016exchange transactions it has been believed it would take at least
three days. FinTech could make it happen more quickly. For the usersof FinTech, a quick transaction at a cheaper fee could be achieved byskipping all the existing procedures and using a totally different
route.
In Japan, we use credit cards less often than in the United Statesand Europe and an individual consumer uses a check much lessoften. In this regard, FinTech may not seem to have been making
much headway in our society. However, smartphones are widelyused and we can expect them to work as a medium for FinTech, sothat new services using the Internet could be born throughsmartphones and this could lead to transactions using virtual coinsand blockchains. I believe we will see more new services emerge
given the spread of smartphones in Japan, though at this moment
this area looks underdeveloped.
JS: How has FinTech become so deeply integrated
into our lives? We have had an IT revolution for two
decades and the landscape of our office life has
rapidly changed, but has this also affected the worldof finance by IT being used for settling accounts?
Niimura: Yes. I think reform of the workplace will need IT technology
to support it. For example, VDI (Virtual Desktop Infrastructure), thinclients and smartphones are technologies that have a common basis,so the fundamental IT supporting a wide range of services should beof a universal nature. We will see a variety of business models
depending upon new ideas or operations to be added to this basictechnology.
JS: I only heard about FinTech about one year ago.

How long has this term been used?

Niimura: It was about two or three years ago when IT businesspeople started talking about it. We had contact with companies
producing new solutions through our business, and in ourconversations they talked about IT and finance in London or Silicon
Valley. At that time such topics were not so related to our own
business, but it is amazing now that we feel so close to this issue.
The waves of FinTech have reached us so rapidly.

The FinTech Revolution
JS: It is often said that FinTech will change manythings in our world. What is most intriguing is itsimpact upon banks. Will the new financial services
provided by FinTech be competing against banks or
supplementing their functions?

settling accounts outside the banking network. The transaction feesin those venues would be much cheaper. However, the megabanks
should try to keep their existing clients even if they have to lower
their fees, since fees for settling accounts are their principal sourceof revenue. The megabanks are now actively working on theapplication of FinTech, such as virtual currencies, to their business.
It is also true that after the current revised banking law in Japan
related to FinTech passes the Diet, the restrictions on Japanese
megabanks taking a stake in IT companies with FinTech technology
will be loosened. They will be able to buy FinTech technology, while
they have so far been engaged in developing technology throughtheir own systems-engineering subsidiaries.
Each country has its own regulations on financial business, soJapanese banks are not particularly disadvantaged. The large
Japanese banks are now working hard on the application of FinTechto their business through their special project teams.
JS: Well, then perhaps banks will not disappear but

their transaction fee business will decline due to therise of FinTech.

Niimura: Yes. In other words, in order to maintain theircompetitiveness, high transaction fees will not work. But they could
maintain their profitability by increasing the number of transactions
and curbing unit labor costs.
JS: Blockchain seems to be a key technology in

FinTech. What does it look like?

Niimura: In order to access data in banks, we currently use acertification key. This is a way of confirming that the certificationregistered by the account holder is the same as the one preserved in
the bank’s data center. In the case of blockchain technology, theinformation is held in common among distributed computers as ablock. All the transactions done by yourself are copied by thecomputers and thus this information can be accessed by thosecomputers’ certification of the access code.
This system keeps the information distributed rather thancentralized. I believe that though blockchain technology still has
technical questions to be resolved, it could have a good possibility of
reducing the risks from computer hacking or other external threats.
Another merit would be that this system would not need apreliminary system for disaster recovery to enable the whole system
to be restored quickly after any malfunction caused by a disaster. So
we would not need to invest money in such a preliminary system tominimize difficulties caused by a disaster and thus countermeasures
to deal with such a temporary system malfunction would bechanged.

Niimura: As FinTech spreads, there will be many more venues forJapan SPOTLIGHT • November / December 201647

Special Interview 1company are gradually becoming more narrowly defined and therelated regulations are now increasing. I think this is inevitable andwe have to leave these policy decisions on regulations to eachnation’s government in accordance with their own economicsituation. We would need to have such regulations to prevent
infringements of public interest that could be caused by any
loopholes from the lack of regulations on new technology. We would
have to introduce regulations to eliminate concerns about security.
However, I am rather optimistic about this. Regulations would
certainly be a potential impediment to progress, but the technology
will eventually prevail. I believe that eventually FinTech will spread
globally, though it will take time to deal with such security concerns.
JS: If FinTech is spreading globally, then we would

Possible Demerits of FinTech
JS: Now I would like to ask you about the possible

demerits of FinTech. There will be concerns about
the leakage of client information, for example. How
do you think we can avoid this and maintain thesecurity of information?

Niimura: People in general may worry about the increased risk ofleakage of information as a variety of data will be preserved among
many venues in a diversified environment with blockchain
technology. However, what would most likely happen in this case isthat banks would maintain their current client information andbusiness operations, and thus the scope of diffusion of information
would be limited. The reputation of banks regarding security risks
would be enormous and they would maintain their data in as secure
an environment as possible. In addition, blockchain technology has
an archival record of access and the data handled by it cannot beeasily copied, and as such it is considered a secure technology.
JS: There must be new regulations to prevent theabusive use of virtual currencies, such as fundraising for terrorist groups or tax evasion. But theseregulations, if excessive, could discourage lesscostly transactions and damage the advantages ofFinTech. How do you think we could resolve thisissue while maintaining the merits of FinTech?

Niimura: It would be very difficult, I guess. Regulations could retard
the progress of FinTech. In Japan, as virtual currencies are beginningto be perceived as an effective currency, you must register yourcompany with the authorities as a company engaged in the virtual
currency business. The qualifications for becoming a registered48 Japan SPOTLIGHT • November / December 2016

need international harmonization of rules, sincedifferent rules among the nations could prevent
smooth business operations. Don’t you think so?
Niimura: Yes, I do. I think such harmonization of rules could
encourage global usage of FinTech.
JS: In order to achieve such international

standardization of rules, we would need aninternational organization equipped with expertiseon FinTech. Assuming that we cannot expect suchknowledge and capacity in any internationalorganization at this moment, I guess on thebusiness side you would need to exchange
information with other companies overseas andstart thinking about the best security policy for yourclients.

Niimura: At this moment, fortunately, we are happy to see many new
business ideas emerging not only from the exchange of information
among companies but also from our users as consumers. SoI believe we can get a variety of ideas through such exchanges of
information among clients as well as business firms. The greatest
merit of FinTech may be that its users are very diversified.
JS: For expansive use of new technology, would it

also be important to develop patents andstandards?

Niimura: Yes. Patents are crucial to the development of newtechnologies and standards would be very important in expanding
their usage. In electronic money, for example, Japan has its own
standard while other nations have theirs, and that would discourage
its expansive use globally.

FinTech as Source of Entrepreneurship
JS: The fusion of finance and IT, the basic concept ofFinTech, could create a variety of business models.
What kinds of new business do you think could becreated?

Niimura: IT can be applied to any business, possibly more so thaneven finance. Blockchain technology is a technology for universal
use and is connected with Big Data and the Internet of Things (IoT).
What kind of business models could be created by this would
depend on each nation’s access to public information. For example,
whether you can preserve data on health, such as personal histories
of illness or medical records, outside hospitals could create different
business opportunities.
As regulations on data preservation are modified and a greater freeflow of information is achieved, there would be many more new
business opportunities created among a wide range of sectors. With
information from smartmeters or wearable computers or personal
medical data, an insurance company could produce new insurance
products. With more connections with business sectors other thanfinancial, FinTech would have a wider use and thus enter into thearea of Big Data.
JS: So the manufacturing industry would become

more like the IT service industry?

Niimura: Yes. For example, a device maker, producing goods
applicable to IoT, could collect a driver’s information from a car.
Telecommunication technology could be used to concentrate thecollected information on a certain computer. And then, IT technology
could be used for analyzing the collected and concentrated Big Data.
If we can specify data on a certain individual, we could provide
specific financial services like insurance products by taking
advantage of his or her personal information. Through connecting
the information obtained by the manufacturing industry with a wide
range of other sectors, we would be able to create a new society
providing each individual with extremely convenient services. The
key to achieving it would be how to transform regulations, I believe.
JS: It is often said that we will need more decades to
see the impact of innovation in general on oureconomy. But I guess in the domain of IT innovation,
including Big Data or IoT, its impact upon theeconomy would be significantly quick. How rapidly
do you think what we call the data driven innovationof the “Fourth Industrial Revolution” will affect oureconomy?
Niimura: We cannot stick to the same ideas or concepts for morethan five years in this area. IT technology of five years ago would beconsidered obsolete. During the 1980s when Japan was in the midstof the “bubble economy”, IT business was knowledge-intensive andthe smart engineers working on it were in the spotlight. As all
sectors were using IT, it became a labor-intensive business. During
these past five years, IT business has undergone drastic innovation,
and we are now able to create new marketing to stimulate consumer
demand in accordance with social data now widely available on theInternet. Such an expansive spread of social data has never beenpossible before. Such a remarkably speedy change in the businesslandscape could raise concerns about how business regulations cankeep pace with it.
JS: There is also an argument that our economic

data would fail to grasp the full picture of suchspeedy innovation. What do you think of this?

Niimura: I am not an economist, so I am not quite sure about it.
However, it is true that whenever we have had a financial crisis inrecent years, a new business model supported by a new technology
has emerged. In this regard, we will see the quickest progress in thisarea in the future as well. Above all, banks also have strength inFinTech, since they have their existing clients’ data from their bankaccounts and in Japan in particular each individual has a large
amount of transactions linked to their accounts. In other words, theJapanese banks are focusing their business transactions on thedomestic retail business. In the future, I guess they will expand theirbusiness to the retail sector in Asia and raise the quality of theirservices for clients by new technology. This is another importantpiece of the picture of the FinTech innovation.
JS: My last question is about Japanese culture. TheJapanese are generally considered a risk-aversepeople rather than risk takers. I think we should takerisks in order to take full advantage of FinTech andachieve new business models. Do you think weJapanese should change our attitude towards risk?
Niimura: Yes, this could be true. Many IT business people aroundthe world are mostly happy to take risks to enjoy the fruits of a newtechnology. By contrast, Japanese IT business people including
myself are a bit reluctant to do so. We should understand that risktaking behavior could lead to outstanding business outcomes in thisarea. A deeper understanding of the possible benefits of FinTech
would lead to empowering the Japanese economy, I believe. I thinkthat megabanks’ involvement in FinTech in Japan could mitigate suchfears of risk and contribute greatly to the progress of FinTech.

Written with the cooperation of Naoko Sakai who is a freelance writer.

Japan SPOTLIGHT • November / December 201649