Japan’s wealth management market differs significantly from the global market in a number of ways.

Individual financial assets are managed with an emphasis on security and primarily allocated toward deposits, while potentially highly profitable securities — in particular, equity — are not typically preferred. The asset management emphasis toward savings deposits has persisted through the nation’s deflationary phase, but with the introduction of inflation targets and drastic monetary easing, this approach increasingly makes less sense. This leaves one wondering when the tide will change and who or what will trigger a change.

In January 2014, the government introduced a new initiative to encourage a shift in behavior from saving to investing. Called the Nippon Individual Saving Account (NISA) the program is designed to support the stable growth of household assets while boosting the availability of capital available for economic growth. While a combination of macroeconomic factors — including changes in exchange rates, a rebound in stock prices, and an upturn in the economic environment — seems to have the market headed in a more positive direction, Japan’s investment market still differs significantly from Europe’s and North America’s, particularly in areas such as the diversity of the composition of individual asset holdings, the investment environment for individual investors, and investment literacy.

FIG 2: Individual Financial Asset Breakdown: Japan-US Comparison


Growth in the Mutual Funds Market

Against this backdrop, the growth in funds allocated to publicly offered mutual funds has been particularly prominent. In May 2015, total assets under management topped 100 trillion yen for the first time, driven by an influx of money into open-ended mutual funds. As of the end of September 2015, this had reached 75 trillion yen, up 60% from 2012. This rise has been spurred not only by market value factors (a rise in asset prices) driven by increasing stock prices and a weaker yen, but also by trade-related factors — that is, new inflow of capital. Open-ended mutual funds turned positive in the first half of 2014, and in the second half of 2015, they returned to levels seen prior to the 2008 collapse of Lehman Brothers.

Two core factors are behind the growth in the mutual funds market: increases in channels and products. Channel growth principally signifies a diversification of intermediaries and intermediary types for bringing together mutual fund management firms and investors. The market was opened to banks in December 1998. After an eventful subsequent period, the formidable growth of the banking channel has put it nearly on par with the securities firm channel. As of the end of 2015, banks’ mutual fund sales, including private placements, had reached 64 trillion yen, accounting for 46% of the market; moreover, at the same time, the banking channel has similarly diversified its collective product lineup, including the following areas:

  • General mutual funds: Typical mutual fund sales through traditional channels
  • ETFs: Brokering analogous to listed securities brokering
  • Discretionary investment mutual funds (wrap account): Brokering for discretionary investment services
  • Dedicated DC (defined contribution pension) mutual funds: Dedicated sales for defined contributions to pensions


Wrap Accounts

Among these, the inflow of funds into discretionary investment mutual funds wrap accounts has been particularly prominent. Following 2012, the sector saw an influx of 1.4 trillion yen in the second half of 2014, and more than 1.2 trillion yen in the first half of 2015. This flood of funds has been fueled not only by the growth of products that meet consumer needs and more channels offering greater convenience, but also due to a shift in emphasis in sell side strategy from stressing sales commissions to one putting more weight on asset management balance and performance.

Until now, retail investors in Japan have exhibited a preference for major brands and the stability associated with them, resulting in investors becoming comfortable with an investment environment with a high degree of reliance on the sell side, namely the strategies of major financial groups. Further fueling the current surge in low-cost investing, which can expect high if unstable returns, will require raising investor financial literacy, providing novel products and services, and forging new sales channels that harness technology. There is vast “blue ocean” potential here for robo-advisory services to gain a foothold and thrive in the Japanese market.


Just published the new Celent reports:

Fintech and Robo Advisors: Booming in Japan



The year 2016 proved a watershed for Fintech. It saw Fintech move from discussion and concept to implementation in the real world. Below are four key global trends in wealth management, the central theme of this post.

  • Fragmentation of retail services: There has been increasing diversification among purveyors of asset management services including major securities firms, discount brokers, and independent asset management companies. These include a rich variety of services and technologies that span online and self-service services as well as technology-based advisory services.
  • Emergence of next-generation investors: So-called Generation X individuals (those born between 1961 and 1981) are comfortable with technology and have adopted an investment style that accommodates schedules with steep time constraints. Meanwhile, millennials (people entering the workforce in 2000 or later, in the US, primarily those born from 1980 to 2000) are gradually becoming the core investment demographic, with more than 80 million individuals of the so-called digital native generation emerging as next-generation investors.
  • A shift to passive investing: There is a broad market shift afoot to index-driven investing from active asset management, which has peaked and is declining. Exchange traded funds (ETFs) are emerging as the next stage of passive investing.
  • Digitalization: Investors, brokers, and asset management companies are demanding applications with greater mobility and automated processes. Key issues here include investor-broker communication, social media, social trading, and crowdsourcing.

In addition, fragmentation is occurring in the asset management sectors of mature markets. Robo-advisor-driven services are gathering greater attention as a technologically advanced, low-cost means of automated asset management in a market that is increasingly crowded with players including traditional brokers (such as banks with domestic and international networks and comprehensive securities firms), independent investment advisory firms, and online securities companies.


Automated Advice

The definition of a robo-advisor can be slippery, differing by service provider and analyst. For the purposes of this report, Celent defines robo-advisors as new services from financial institutions that possess the following characteristics.

  • Key features seen in 2015: The three primary features are automation of onboarding and analysis, portfolio management, and reporting. Gradually, in addition to online assistance, human customer response initiatives, such as call centers, are beginning to appear. While in principle a non-face-to-face approach, automated initiatives are increasingly being expanded and coupled with manned support and full-line support a la those conducted by traditional operators.
  • Non-human advisors: Algorithms are used to support investment and portfolio-building based on the risk appetite of customers including tax optimization, all based on a customer profile developed from an online questionnaire.
  • Easy to understand: The process is streamlined to reduce customer anxiety and give customers peace of mind by using simple, typically three-stage processes that support investors from application stage to portfolio creation.
  • Small-value, low-cost options: Caters to small-value amounts in the range of $5,000 to $25,000 with investment (automated robo-advisor) fees in the neighborhood of 0.3%. These small-value, low-cost investments are customized services but automated and do not involve any manual (human) attention.

Robo-advisor services are evolving at a rapid clip, particularly at the cutting-edge of the industry, and much of the effort in this area is being concentrated in the three areas below.

  • Easy-to-use non-face-to-face channels: Eliminate the tradeoff between price and convenience, offering services that are both low in price and highly convenient.
  • Full service investment support from onboarding to reports: Automating services will enable greater processing efficiency that allows industry players to break through existing limits in their capacity to handle small value investments.
  • Hybrid operation support catering to diverse needs and levels of literacy: Online self-help services combined seamlessly with existing contact centers and face-to-face channels.


Segment Targeted by Robo-advisors

Initially, the demographic segment targeted by robo-advisors was a fragmented portion of the retail investor market, but this has changed. As noted above, in North America robo-advisor services are most embraced by traditional and active retail investors (individuals around age 50 located somewhere in the mass to low-mass affluent demographic).

However, this demographic is not static. With age, experience, and increases in investable assets, the need for investment advice rises. In addition, advancements in technology and investment literacy are blazing a trail to undeveloped market areas for robo-advisor services. Indeed, investor segments such as seniors and the affluent, which have until now been largely untouched by robo-advisor developments, can be expected to increasingly hop on the robo-advisory services bandwagon.

FIG 1: Automation of Advice Market Segmentation (US)



Just published a new Celent report:


TradeTech Asia 2016

TradeTech Asia is the conference designed by the buy-side for the buy-side, offering dedicated content to address our biggest equities trading and technology pain points.

Every year with the most influential buy-side Heads of Equities Trading and Heads of Trading Technology all under one roof at one time, this is our opportunity to benchmark our business with those that are best adapting to the new financial landscape.

It seems every day we hear of new “innovation” or “disruption” (depending on your point of view). However, the sheer volume of all this noise can be overwhelming. How do you determine what you need to listen to out of the cacophony of voices? We can help. We do the listening for you.

Join us as we examine the hottest trends TradeTech, Digital & Modernization!

All Star Panel: How can you use machine learning and artificial intelligence for predictive analysis and accurate analytics?

Among the topics we will cover are:

  • How can you optimize trade execution with AI?
  • How can artificial intelligence help in predictive and accurate analytics?
  • How can your investment research and portfolio analysis benefit from AI applications?
  • AI and compliance: How do your trade surveillance capabilities need to evolve with adoption of AI?
  • Buy or build strategies: How can you work with fintech vendors and develop inhouse AI capabilities?

Click here for more information: TradeTech Asia 2016



The situation surrounding financial and payment services has undergone dramatic change. In any era as dynamic as ours, a comprehensive conceptual framework that can serve as a guide pointing toward a better future is essential. Toward this end, Celent uses its payments taxonomy and payments value chain frameworks as lenses to examine evolution in the payment sector. [1] Payments innovation is also informed by the changing behavior of payment services users and exists in the context of the payments value chain. Service providers should see this field as a blue ocean—a market space ripe for pioneering new payment initiatives.

The intense competition over the already existing services, which is called legacy systems in Japan, makes the market a red ocean. There is no room for anything new in the interbank payment settlement systems such as the BOJ-NET or the Zengin; ATM as a cornerstone of cash distribution; and credit card network systems as the most noncash methods of payment. We need to think of some “value proposition” which is new and beyond already existing payment methods. Despite consumers in the digital era hoping for something more convenient than cash, the supply side is not aware of this demand. As a matter of fact, the number of online banking accounts is about 60 million. This accounts for only 20% of the number of ATM cards, which is 300 million. The financial services institutions have failed to provide handier and more convenient services than cash.[2] FSI which are thriving in Japan's growing e-payment market are not very traditional ones so far.[3]

Here, Celent wants to advocate a conceptual system as an open innovation platform that would create a platform layer (the formulation of rules under new frameworks) with an innovation layer (creation of new services within the new framework). The expectation is that this conceptual system could fulfill the role of API provider in the era of the API economy. This envisions a situation in which financial institutions use an infrastructure shared with the manufacturing, retail, and logistics industries, using the API to fuse together not only B2B but also B2C information—that is, information about consumer lifestyle and consumption patterns—with financial information to create a blueprint to enable technology to bring relevant financial services into the daily lives of consumers. Historically, the business or commercial information regarding companies and consumers’ lives has been far from integrated; doing so moving forward is aimed at illuminating the flow of related funds and creating a closer and more useful relationship between the two.

In crafting a vision of the financial services of the future, one must ostensibly imagine services that transcend the traditional confines of financial services and are more intimately intertwined with corporations and their activities as well as the lives of consumers. The advent of fintech continues to raise the expectations of financial services customers. Indeed, the key to competition in financial services may lie outside the financial industry, coming from services and businesses that specialize in knowing the customer such as YouTube and Ritz-Carlton, customer behavior prediction such as Google and Amazon, or even referencing how SNS seek to clearly iterate their services and realize simple interactions. In short, meeting these needs and expectations can be seen as a compass that points toward building the financial landscape of the future.

Celent prioritizes the following three points when it envisages “the future of financial services.”

  1. The technology evolution that is taking place through the building of financial market infrastructures: the rise of Bitcoin, Blockchain, and Distributed Ledger Technology (DLT) and their latest examples.
  2. Competition and co-creation in building these financial market infrastructures: Classical technology (ACH, SWIFT, etc., which are equivalent to Japanese Banks’ Payment Clearing Network) VS Emerging Information and Value Transfer (Next-generation digital gift card service networks of Gyft[4]  and Chain.com, Ripple’s[5] bi-directional messaging system coupled tightly with distributed ledgers for international banking payments).
  3. Blue Ocean Strategy on payment services: New services based on financial market infrastructures which have resulted from the fusion of old and new techniques; Resultant new digital lifestyle or new digital supply chains. 
  • a) for retail market: inexpensive Peer to Peer (P2P) money transfer services for less frequent and small transfers.
  • b) for corporate market: next-generation transaction banking services where commercial distribution, commodity distribution, and money transfers are all integrated.

These new money transfer services for retail customers will be a total watershed, replacing existing e-money. They will serve as a basis of information transfer and value transfer for digital native generation as well. On the other hand, the next-generation transaction banking services for corporate customers will make it possible to renovate existing supply chains and exercise tighter control over corporate information and value transfer through digitalizing and liberalizing contracts and settlements. Celent sees great potential for significant innovation and a “fund transfer revolution” in these new services.

Figure: Open Innovation Platform



This area is explored in depth in the Celent report:




「日銀ネット」「全銀システム」に代表される銀行間決済インフラ、「現金」流通の要であるATMや、「現金代替手段」であるクレジットカードのネットワーク網は、日本社会のレガシーシステムであり、その領域は既にレッドオーシャンである。構想すべきは、それらが実現していない「利便性」である。デジタル時代の消費者は、「現金」以上の利便性を望んでいないのか?いや、サービス供給者が、その需要に気付いていないだけだ。事実、ATMカードの発行枚数(3億枚)に対して、オンラインバンキングの契約口座数(6千万件)は2割に満たず、金融機関は「現金」以上の利便性を提供していない。[2] また、隆盛する電子マネーの担い手は、今のところ、伝統的な金融機関ではない。[3]




  1. 金融インフラを構築する技術の進展: ビットコイン、ブロックチェーン、分散型台帳技術の隆盛と、その先進的なユースケース
  2. 金融インフラの主流を巡るビジネスの攻防: レガシーな技術による金融インフラ(例えば、全銀システムのような各国のACH、SWIFTなど)と、新たに隆盛する、インターネットをフルに活用した情報と価値移動のインフラ(例えば、Gyft[4]とChain.comによる次世代デジタルギフト券サービスネットワーク、Ripple[5]による新たな国際銀行間決済サービスネットワークなど)の競合と共創の関係
  3. 決済サービスのブルーオーシャン: そうした新旧の金融インフラを駆使して提供される新サービスと、それが革新する新たなデジタルライフやサプライチェーン
  • 個人向け:少額低頻度のP2P送金を極めて安価に提供するサービス
  • 法人向け:商流、物流と金流を融合する次世代トランザクションバンキングサービス


図: オープンイノベーションプラットフォーム


Core System Strategies for the Fintech Age: LEGACY MODERNIZATION IN INSURANCE INDUSTRY, Part 6

Finally, we will speak out the proposal from three perspectives…

  1. Automation to Complex Systems
  2. Core Standard and Local Variation
  3. Review Sourcing Models

Winding down this post series, Celent would like to put forth an approach specifically tailored to helping insurers formulate modernization plans.

This entails determining top-priority business strategy challenges, formulating a solid scope definition sufficiently reflecting a firm’s capabilities, strengths, and appetite for risk, architecture design, and assessing the feasibility of the project.




It is important to create a conceptual diagram that will function as a systems map, containing the peculiarities and implied information to give stakeholders a clear overview of the systems.

In addition, using a system landscape, which is an accepted industry approach to convey knowledge (including the constitutive elements of the core systems in the context of business goals and by involved stakeholder), companies can thrust the unique and peculiar elements into relief.

This task will probably be unfamiliar to Japanese insurers who have designed, developed, operated, and maintained their own core systems. In short, it will be difficult to determine

  • What is standardized?
  • What is peculiar?
  • What can be outsourced?
  • What should be internalized?

Identifying modernization targets, along with formulating the project scope definition, will facilitate setting business strategy priorities and will help lead to emphasizing core system priorities based on desired capabilities.

FIG6-1: Landscape and Targeting: Insurer System Landscape




The greatest risk of any legacy modernization project is recreating legacy issues.

Indeed, Celent regards this as more significant than both stable system operation and realizing a business case.

It is of paramount importance that modernization projects do not recreate legacy challenges but rather free firms from them. Celent puts forth the three proposals below to help ensure that insurer modernization initiatives are successful.

1. Automation and Its Application to Complex Systems

The key to attaining a high level of operational efficiency, not only among systems, but also with straight-through processing (STP) of insurance office tasks as well as office and communication processes, lies in applying automated business processes to complex systems tasks (this refers to processes that are excessively concentrated and frequently require exceptions processing).

When it comes to communication among insurer stakeholders (customers, intermediaries and agents, employees, management, and others involved in the market), it is important to look at several things including rethinking stakeholder interaction and communication (reports, contact, and consultation routes that occur in daily operations), making communication possible through a portal, and the possibility of consolidating existing applications such as workflow tools.

The capacity for insurance office activities to be automated (core processes, exceptions processing, eligibility criteria, business rule management, and business process management) is rooted in a common infrastructure and the monitoring tools of this infrastructure. The positions and opinions of many internal staff members, ranging from actuaries, underwriters, and marketing staff to name a few, must be considered when, for example, implementing a monitoring scheme, renewing automated rules and processes, and setting and modifying governance rules. In particular, for changes in rules or processes, the transition must be rapid and be able to respond to increased business volume. In addition, the objective of STP is to minimize exceptions processing. Eligibility criteria need to be used from the initial stages of the process even if conducting appropriate process routing.

FIG6-2: Automation to Complex Systems



2. Establishment of Core Standard and Allowance for Local Variation

The key to realizing agile operations and reducing IT costs is determined by reusability and standardization in lower layers. Of the three layers of presentation, business logic, and data, the first two, must be shared to standardize and make the data layer reusable.

This is difficult as shown by the insurer responses indicating that "data model rigidity" is one of the largest IT challenges. While it may be difficult, if insurers do not address this matter, they are doomed to recreate their legacy issues.

FIG6-3: Core Standard and Local Variation



To avoid being ensnared in this pitfall, Celent recommends referencing the below approach. These are universal issues that are applicable across industries, and Celent hopes to see vendors create tools and strategies that offer better solutions to this problem.

  • Presentation layer:
  • Configuration for unique user interface (even if fixed or common, configure using tool base).
  • Equip with framework for items such as shared user interface, reporting, and audit procedures, security (even if for unique user specifications, configure using tool base). 
  • Business logic layer:
  • Architecture allowing common office processes and unique variations to operate in tandem.
  • Equip with rule library to implement unique variations and common office processes (even if for unique user specifications, configure using tool base). 
  • Data layer:
  • Standard data model and field for adding unique items.
  • Mechanism to allow the use of non-structured data.

FIG6-4: Core Standard and Local Variation (cont.)



3. Review Sourcing Models

Formulating a modernization plan should include a review of sourcing models. This should start with the design phase, involve assessment of the build phase, and sufficiently verify plan feasibility.

Global insurance IT firm offerings are many with options spanning core system build, operation, and maintenance. IT firms have expanded their scope of activities to include areas such as maintenance of existing applications, testing relating to the center of excellence (CoE), and data migration.

FIG6-5: Review Sourcing Models



We should conclude this post series in this page.

KRQ #3: What does an insurer roadmap to modernization look like?

We’ve found the following:

  1. Legacy modernization framework.
  2. Understand your organization’s priority challenges and risk tolerance.
  3. Scope definition.
  4. Ensure that your modernization does not simply reproduce legacy issues.


Just published the new Celent reports:

Legacy Modernization in Japan’s Insurance Industry, Part 1: Survey Analysis and Status Update

Legacy Modernization in Japan’s Insurance Industry, Part 2: Prescriptions and Proposals


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Asia Insurance CIO Technology Summit에 다녀와서…

2016년9월5-6일에 싱가포르에서 개최된 Asia Insurance CIO Summit를 다녀왔다. 100명 가까이 되는 참가자들이 모여 성황리에 끝났다. 보험사, IT업체 그리고 스타트업들이 모여 자리를 빛냈다. 이틀간에 걸쳐 열린 이 이벤트의 첫날째는 보험업계의 방향성을 논하는 발표들이 눈에 띄었다. 접근방식에 다소 차이는 있으나 고객중심적으로 발전해가야 한다는 이야기가 많았다. 또 첫날째에는 저희 Celent가 심사위원을 맡은 제6회 Asia Insurance Technology Awards 시상식도 […]Continue reading...