FinTech Business

Structure

FinTech Business with Annual Growth
Rates of 17%
Transactions in MARUI GROUP’s FinTech business havecontinued to grow at an average rate of 17% per year, well
above the average of 7% for the credit card industry.
Previously, we offered an in-house card that was only
usable at MARUI GROUP stores, but everything changed
when we received a direct license from Visa Worldwide

Structure

FinTech BusinessJapan Co., Ltd., allowing us to begin offering the EPOS
card, a multipurpose card that is usable anywhere in theworld. Since its launch in 2006, the EPOS card has contributed to ongoing growth in card shopping transactions,driving the growth of not only the FinTech business but
also of MARUI GROUP as a whole.

Transactions in MARUI GROUP’s FinTech Business

Perspective of Inclusion

POINT 1

Cardholder Base Consisting Largely of Youths andYoung Adults and Generating High Profitability
We set low credit limits for new applicants, making iteasier for students, minors, and other individuals whose
income will only start growing in the future to receive
credit cards. As a result, for approximately 30%*1 of ourcardholder base, the EPOS card was their first evercredit card. In addition, we encourage cardholders to
upgrade to Gold cards, which feature no annual fees,
based on their usage frequency and amounts.
Approximately 25% of cardholders currently carry Goldor Platinum cards. Moreover, Gold cardholders tend tomaintain consistently high rates of using revolving andinstallment payments while making transactions in larger
amounts, contributing to higher earnings.

Cardholders by Age
EPOS Card■ Age 39 and below ■ Age 40 and above Industry*2■ Age 39 and below ■ Age 40 and above 

EPOS Card

4897

GOOD
THRU
有効期限

On-the-Spot, In-Store Issuance Made Possible by
IT-Powered Operations

MONTH / YEAREPOS cardholders

6.36 million

Card shopping­transactions outside ofMarui stores

Card shopping­transactions at
Marui stores¥354.9 billion

Cash advancetransactions
Services,
IT, etc.
FY200738

System management and development at MARUI GROUP
is handled by Group company M & C SYSTEMS CO., LTD.
This company develops over 100 systems a year and iscapable of delivering speedy service and installing cuttingedge technologies. Thanks to systems developed by thiscompany, we are able to issue EPOS cards on the spotusing store tablets in as little as 20 minutes, a world
record. In fact, the EPOS card is an IC-chip-equipped Visa
card to be issued in this manner. By enabling customers toreceive their EPOS card on the spot and use it immediately, we make it more likely that their EPOS card will
become their main card, thereby realizing higher rates ofactive card users.

POINT 34.03 million

FY2008FY2009FY2010FY2011FY2012FY2013

FY2014FY2015FY2016FY201731%
69%■ Male ■ Female 

POINT 2
Total transactions

Unique Collaboration Scheme Supporting
Nationwide Expansion
As part of our efforts to expand our cardholder base, we
issue collaboration cards together with partner facilities andcompanies from other industries. We establish EPOS card
application centers as tenants at partner facilities, whichallows us to position application centers across Japan.
Furthermore, although standard collaboration cards only
grant cardholders access to the benefits of the one partnerthat corresponds to their card, EPOS collaboration cards
allow holders to use the benefits of all partners with justone card. This unique scheme is beneficial for customers
and collaboration partners as well as for MARUI GROUP.

26%
74%

Cardholders by Gender*1 Source: Epos Card Co., Ltd.

¥1,723.3 billion

52%
48%

Industry*2

51%
49%

■ Male ■ Female *2 Source: Consumer Credit Statistics from Japan (FY2016), Japan Consumer
Credit Association

NEWS

Receipt of 16th Porter Prize by MARUI GROUP’s
Credit Card Services Business
MARUI GROUP’s credit
card services businesshas a long history datingback to its founding andthe installment payments offered then thatgained additional depth
when the Company
issued Japan’s first credit card in 1960. This business was awarded the16th Porter Prize. The rationale for this selection included a high evaluationof factors such as how we ensure the convenience of credit card issuance inrecognition of our cards’ position in supporting retail, how our cards arelargely held by customers under the age of 40 due to our policy of building
creditability together with customers, and the large ratio of revolving
payment usage.
www.porterprize.org/english/pastwinner/

About the Porter Prize
The Porter Prize is an award that was created in July 2001 to bestow
recognition on Japanese companies that have achieved and maintained
superior profitability in a particular industry by implementing uniquestrategies based on innovations in products, processes, and ways ofmanaging. The name of the award is derived from Professor Michael E.
Porter of Harvard University.

39

FinTech Business

Structure

FinTech Business

Financial Services in Our Daily LivesMARUI GROUP only provides financial services, such as payment and borrowing services, through its credit cards.
In the future, however, the Company will strive to expand its offerings to include services for saving, increasing, andlending money as well as for encouraging others and preparing for contingencies. We will engage in open innovation
activities with venture and other FinTech companies to develop such services in various fields.

Structure

Perspective of Inclusion

Pay 
Easy and Smooth Payment
In March 2017, it became
possible to use Apple Pay
with all EPOS cards. EPOS
cardholders are now able toregister their card with their iPhone or Apple Watch, a simple
process that allows for smooth payments at convenience
stores and other locations.

Learn Money Seminars for EPOS Cardholders
We hold Money Seminars for EPOS cardholders conducted by financial planners. Approximately 80% of theindividuals that apply for these seminars are in their 30s
or younger, verifying the high level of interest in financial
services among young adults.

Encourage 

Learn
Lend

Encourage

Increase

DonatePlatform

Trial Introduction of Bitcoin Virtual Currency
In August 2017, we introduced, on a trial basis, aservice at Shinjuku Marui
Annex that allows payments
to be conducted using the bitcoin virtual currency. The
decision to test this service was based on the April 2017
revision to the Payment Services Act as well as the rapid
rise in individuals in possession of bitcoins in Japan. The
service itself used the bitFlyer wallet smartphone application provided by bitFlyer, Inc., Japan’s largest bitcoin broker.

Donate 
Save

PrepareConserve

Borrow
Pay

Employee Comment

A Card Usable by All Customers When and Where They Need It

Hironobu Mamuro
Credit Management Department
Epos Card Co., Ltd.

40

In 2006, after receiving a direct license from Visa Worldwide Japan Co., Ltd., we began issuing EPOS cards,
the world’s first IC-chip-equipped Visa card to be issued on the spot in stores (system is patent pending).
When the Retailing business began developing stores to cater to customers of all ages, we followed suit bystarting up a Groupwide project pertaining to credit cards. Through this project, discussions regarding theideal form of our credit card were carried out over the course of a year. The conclusion we reached was that
our credit card should be a card that is usable by all customers when and where they need it. We thus
decided to transition from our previous in-house credit card to a multipurpose credit card. On-the-spot,
in-store issuance of an IC-chip-equipped credit card was an unprecedented feat, even for Visa, and thiscompany’s high security standards made negotiating for this privilege difficult. Luckily, MARUI GROUP had
all of its system development, information security management, and card issuance procedures conducted
through a Group company, which enabled us to tackle this challenge through a concerted Groupwide effort.
Eventually, we succeeded in receiving approval from Visa thanks to this strength.

Cards Designed by Differently Abled Artists
We held a card designcontest for differently
abled artists. Two of thesubmissions were
Shining Life
Colorful Orange
Art by Ken Tamura
Art by Yuko Miura
selected via customer
vote and then transformed into actual cards in June 2017.
The issuing fee for a card with one of these designs is ¥500.
All of this amount is donated to SHOUGAISHA JIRITSU
SUISHIN KIKOU ASSOCIATION, an organization that supports the independence of differently abled individuals.
Donations through EPOS Points
MARUI GROUP has included a donation option on the listof EPOS point exchange options, providing an outlet for
cardholders who wish to contribute to society. Wellmeaning cardholders can choose from among 14 donation targets that have been sorted into four categories:
support for children’s education through UNICEF, humanitarian and refugee aid, environmental and regional support, and support for differently abled individuals.

Monthly Rent Advanced-Payment
Rent Guarantee Service
The ROOM iD advanced-payment rent guarantee service
bundles advanced payment and guarantee services for
renters. This service eliminates the need for renters to
identify a guarantor when moving into an apartment,
which has become increasingly more difficult due to thedeclining birthrate and aging population.
Communication of Anime Content to the WorldMARUI GROUP established the Anime Business
Department in April 2016 to spearhead efforts to communicate anime content to the world. Anime is an art form
Japan prides itself on and is said to have a market value of¥12 trillion on an annual basis. The department engages
in collaborative initiatives that increase the value of anime
works and creates EPOS cards with original animeinspired designs, much to the delight of fans.

Otomate EPOS CARD

Capcom EPOS CARD

Gintama EPOS CARD©IDEA FACTORY Co., Ltd. /DESIGN FACTORY INC.

©CAPCOM CO., LTD.
ALL RIGHTS RESERVED.

©Hideaki Sorachi / SHUEISHA /TV TOKYO / DENTSU / BNP / Aniplex

Employee Comment

Yoshiki Murabayashi
Anime Business Department
MARUI GROUP CO., LTD.

The Gintama EPOS CARD wasissued following MARUI GROUP’s
participation in the production
committee for the live action
Gintama movie. This card proved
immensely popular, with more than
10,000 cards being issued in only
two months. I am proud to knowthat the card and store promotions
I carried out based on my experience at Epos Card helped make
Gintama an even greater hit.

41

FinTech Business

Perspective of Inclusion

FinTech Business

Financial Inclusion of All Customers
MARUI GROUP’s vision for financial inclusion is to provide financial services that can enrich the lives ofyounger generations and everyone else. This vision shares the same perspective as a core concept of the United
Nations Sustainable Development Goals—the idea that no one will be left behind.

Services for Younger Generations and Everyone ElseIn the past, financial services have primarily been for thewealthy. The concept of FinTech seeks to break awayfrom this tradition by providing financial services thatcan be used by everyone, regardless of their income orage. MARUI GROUP sees its mission as being topromote financial inclusion by supplying financial
services to everyone. Accordingly, we strive to provide
financial services that enrich the lifestyles of everyone,
particularly the youths and young adults for whom
existing financial services lie out of reach.

Structure

Perspective of Inclusion

Concept of a Prosperous Society

MARUI GROUP’s Vision of Inclusion

The impetus for MARUI GROUP turning its focus to everyone was the question of what exactly constitutes a prosperous society. An issue faced by Japan is disparity
between individuals. When looking at the country, we saw
that, although many were successful at accumulating
material wealth, there were some that were excluded fromthis pursuit.
In terms of products, the industry standard sizes for
women’s shoes, for example, only covered the foot sizes of
72% of Japanese women, excluding many for use of theseproducts. The world of financial services was even moreexclusive, as the majority of services were only provided toa limited group of wealthy individuals. Recognizing thisfact led us to conclude that society could not be said to betruly prosperous unless products and services are madeavailable to all individuals. Moreover, we came to realizethat it would not be enough to simply provide inclusive
financial services as social contributions; we would needto also craft these services into a business model that
could achieve sustainable growth.

A large portion of MARUI GROUP’s customers are aged
18 to 39. The Company history began with a business ofhelping young adults that could not purchase expensive
furniture in single payments, and this spirit lives on in ouroperations today. Based on our unique credit philosophy,
we have set credit limits for new applicants lower thanthose of other companies in order to make it easier for
university students and minors without credit card experience to apply. Accordingly, the EPOS card is the first cardfor many of our cardholders, and we have thus been able
to forge long-term relationships with these customers.
Among developed countries, the portion of financial
assets that are in the form of savings is thought to be thehighest in Japan. Of the approximately ¥1,700 trillion
worth of financial assets in the country, only 6.6% are heldby households headed by people in their 30s or below.
Nonetheless, the number of youths and young adults
focused on preparing for the future is rising. Looking at thesocial issues expected to arise in the future, MARUI GROUP
is branching out from the conventional payment andborrowing services provided through credit cards to offer
a wider variety of financial services in its FinTech business,
including those for saving, increasing, and lending money,
offering monetary encouragement, and preparing for the
future. Moreover, we hope to supply these services toyouths and young adults as well as to everyone else.

Households in Japan by Income Level

Total Financial Assets in Japan by Ageof Head of Household

Wealthy

YouthsProvision of financial services to younger generations
and all other customers

Inability of People under the Age of 40
to Secure Sufficient Financial Assets

Increasing Emphasis on Preparing
for the Future Among People Aged 18–39

Ratio of the approximately ¥1,700 trillion worth of financial
assets in Japan owned by households headed by people intheir 30s or younger

Ratio of people preparing for the
future through saving or investment

6.6%

58.2%

Based on Presentation on Inheritance Tax and Donation Tax,
Ministry of Finance, October 2015

Based on Public Opinion Survey Concerning People’s Lifestyles,
Cabinet Office, June 2017

■ Less than ¥3 million ■ Less than ¥5 million ■ Less than ¥7 million ■ Less than ¥10 million ■ More than ¥10 million 

33.3%
23.6%
16.5%
14.9%
11.7%

Based on Comprehensive Survey of Living Conditions, Ministry of Health, Labourand Welfare, 201642

■ Age 39 and below ■ Age 40–49 ■ Age 50–59 ■ Age 60–69 ■ Age 70 and above 

6.6%
12.7%
21.2%
34.1%
25.4%

Based on Presentation on Inheritance Tax and Donation Tax, Ministry of Finance,
October 2015

43

FinTech Business

Perspective of Inclusion

FinTech Business

Big Data and Co-Creation Credit
Expertise Supporting MARUI GROUP
Since its founding, MARUI GROUP has operated under the basic belief that creditability should be built
together with customers. As opposed to being assigned credit based on a customer’s age, profession, or income,we feel that credit must be shaped through a customer’s usage and payment records. This belief has led to our ratio ofdelinquent debt being the lowest in the industry at 1.45%.

Basic Credit Philosophy
The credit standards MARUI GROUP uses in judging credit
card applications and setting credit limits are based on the
belief that creditability should be built together with customers, which we have adhered to since the time of theCompany’s founding. This belief clearly distinguishes
MARUI GROUP from other companies, which generallybase judgments primarily on a customer’s age, profession,and income, as the Company instead seeks to build­trusting relationships with customers in accordance with
their credit card usage frequency and amounts after­application approval.

In the United States, credit cardholders are assigned creditscores based on their credit histories, and these scores
are stored by credit institutions. In addition to credit card
usage, credit scores also take into account factors such as
housing and automobile loan repayment history, outstanding debt amounts, and other credit information to assign
individuals a score of 300–850. The average credit scoreis around 680, and individuals with scores of less than
660 are considered to be in the subprime range. Roughly
30% of all people in the United States are in this subprime
range (see Figure 1). Credit scores are not only referenced
when applying for credit cards or bank loans, but also
when seeking employment or renting housing. In thismanner, credit scores are used to judge various aspects ofpeople’s lives, and the level of a person’s creditability is
decided based on their credit history.
Figure 1: Distribution of Consumers by Credit Score
in the United States30%         Utilize big data based on credit expertise
accumulated since founding
Reduce credit limits to issue credit cards to customers
that would be denied by other creditors andlower refusal rates

Credit Monitoring         Founder’s belief that creditability should
be built together with customers:
the principle of co-creation

Perspective of Inclusion

U.S. Credit Scores and MARUI GROUP’s Big Data

Less than 660
Subprime

Initial Credit

Structure

More than 750
Prime

40%

Similarly, MARUI GROUP uses credit-related big datacollected based on customers’ payment histories. Whenissuing a credit card to a first-time applicant, we conduct
examinations based on external credit histories while alsoutilizing our unique credit expertise. This expertise has
been accumulated over the course of MARUI GROUP’s
history, beginning with the sale of furniture throughmonthly installment payments at the time of the Company’s
founding, and is based on our co-creation philosophy ofbuilding creditability together with customers. Our credit
framework does not entail assigning credit to customers,
but rather involves setting a credit limit that is within theirmeans and gradually increasing this limit based on theirusage history. Through this framework, our cardholder
base has come to largely comprise university students andminors without credit card experience and adults aged 18
to 39. Furthermore, 30% of these individuals received
their first ever credit card from MARUI GROUP. From ourfounding up until today, we have continued to amass
extensive amounts of data on customers’ credit histories.
This data has allowed us to develop wide-ranging expertise with regard to credit, which helps us identify the cases
in which credit limits accurately match customers’ means
and the cases in which a customer will likely become acredit delinquent. Based on this expertise, we are able toincrease the accuracy of credit examinations. This dataand expertise have evolved into the big data that serves as
the initial credit standards used by MARUI GROUP in
issuing credit cards.

Based on Fair Isaac Corporation

Increase credit limits based on post-application
approval usage history, specifically frequency
and amounts

Credit Philosophy of Building Creditability Together with Customers

MARUI GROUP’s Basic Credit Philosophy

CreditCreditability should be built together with customers based on usage and payment histories, regardless of age,profession, or income.

Delayed payments Responsibility lies with both the customers and the creditor, and a payment solution should be sought together.
Customers that
do not passexaminations

44

Such customers should be refused (while expressing appreciation for applying), and we must continue seeking to
improve the accuracy of credit examinations to lower refusal rates.

Through EPOS cards, we seek to provide customers with their first credit card and encouragethem to use this card over the long term. To this end, we set initial credit limits lower thanother credit providers in order to supply financial services, namely credit cards, to thosecustomers that could not receive a card elsewhere. This approach has led to a large portion of
EPOS cardholders being adults aged 18 to 39, a demographic that tends to have a strong
inclination to make purchases. In monitoring customer credit, we use our credit management
platform and seek to raise customers’ credit limits based on usage history, and have maintained the industry’s lowest ratio of delinquent debt as a result. It is common for customers
without credit experience or that do not have bank accounts to fail to pass initial credit examinations and therefore not be issued a credit card. At MARUI GROUP stores, however, ourrefusal rate for credit card issuances is only 8%, whereas other providers exclude a muchgreater number of individuals, as indicated by the industry average refusal rate of 23%. Thisdifference is a product of MARUI GROUP’s credit philosophy of building creditability together
with customers.

Toshikazu Takimoto
Managing Executive Officer
Responsible for FinTech Business

45

FinTech Business

Perspective of Inclusion

U.S. Credit Cycle and MARUI GROUP’s Ratio of
Low Delinquent Debt

Improvement of Credit Standard Accuracy Using
Artificial Intelligence

In the United States, there is an ongoing cycle in whichloans to subprime individuals leads to an increase in therate of overdue debt, which causes lenders to refrain from
subsequently lending, in turn stimulating a decrease in therate of overdue debt. This is referred to as the “credit
cycle” (see Figure 3). The current stage of this cycle is theone in which its overdue debt rates rise, meaning thateven credit card companies with impressive transaction
volumes cannot ensure that this topline growth will translate to higher profit. When viewed from an inclusion perspective, altering lending volumes based on the credit
cycle will not be at all helpful in reducing customers’ concerns for their livelihood or in resolving issues surrounding
subprime borrowers.
MARUI GROUP’s own experience is a counter example
to the credit cycle. Although the ratio of delinquent debt
rose temporarily over the period from 2005 to 2008, due
in part to the impacts of the revision of the Money Lending
Business Act, this ratio has continued to decline thereafter,
recently reaching the industry low of 1.45%. At the sametime, EPOS card transactions have been growing at an
average rate of 17% per year, dwarfing the Japanesecredit industry average of 7% per year. This ability to defy
the standard set by the U.S. credit cycle indicates thatMARUI GROUP’s business represents a model for achieving sustainable growth while simultaneously realizing
financial inclusion (see Figure 4).

A major characteristic of MARUI GROUP’s credit standards
is that they are based on credit information relating to individual customers’ shopping habits and lifestyles. In 2016,
we conducted an experiment using artificial intelligence(AI) to verify the accuracy of our standards for Gold card
applications. This experiment indicated a difference
between the Gold card application standards used by theCompany and those selected by AI. The results also
showed that our credit standards are distinct from those ofother companies using AI. At the moment, we are monitoring the usage patterns of the individuals that AI has newly
selected as Gold card candidates to further improve theaccuracy of our credit standards (see Figure 2).

Director and Senior Executive Officer
General Manager, IR Department
In charge of Corporate Planning and ESG Promotion

46

Perspective of Inclusion

Figure 3: Credit Card Receivables and Ratio of Overdue Debt (More Than 90 Days Overdue) in the United States

Increase inlending

Credit card
receivables

Increase inlending

Limitation of lending

Increase in overdue(delinquent) debt
Increase in overdue(delinquent) debt

Decrease in overdue(delinquent) debt

Ratio ofoverdue debt

Figure 2: C omparison of Gold Card Application
Standards
2003
MARUI GROUP’s
Gold card application
standards

Gold card application
standards selectedby AI

Opportunity for
MARUI GROUP

Realization offinancial inclusion

Discovery of new customers

Unprecedented Business Model Not Seen Anywhere Else in the World

Hirotsugu Kato

Structure

FinTech Business

When I was visiting the United States as part of our investor relations activities in July 2017,a credit card industry analyst asked how, despite having a customer base primarily consistingof youths and young adults, we were able to achieve industry-leading levels of growth while
maintaining and even decreasing the ratio of delinquent debt for EPOS cards. It was throughthis exchange that I first learned of the credit cycle. In the United States, if the number ofsubprime cardholders goes up, the rise in lending to these cardholders will almost assuredly
cause an increase in the ratio of delinquent debt. This principle is common sense within theindustry in the United States. However, EPOS cards deny this principle by maintaining averageannual growth of 17% combined with a decreasing ratio of delinquent debt. This accomplishment is no doubt a result of the credit expertise, currently grounded in co-creation and big
data, that we have unconsciously exercised since the Company’s founding. This particularinvestor relations visit made me recognize that MARUI GROUP’s business model is unprecedented, not being seen anywhere else in the world. At the same time, I came to realize thatthe strengths of the Company were not accurately understood. Addressing this issue will be atask for future investor relations activities.

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Source: Compiled by the Company based on Quarterly Report on Household Debt and Credit, Federal Reserve Bank of New York

Figure 4: EPOS Card Operating Receivables and Ratio of Delinquent Debt
¥488.8 billion
Growth in revolving and­installment payments and othercard shopping transactions

Ratio of delinquent debt

EPOS card
operatingreceivables

Decline in ratio of delinquentdebt in conjunction with increasein credit examination accuracy

1.45%
2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

47