Dialogue 02

Dialogue 02
Financial Inclusion—The Essence of FinTech

Financial Inclusion—The Essence of FinTech
We arranged for a discussion between Masakazu Masujima, a leading authority on
FinTech, and President Aoi on the possibilities that will be unlocked by FinTech andfinancial inclusion at MARUI GROUP.

There are times when data alone will
not be enough to encourage someoneto commit. It is important to consult
with someone to get that final push.

Masakazu Masujima

Hiroshi Aoi

Partner, Mori Hamada & Matsumoto
Advisory Board Member,
MARUI GROUP CO., LTD.

President and Representative Director
Representative Executive Officer
MARUI GROUP CO., LTD.

Financial inclusion is the process ofcreating the data on which credit isbuilt together with customers.
Hiroshi Aoi

Masakazu Masujima

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Dialogue 02

Dialogue 02

Financial Inclusion—The Essence of FinTech

Financial Inclusion and Co-Creation     Aoi: “Financial inclusion is the essence of FinTech.”Hearing those words from you, Mr. Masujima, in the springof 2016 left a strong impression on me. Those words
awakened me to the fact that FinTech is the path MARUIGROUP should pursue given our focus on inclusion. I also
recall your mentioning that the financial crisis of 2008 led
to the pursuit of this financial inclusion.
Masujima: Whether a company is in finance or in someother business, it cannot succeed without the support of awide range of stakeholders. However, the type of financial
businesses of the past only offered limited options, forcing
consumers to choose from those available to them. This
lack of scope led to Wall Street being dominated by thegreed of such financial businesses, which began sacrificing the powerless for their own gain, pulling the trigger for
the financial crisis of 2008. From the aftermath of thefinancial crisis emerged people that sought to provide
financial services for those who had been excluded fromsuch services previously. At that point, the needs that werepresent in society were able to be sufficiently met by theresources available, creating what could, in an overarchingsense, be seen as the start of the financial inclusion trend.
Aoi: Prior to the financial crisis, there was a move to use
financial engineering to create frameworks that wouldenable subprime individuals to purchase homes. However,these frameworks were hollow and lacked substance, likea sandcastle, triggering the financial crisis as they crumbled. Conversely, FinTech is backed by solid technologies
and insight, giving it the necessary substance.

Masakazu Masujima
Partner, Mori Hamada & Matsumoto
Advisory Board Member, MARUI GROUP CO., LTD.

Mr. Masakazu Masujima graduated from the Faculty of Law at the University ofTokyo and from Columbia Law School. He has held positions at the Palo Alto officeof Wilson Sonsini Goodrich & Rosati P.C., in the Supervisory Bureau of theFinancial Services Agency, as a member of the Blockchain Study Group of theMinistry of Economy, Trade and Industry, and as a member of the Review
Committee for the Sharing Economy of the National Strategy Office of Information
and Communications Technology under the Cabinet Secretariat.

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Financial Inclusion—The Essence of FinTech

Masujima: You are exactly right. At that time, what people
called “financial technology” was, in fact, nothing morethan financial engineering and calculation. There was a
logical backing to these “technologies,” but not a practicalor real-world backing. Today, we have this backing in theform of data. The technologies of today enable us to constantly collect and monitor data.
Aoi: MARUI GROUP was founded in 1931. At that time,
our business involved selling furniture through monthly
installment payments, enabling younger generations topurchase these items on installment plans. When I think
about it now, it seems as though this business could beseen as promoting a type of financial inclusion.
Masujima: That was a period in which industry wasgrowing, meaning that individuals, particularly younger
generations who had just joined the workforce, could noteasily borrow money. At the same time, this was a period
in which various goods and commodities were becoming
available. The monthly installment payment system arose
as a means of providing these items to people who
wished to purchase them, but lacked the means. Thissystem could thus be seen as embodying the philosophyof what we now call financial inclusion.
Aoi: Konosuke Matsushita, founder of Panasonic
Corporation, spoke of what he called his “Tap Water
Philosophy.” Basically, this philosophy stated that if electronics could be created at low costs, people would
quickly come to use these products as readily as they use
tap water. This process would free housewives from thehassle of doing laundry. At the time, a quality washingmachine would be quite expensive. As such, it is said thatthe advent of installment payments and credit greatly
aided in normalizing the sale of these items. Knowledge ofMARUI GROUP’s contributions throughout history is amajor source of motivation for me.
Masujima: It is my understanding that, for example, whena young adult that has moved from the country to the city,
only living on a limited allowance from their parents, tries
to pay with a credit card, Marui sales staff may caution
them against overspending. In this, one can see thatMARUI GROUP is attentive to its customers’ needs in thetruest manner. I think it is spectacular how, rather thansimply viewing customers as a source of profit, theCompany has based its business on forging long-term
relationships with young adults.

We have been looking for ways to provide
services that help young adultsaccumulate assets in a manner that gives
them a clear vision of their future.
Hiroshi Aoi

Aoi: That attitude is an important part of MARUI GROUP’slegacy. Among the words left by our founder, perhaps myfavorite saying is that creditability should be built together
with customers, rather than assigned to customers. I wasmoved when I first heard these words. Finance based on
this idea of creating together is, with perhaps the exception of microfinance, almost nonexistent outside ofMARUI GROUP, whether you look at Japan or even theentire world.

Value Created by Combining Data     
Aoi: I find issue with the recent overemphasis of data.
There is no doubt a lot of data, and there are some issues
that can be resolved by analyzing big data using artificial
intelligence. However, this reliance on data can lead topeople being excluded from financial services. True inclusion is the process of creating data together, which equates
to building creditability together. This process is fundamentally different from that of making one-sided decisions
based purely on the data that has been collected.
Masujima: An interesting perspective can be taken withregard to data. This perspective relates to how data is notbound by the stereotypes that people impose on others.
For example, people tend to group others into categories,
such as “housewife” or “young businessman,” and makejudgments on this basis, despite the fact that each individual is actually quite different. Product data can only
give information on purchases made. Meanwhile, the full
spectrum of financial data and non-financial data can tell
us how the money to make a purchase was obtained,
whether or not the purchaser had sufficient money at thetime, and other facts. When both financial data and nonfinancial data are combined, it becomes easier to determine what recommendations should be made to
individual customers at a given time, and this is when data
exhibits its true value.

Concern for the Future among Young Adults     
Aoi: Awhile back, I was watching an interview with people
that had just reached adulthood in which they were asked
about their resolutions for that year, and the responses
were quite shocking. The first respondent said “cuttingback on spending”; the second replied “saving.” Currently,
around 70% of young adults have come to harbor concerns regarding money. Not knowing exactly how toaddress these concerns, they tend to turn to conservationand saving. However, conservation and saving alone are
not enough to alleviate such concerns or prepare for thefuture. In light of this situation, we have been looking forways to provide services that help young adults accumulate assets in a manner that gives them a clear vision of
their future. It is true that young adults may lack resources.
However, if they accumulate assets gradually, they shouldbe able to continue building upon their portfolios nomatter how the market may fluctuate. This is an area weplan to focus on going forward.
Masujima: By analyzing Google search results, I learned
that people tend to live the majority of their lives, fromtheir 20s to their 70s, worried about money. I suspect thisworry is a result of uncertainty for the future translating
into monetary concerns. For this reason, I see a need forservices that adapt to the circumstances of individual51Dialogue 02

Dialogue 02

Financial Inclusion—The Essence of FinTech

Financial Inclusion—The Essence of FinTech

New Yardstick of Value Created by
Virtual Currency

Any entity would be evaluated based on
the value it provides to society. This would
be the ultimate form of inclusion.
Masakazu Masujima

customers in real time. If a service could, for example,
analyze a customer’s current situation to project the patterns that their life may follow in the future, this service
could transform concern for money into hope for thefuture. The support for asset accumulation that you speakof is one service with this potential. The benefits of asset
accumulation include how it enables individuals to get aclearer vision of their future, thereby allowing them tolive more fully in the present. In addition, I think it ispossible to create services that entail working together
with a customer, perhaps a car lover, to help them findsupport for purchasing a car without bankrupting themselves and then providing post-purchase lifestyle advice
to this individual.

Co-Creation between Data and People     Aoi: The lifestyle advice you speak of refers to financial
advisory services, if I am not mistaken. We have a desire toprovide the younger generation with investment and asset
management services, but we first must overcome theobstacle of finding a way to effectively solicit these services
to such individuals. Jumping straight into investment may be
a little bit overwhelming for some. For this reason, I think it
would be simpler to ease these individuals into investment
by grabbing their attention through providing knowledge
about money or some other means of sparking their interest.
Masujima: Once a system has been developed, the costs
will not change if it is supplied to one person or to one
million people. In fact, it is better to provide this system to52

one million people as this will yield more accurate andvaluable data than offering it only to one. However, services cannot be provided by systems alone; it takes a
combination of systems and people. When faced with amajor decision, there are times when data alone will not
be enough to encourage someone to commit to one
option. In these cases, it is important to consult withsomeone and share information to get that final push to
make a decision.
Aoi: One particularly interesting tidbit of information
I learned when speaking with financial planner Aya Maeno
was how Ms. Maeno always begins by asking her clients
what exactly they want to accomplish. For example, if acertain customer is very fond of their pets, Ms. Maeno willadvise them on ways to cut back on spending that do not
detract from the funds they devote to their pets. In working to alleviate people’s concerns regarding money, Ms.
Maeno adopts an approach of helping them accomplish
their true goals and live the lives they desire.
Masujima: I think that this approach is the essence ofengagement. The same principle underlies MARUIGROUP’s credit operations. If you provide a service thatmakes it apparent to customers that they are moving
toward the future they desire, they will see no need to partways with this service.
Aoi: There are countless ways in which data can beutilized, and the forms in which data and human interactions can be combined are equally vast. Accordingly,
there is still a great deal of possibilities for us to explore
in this area.

     
Masujima: The yardstick for the value of a company isgenerally considered to be its stock price. However, somehave begun suggesting that this may not be the best
measure, and virtual currency is presenting the possibilityof a new yardstick. One form of value created by companies is social capital, and there is no guarantee that thistype of value will be accurately reflected in a company’s
stock price. Accordingly, if a financial instrument that iscapable of more accurately reflecting a company’s value
were to appear, there would be reason to consider usingthat instrument as the new yardstick.
Aoi: In the stock market of today, there is a great deal ofinterest in investment based on environmental, social, andgovernance concerns, and this trend itself is an indicationof the rising influence of external factors on companies.
Now, companies that are unable to effectively consider theinterests of wider ranges of stakeholders will not be able tosurvive over the medium-to-long term. This trend is anextension of what you just mentioned about new yardsticks for value, and is a representation of how people areincreasingly recognizing this as the path we must take.
Masujima: Virtual currency does not issue dividends,
and you will not become any richer just by being inpossession of it. However, if everyone possesses thiscurrency and desires to use it, the value of the currency
will go up. Here, we see the possibility for the Company
to create, say, “MARUI coins.” If the number of people inpossession of these coins rises, their value will increase
as will the assets of the people holding them. In thismanner, virtual currency can forge a connection withcoin-holders that is even closer than the connection
formed by making customers into shareholders. Myvision for virtual currency is this kind of link formed
through the financial service of coins.
Aoi: That is an amazing vision. This is the first time I haveheard someone speak of virtual currency as a tool forbuilding a sustainable system that will overcome theissues of capitalism to surpass this system. However,I suspect that not everyone involved with virtual currency
shares your vision.
Masujima: Many people simply see virtual currency as ameans of making money. Nonetheless, I believe that, if
this vision for virtual currency were to become a reality,
it would lead to the advent of a world in which anyentity, be it a nonprofit organization, an individual, or acompany, would be evaluated based on the value it
provides to society, and in which its ongoing successwill be contingent on this value. This would be the ultimate form of inclusion.

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