Fintech Startup Debuts to Challenge Japan’s Old-School Finance

(Bloomberg) — Finatext Holdings Ltd., a Japanese fintech startup that provides stock trading apps and brokerage infrastructure, said it’s aiming to quadruple its revenue to $88 million in three years as the firm goes public in Tokyo on Wednesday. 

It’s among the most closely watched new listings in a record month of debuts on the Tokyo Stock Exchange, and highlights the growing demand for investing opportunities among a younger generation of Japanese, even as stock ownership still trails far behind markets such as the U.S. 

The IPO will pave the way for Finatext to win bigger clients and achieve faster growth, according to the company’s chief executive officer and co-founder Ryota Hayashi. 

The 10 billion yen target “is not something that’s impossible to achieve,” Hayashi said in an interview, though he cautioned it was a goal rather than official guidance. The company expects about 2.65 billion yen ($23.3 million) in sales for the year ending March.

The bottom line remains in the red, with the firm expecting a net loss of 1 billion yen this fiscal year. Hayashi says he’s in no rush to generate profit, though added it could do so quickly if required. 

The Tokyo-based company, founded in 2013, generates revenue through commission fees in what it calls “brokerage as a service,” providing low-cost infrastructure and solutions for clients to implement trading solutions. Among its clients is Credit Saison Co., which uses Finatext’s software in a stock-trading platform for customers. 

However, the company is better known to retail investors for services such as Asukabu, a stock-centered game in which users guess which direction a certain equity will move the following day. The firm’s apps aimed at new investors have accumulated more than 2 million downloads. It also offers Stream, a bona fide stock-trading app. 

Finatext also provides software that helps clients manage insurance contracts, and is looking to expand its services to cover those linked to credit cards and loans. 

The firm will have a market value of 63 billion yen at listing, having raised nearly 20 billion yen in the IPO. It joins a host of Japanese startups listing in what is set to be the busiest month ever for local listings. 

“It’s one of the stocks getting the most attention among those going public in December,” said Matsui Securities Co. analyst Tomoichiro Kubota. He sees the revenue target as feasible, but added it’ll be “tough” for Finatext to immediately win over any major financial firms to its systems. 

Continued system failures at the likes of Mizuho Financial Group Inc. highlight how Japan’s financial system is falling behind in adapting to digital services, even as it accelerates its digital push. Hayashi is confident that there’s a place in the market for Finatext’s alternatives.

“Right now we’re about providing software that form the infrastructure for brokerage and insurance services, but next it’ll be loans, consumer finance and credit card systems,” Hayashi said. “Things still are done with paper, faxes — for real — and phone calls. I think we stand a chance.” 

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