MARUI GROUP Co., Ltd.
MARUI IR DAY2021<Questions and Answers＞
BNPL and its impact on FinTech
Q. Could you explain a little bit more about Lifestyle app?
A. We launched it in April of this year, and we are in the process ofregistering people to use it. Apps that have been there for a long time,
but this can be easily look up questions, such much as how they spent
this month, their credit limit, how much they have left, when their next
payment date is, and how many points they have accumulated.
The EPOS Lifestyle App is an upgrade to this version, but it is basicallydesigned to go beyond the convenient search function and provide
services related to the overall use of customers’ money.
For example, I think I have explained the initiatives to maximize
EPOS Card payments in household finances in the past, but we candivide the contents of the customer’s consumption into monthly variable
expenses and fixed expenses. For example, we can see how much of theelectricity, utilities, rent, etc., that we are recommending now can be
paid by credit card, or not, and how much of the variable expenses,
which vary from month to month, are being used.
To put it another way, the more you use this EPOS Lifestyle App, themore it will serve as a simple household account book, and the moreconvenient it will be for you to use.
Furthermore, there is the personal version of funding called pinch
avoidance, a function to help you manage your money on a monthly
basis, and a function to eliminate the worry of overspending.
In addition to this, there is a little something called EPOS QUEST,
which is like a game, and there are various services in EPOS Card. For
example, it is difficult to tell customers about all the various services
that are available when there are about 50 services. Since customers
1can’t memorize all of these, we have prepared a UX that allows
customers to follow each of them one by one in this game format.
As a result, the customers can use a service that suits them which ismore convenient for you, for example, the EPOS ETC Card for thecustomer who drives a car. We are using this as a medium to connect
our customers with us, hoping that this will increase the number ofusers.
Q. You mentioned that you are going to enter the BNPL business again asa co-creative investment partner. I think that you have a certain amountof budget for investment, but how much do you plan to invest in BNPL?
A. There are about 30 startups that we have already invested in and arecollaborating with, we have been approached by a few of them to see if
we would be interested in starting a BNPL service. Therefore, we would
like to enter into new areas while examining whether it is feasible ornot.
Q. What is the scale of the total investment of these 30 companies now?
A. For startups alone, it’s about ¥13 billion.

Q. If you think about the use of BNPL payments on EC, the use by Gen Z,
and the use by the core customer base of the anime, I think there is ahigh possibility that BNPL will be used as a method of payment in the
metaverse.
There is a possibility that a payment and settlement system on the
metaverse will grow in Japan in the future. What do you think about
this?
A. The metaverse is a very interesting area, and it’s already very popularglobally in the game field, so it’s not too far-fetched to see commercecoming into this area, and some people are already doing it, so wewould really like to study it. It is said that cryptocurrencies will
naturally become the mainstay of transactions here, and I would like to
study this as well.
2However, in terms of time, while BNPL is already in front of our eyesin the form of EPOS BNPL service and collaboration with co-creative
investment partners, settlement and transactions using cryptocurrencies
in the metaverse are a little further away. We will continue to study thisissue.

Q. Are you going to enter the BNPL market in earnest?
I think that Affirm, Afterpay, and Paidy have all made significant
upfront investments to grow their businesses. I would like you to tell us
what kind of scale you have in mind.
A. In terms of scale, I think it is still difficult to decide what level we wantto achieve. I think we are at the stage of experimenting to see how far
we can go on our own, or how far we can go in promoting our products
through collaboration with digital native startups, especially in terms oftechnology. We would like to think about our next goals and strategies
by actually jumping into this BNPL, experimenting, competing, andcompeting with existing players and professional companies.

Q. Considering that your company’s credit system and a wide variety oftenants, is it correct to say that there are quite a few things that can beconverted?
A. Yes. I think it is. We have the best track record of providing credit toyoung customers among Japanese credit cards, and our brand is well
supported, so we believe that we can use this kind of know-how to ouradvantage. However, it is also true that there are differences in thebusiness laws and systems that are applied, so we should notunderestimate the importance of these factors, and we would like toproceed with credit while firmly controlling risks.

Q. You mentioned earlier that there are a lot of people who have credit3

cards and use BNPL, but BNPL is used in settlements in which unit
price is not very expensive. Is it possible to segregate credit cards formore expensive areas, or to focus EPOS Card on segments with aslightly higher price range?
A. I think that we can separate our business in such a way, and more
importantly, I think that our customers will use our products in such away.
For example, in the previous material, I showed you a pie chart thatshowed that 90% of BNPL users are credit card holders in the US, and
70% in Japan. The reason for the 20% difference is that in the US, credit
cards are mainly used for revolving payments, while in Japan, one-time
payment is the main method. Therefore, this credit card functions like a
BNPL in a sense through this one-time payment. I think this differenceis 20%.
So, in the case of our company, for example, we have been receiving
requests from young customers, students, and customers who don’t havecredit cards at anime events. They have been asking us if they can use
this kind of later payment, so we already know that there is a need for it.
So, for example, if we can get these customers to use EPOS services,
through EPOS Later Payment, we can recommend EPOS Cards to themwhen they turn 20 or graduate from school and become adults, and we
can also increase the population subject to new solicitation for EPOS
Card. In this sense, we believe that it will be beneficial for us to be
involved in BNPL.

Q. You will enter the BNPL market together with co-creative investment
partners, but is this a move to work together with multiple companies?
A. The Company has already decided to launch BNPL under the tentative.
This is about expanding the domain of EPOS as a FinTech.
In addition to this, the reason why we want to be proactive with our
co-creation partners is that many of our co-creation partners are young
people from Gen Zers and the millennium generation. These people are
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digital natives and have a very good sense of UX through DX, so I
would like to learn about the cutting edge of DX and UX bycollaborating with them and co-creating with them at BNPL.

Q.

Regarding later payment, I think there are some companies in Japanthat are ahead of this. Can you create a differentiating factor?
As for credit cards, I think that you have been very creative inproviding detailed services. Can you tell us if such differentiating
factors can be created?

A. I am not sure how far we can go to differentiate ourselves from theexisting BNPL in Japan. From our point of view, credit cards require acertain amount of time and procedures, including identification, tobecome a member. I think one of the greatest advantages of BNPL isthat you can use it without going through these procedures.
In addition, there is also the aspect that people of the age who do not
actually have credit cards are using or want to use it, so this is just an
expansion of the range of services that EPOS can provide beyond credit
cards. The other is to secure a population of people who are ready to
become members of the EPOS Card.

Q. It was said that there would be no impact on the acquisition of young
members, but I would like to confirm future threats in terms of market
expansion. If you have analyzed the general payment unit price of
BNPL and the affinity between the amount of money paid with yourcard at one time and that with BNPL, please let us know.
A.

We are aware that we have already covered to a great extent theservices provided by BNPL through the various services. So, as more
and more members become aware of this through the new EPOS app,the lifestyle app, and as this becomes more widespread, I believe theopportunities for those customers to use BNPL will decrease in turn.
Therefore, we would like you to think of our new entry, EPOS Later
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Payment, as an introduction to the EPOS Card, or a preliminary step, forcustomers who do not yet have EPOS Card.

Progress with Co-Creative Investment
Q. I think that you are now building a career that is very different from thebusiness career you originally had at MARUI GROUP. How do you
think this will help you grow in the future, or in your future careerdevelopment at MARUI GROUP?
A. (BASE co-creation team manager) Before I joined the Company, I had
a vague idea that I wanted to work in advertising and promotion, butwhen I joined the Company, I found that I was working in completely
different fields such as cards and online sites. On the contrary, I am very
happy that we are doing various things in the Group companies, and we
can also transfer to various places through job changes. In addition,
there are various conferences, seminars, and other programs that are
offered, and I think it’s really attractive that the Company allows us tochallenge ourselves in any way we want, so I think it really helps tobroaden our horizons.
A. (Surugaya co-creation team manager) In 2016, I was belonged in the
anime department, and I like anime and hobby contents. From there, I
was transferred to A-too, so I feel that I am working in a place withwhich I have a great affinity. Quite frankly, MARUI GROUP is very
“conscious” company. On the other hand, Surugaya has a “culture of
greed and a desire to earn profits”, and I think learning from both has
been a great growth for me. Mr. Sugiyama likes a challenge, and he isexpanding the scope of his business. The finance manager procuresbusiness funds, etc. I feel that the experience of seeing the management
up close is very useful for my future career, and I am learning a lot from
him.

Q.

MARUI GROUP is a so-called large company and BASE is still an
6early-stage company, so do you have any insights into the various
aspects of doing business with people in that area?
A. Employees of our company have experienced a variety of things, but I
think that employees of BASE have a lot of specialized knowledge. I
feel that BASE’s knowledge and schemes are very helpful to us everyday.

Q. Please tell us about any issues that Co-creative investment.
A.

In addition to the member of investment, the members of theco-creation team communicate with the investees in a multilayered
manner to enhance the corporate value of both parties. On the other
hand, only a few have been able to achieve their goals, if collaboration
does not proceed due to their own circumstances or if communication is
not very good. Therefore, I think it is very important to create a systemthat will allow us to work together well.
Secondly, we have been building up our know-how since 2016, and I
believe that we need to work on how much we can increase the depth ofhuman resources who are capable of this kind of co-creative investment
and startup investment. For example, we are currently focusing on
domestic companies, but in the area of FinTech, for example, there is apossibility that we may be able to invest in startups overseas in the
future, so I think it is very urgent to create a system that can withstandsuch investments.

Q. What was the hardest part, or what did you do that worked well? And
if you have any thoughts about how MARUI GROUP could do more inthis area, I would appreciate it if you could let me know.
A. (BASE co-creation team manager) First of all, I would like to mention
that the speed of the planning, settlement, and promotion of the project
was very fast. Many members in management positions are also in theteam and are communicating closely with the staff. In addition, with the7participation of people from various departments, we have been able togather members with expertise and expand our network both inside andoutside the Company, which has accelerated the speed of our efforts.
As for the difficulties and challenges, since this is a collaborative effort,
both companies must agree on the measures to be taken, so in a sense,
there are 2 hurdles to overcome. It is not easy to find a win-win
relationship with each other, but I think that is the most important part,so that is what we are focusing on.
Also, in terms of support from the Company, I think they support us
well.
A.

(Surugaya co-creation team manager) The reason why thecollaboration went so well was the existence of the co-creation team,and since I was seconded to the site, I was able to get involved in theteam, so I was able to convey A-too’s intentions and what we wanted todo, and the team was able to make it happen. I think that was a factor in
the success of the project.
On the other hand, one of the difficulties I encountered was that it wasvery difficult to create a win-win relationship with people outside of theco-creation team. It was difficult for them to understand where
Surugaya was making money and where Marui was making money, andto create this business scheme. The people in charge of MARUIGROUP tend to prioritize MARUI GROUP’s profits, and I thought itwould be my job as a seconded employee to translate this, so I put a lotof effort into it.
As I was seconded, I can say that MARUI GROUP’s support was very
generous, including regular interviews and support for seconded
employees, so I think it was substantial.

Q.

As you continue to expand your co-creation partnerships, I waswondering if you could give us some hints as to what you know or think
about how to increase the hit rate.

A. I think it is very important to see how much overlap there is between
8us. In the process of realizing these goals. there are cases where the 2parties will not be able to work out how to actually collaborate.
In the case of the ones that did not go so well, when we first took over,both companies decided what they wanted to do, but when the policies
of both companies changed, it was difficult to get things done. There isa sense of communication and unity. I think it is very important to work
as if we are a team rather than separate companies.

Q. I think it would be great if you could create a virtuous cycle scheme inwhich these amazing examples of successful co-creation are fed back to
the management of MARUI GROUP itself, and MARUI GROUP itself
changes. Please tell us your thoughts on this.
A.

First of all, we have the Medium-Team Management Visionary
Committee once a month. This is a conference for everyone, fromyoung people to seniors, to apply and participate in. Through thatmeeting, we are making an effort to inform our employees by sharing
the success stories of this co-creation.
In addition, the co-creation team currently consists of nearly 220
people. I think it is very important to increase the number of people whoare involved in this kind of work, so that they can bring it back to theirown business, their main business, and pass it on to the people aroundthem.
In that sense, all of us in the co-creation team are also working alongwith our main jobs, and because we are all working along with our main
jobs at the same time, we can bring our ideas back to our own
workplaces, which is something we are working hard to share within the
Company.

Dialogue with External Director
Q. About how to create barriers to co-creative investment and investment
for the future. I would like to know how you feel about the9differentiation of this co-creative investment and investment for the
future, from an outside perspective or talking about it with people fromMARUI GROUP.
A. In fact, as you know, as a person who is in the investment business, I
am painfully aware that the investment business is a business that isdifficult to turn into a barrier. There are investment opportunities out
there, and we want to take them. Therefore, I think it is very difficult tomake it a barrier business, and that is exactly the theme of thisco-creative investment and investment for the future.
However, unlike financial investors like us, I think the MARUIGROUP is also a business investor. It’s not just about raising financial
returns, but as a business partner. I think BASE and Surugaya are good
examples. Because MARUI GROUP has retail sales, BASE andSurugaya think of MARUI GROUP as a desirable partner as well. In
fact, by having them as tenants, MARUI GROUP believes that there
will be a considerable synergistic effect and business effect inattracting customers. I think that such things are still a barrier, and I
think they will continue to be.
Also, the investment business is still sourcing. Sourcing investment
opportunities is very important, and I think the question is how todifferentiate ourselves in this area. I think that the MARUI GROUP is
now recognized by young start-up entrepreneurs as a very desirable
business partner and a very desirable investor. I believe that this is theresult of the efforts of President Aoi and his team, and I also
understand that there is the possibility of barriers in sourcing and thepossibility of barriers unique to the MARUI GROUP when it comes toimproving value.

Q. What have you been able to do now that you are inside the Company?
I would really like to know what kind of specific things Mr. Nakagami
can do once you go inside and take a step inside.
A. For one thing, I believe that the amount of information has changed
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overwhelmingly. As you can see, the MARUI GROUP has always beenvery keen on disclosure, so we can see a lot of data from the outside.
However, when I am actually a member of the Board, the information
discussed in the Board and the information provided to the Board has
become much richer. Therefore, I believe that Misaki Capital has theability to analyze this information, and we are able to use this wealth of
information to conduct deeper research and analysis, and then provide
feedback. It has only been a short time since I took office, so I think I
still have a long way to go to figure out what exactly it is, but that is
how I see it.

Q. About the distance between External Directors and the Company.
Recently, there was a time when people were saying that external
directors should concentrate on monitoring and supervising. However,
MARUI GROUP’s idea is to focus more on increasing the value of
MARUI GROUP, including its external directors. What do you think is
the most appropriate distance?
A. (Yasunori Nakagami, External Director) As you mentioned, the worldis in the midst of a debate about what governance should be.
If Board 1.0 was a so-called management board or advisory board,
where supervision and execution were not really separated, then thecurrent monitoring board is Board 2.0, where supervision and execution
are separated. I think the idea of a Board 2.0, or monitoring board, isthat the Board is not involved in execution at all, but ultimately justmonitors the Company on a daily basis and selects and dismisses theBoard members when things go wrong. The argument that this is a bad
idea has already been advocated by the global authority of thegovernance world. I think that is exactly what the MARUI GROUP and
Mr. Aoi and I have agreed on, that this is how we should do it.
Rather than having a sense of distance, I would rather sweat and think
together, come up with strategies, and cope with the current
environment. In particular, the amount of information that the investor
has, the ability to conduct research and analysis, and the sense of11

urgency that the Company needs to really increase in value. It is myunderstanding that this time my inauguration is to incorporate these 3
elements into the Board to create a new Board 3.0.
A. (Hiroshi Aoi, CEO) Mr. Nakagami, he mentioned Board 3.0, but I’mlooking at almost the same thing from a different perspective.
Since the year before last, people around the world have been talking
about stakeholder capitalism, and we believe that stakeholder
management is the way to apply this concept to management.
First of all, we have defined our stakeholders as 6 stakeholders,
including future generations, and our mission is to create common value
through dialogue with all these stakeholders. Under such circumstances,
we have decided to invite stakeholders themselves to the Board of
Directors meetings, the core of management, to practice stakeholder
management. At the Board of Directors meetings, we engage indialogue with our shareholders, investors, and other stakeholders, andtry to expand the areas where our mutual profit and happiness overlap
and harmonize with each other as much as possible. For example, wehave been working on IR days, as well as one-on-one meetings, small
meetings, and various other opportunities to create value throughdialogue. In order to move forward and deepen this process, we havetaken a bold step and asked Mr. Nakagami, a representative of a major
shareholder, to join the Board of Directors as a representative of allshareholders.
For example, regarding BNPL, which I explained to you today, we
actually receive various questions and opinions from shareholders andinvestors. To them, we think hard and come up with the answer.
This is exactly a management strategy. I would like to continue to do
this at the Board of Directors meetings, and in dialogues with you as
well. By doing so, we will be able to help provide benefits andhappiness not only to our shareholders but also to other stakeholders.

Q.

I wonder if having a major shareholder as External Director willinterfere with your core business, such as investment activities. Please12

tell us about your position as an investor and your wall as External
Director of MARUI GROUP.
A. Theoretically, I think there are various disadvantages. However, Misaki
Capital invests in only about 10 companies, and they are very carefully
selected. And “Working Shareholders” is the basis of the investment
strategy, so by getting on the Board in this way, we can make more
impactful “Working Shareholders”. I think that the merit is stronger.
Theoretically, there could be disadvantages such as not being able toinvest in other collaborations or head-to-head competitors, but Misaki
Capital is very selective, so I don’t think that would be a concern. Also,
theoretically, a disadvantage is trade. If you are not on the Board, you
can trade freely, but if you are on the Board, your hands and feet are tied.
However, in fact, the Board 3.0 that I mentioned earlier has alreadybeen implemented in the US, and the legal framework is already inplace in the US. Including Information management, or setting
something like a window, and how to trade in the meantime, everything
has already been in place. When I joined the Board, I consulted with law
firms both in Japan and overseas, but basically, I was able to adjust the
US structure to Japan. Basically, I set up a proper structure, and reached
an agreement with the MARUI GROUP to work there, so everything isclear from a legal standpoint.

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