IBM Japan will provide single-charge online banking services for the country's smaller banks beginning in October, the company said here late last week. The company pointed to the "violent" competition now facing smaller banks sparked by the deregulation of Japan's financial sector and the rise in internet usage as the driving forces behind its move.
The service will allow customers of Japan's regional and local banks to check their balances and pay bills remotely via a shared banking centrer IBM Japan will set up, according to the company.
The service will cost banks a one-time sign-up fee in addition to a yearly charge which won't change regardless of how many customers use the service, said Kazuhiko Suyama, a spokesman at IBM Japan. Though the fees have yet to be finalized, Suyama said the sign-up fee will be around 100 million yen ($A1.3 million).
IBM has already signed up two banks to the scheme -- Suruga Bank Ltd. and Juroku Bank Ltd. -- and plans to ink contracts with 20 to 30 more regional and local banks within the year, according to Suyama.
Japan's regional banks like Gifu Prefecture-based Juroku and Shizuoka and Kanagawa Prefecture-based Suruga have also been hit hard by a combination of Japan's economic recession, falling land prices, and intensified competition due to the country's reform of its financial industry.
Part of Japan's so-called "Big Bang" financial reform package, initiated by former Prime Minister Ryutaro Hashimoto in 1996, was to force banks to compete in each others' previously protected home markets. Smaller regional banks have been pressured to increase services to customers as more sophisticated "city" banks extend their presence out into the countryside.
Some of Japan's major banks and financial institutions have also been looking toward the internet to revitalise their businesses in the face of Japan's weak economy.
Sakura Bank Ltd. last month signed a deal with electronics company Fujitsu Ltd to launch an internet banking venture and, two weeks prior to that announcement, Nikko Securities Co. Ltd. and Fujitsu unveiled a plan to offer online trading services.
IBM Japan's service is aimed at providing Internet tools for smaller banks to compete with Japan's larger city banks in online banking, Suyama at IBM said.
Sakura is Japan's sixth-largest city bank, while Nikko is one of Japan's "Big Three" securities houses and specializes in retail services, investment trusts and underwriting. Nikko is 25 per cent owned by Citigroup and last year merged its institutional investment arm with the Japanese business of Salomon Smith Barney.