“To be a Financial Leader” – The Innovation Initiative of MUFG Bank in Silicon Valley
Information gaps will not be filled without a team in the local market
―First of all, could you tell us about your career prior to the assignment in Silicon Valley?
Ever since I joined MUFG Bank in 2001, I gained experience in sales as well as planning for IT-related services. I was also given an opportunity to work in Singapore for three years. After returning to Tokyo for a short period, I flew to the United States to study MBA at the University of Michigan. In August 2015, I was transferred to Silicon Valley, and now working as the Head for Americas, in the Digital Transformation Division.
―What was your mission in Singapore?
Singapore is the best place to oversee the Southeast Asia countries, and my mission was to come up with a new service through the partnerships with local financial institutions in countries such as the Philippines, Vietnam and also in India. One of the successful cases was forming an alliance with a security bank in the Philippines in the area of cash management service, similarly in Vietnam and India as well. I think of myself as an “initializer,” and whenever I approach the potential partners with my new ideas, I make sure the work is done diligently from the beginning to the end.
―When did your company start to focus on gathering information about and partnering with startups in Silicon Valley?
It is since 2014. At first, we often traveled to Silicon Valley to meet the startups, however, it was hard to have a deep conversation with them when we were only here for a short period every time we traveled. In the same year, we decided to permanently station one of our staff in Silicon Valley and that was the beginning of our current team. I still remember writing a proposal to set up a local team, and that was before going to Michigan for my MBA.
―Is having a local team essential?
Yes. While I was in charge of business development in Singapore, I felt there was a gap between the information available in Tokyo and in Singapore. Without a deep understanding about the country we are targeting on, it was difficult to know what and how we should develop a new service, who we should work with, and how we should be sharing the information back to Tokyo. If that was the case even for Singapore, it should be more difficult to understand better about Silicon Valley without a local team. As mentioned earlier, that was why I proposed for a local team to be set up and just when I thought I was returning to Tokyo after completing my MBA, I was told to be based on Silicon Valley.
Running on Two-Wheels: Technology Research & Business Development
―Please tell us about your current team structure in the United States.
The US team consists of seven members in Silicon Valley and one in New York, which includes members from our group companies. We work on innovations in a team of eight people.
―What is your current mission?
When we first started operating in Silicon Valley, our team participated in various conferences. By building connections and network with local companies and key personnel, we performed analyses of new technologies and share knowledge and information with our headquarter in Tokyo. About three years ago, when FinTech was a trend, we started to focus more on business development rather than searching for technologies. Two years from then, our main method of innovation was to build alliances with startups. Nowadays, there is an increasing number of businesses adopting technologies such as AI, IoT, Big Data, and Blockchain. And now we are focusing on both, technology research as well as business development to be ahead of trend and innovation.
―Which areas are you focusing on right now?
In the area of FinTech, we have expanded from the areas of payment and lending, into Big Data, AI, Blockchains, and Security, then to IoT and Healthcare... In a nutshell, we focus on areas that are relevant to financial services.
Getting into Inner Circles is Important
―How do you conduct research?
At first, it was mainly by participating in conferences as it was the best place to follow the trend. Being said that, going just for conferences will not be sufficient to gather truly valuable and interesting information in the startup ecosystem in Silicon Valley.
―So, you need to collect information from various routes?
That’s right. We collect information from many different sources. We have also been investing in multiple venture capitals, and the information that comes from them is also valuable. What counts, after all, is to get into the inner circles of Silicon Valley. We have successfully immersed ourselves into the network here, and we are getting introduced to the promising startups through our connections. Now the key for us would be to deepen this network and relationships with them.
―What do you focus on when looking at startups?
It is always case-by-case, but we usually look at whether the company is invested by “good” investors, the past fundraisings, and the background of the leaders of the company. Most importantly, we place importance on whether we feel comfortable building trust with the company by meeting the team.
―Is there any type of startup you will avoid investing in?
I would say the companies that try to be everybody’s friend, like proposing to work together to whomever they come across. Startups have their own characteristics or focal points, and they should never drift away from those points as those are their strength. It is not a bad thing trying to fit themselves in our ways but that does not work in the long run.
―Building relationships with startups who already have many investors and stable customer base might not be easy, how do you do it?
Ultimately, I believe that the ability to build trust between individuals is the most important key in Silicon Valley. If both parties can open up ourselves to each other, and that find the value in working together, things will work out.
“Trials in US Market FIRST” – the value MUFG offers
―What are the values the startups see in your company?
We tend to get positive reactions when we tell startups that they can work with Union Bank, which is one of our group companies. For those who are interested in the Japanese market but are not ready to expand their business, we will suggest that they can work with Union Bank first in the US market. In the future, when the time is right, we can offer support to expand their business in Japan. I believe this is the value only we can offer to the startups here in Silicon Valley. It is not easy for the Silicon Valley companies to enter into Japanese market because of the language and dissimilar rules and regulations.
In addition, we could also offer other values as we have credit cards companies, stock companies, as well as the deep relationship with Morgan Stanley. Our partnerships with local banks will also be a value to the startups who are looking into other Asian markets. Needless to say, when our value and their needs match, things move fast.
―Being able to start the partnership in the US market is a good way to start off the relationship with the startups, isn’t it?
I think it is great. In order to make this work, we often collaborate with the relevant department in Union Bank. Just by being able to try in the US market, it makes it easier for the startups to communicate and also see the results. I believe taking this step can be one way to start strong partnerships with the startups.
Cryptocurrency and Blockchain
―Could you tell us more about your relationship with Coinbase? Investing in them after about a year since you met them, what was the process like?
It requires a lot of research about the company before signing for investment and partnership agreement. We conducted research by gathering information through various routes and identify the technology that is outstanding or interesting within a similar market. We started to see how special they were and begin to analyze in detail.
―What were the difficulties you faced?
The most important and difficult part was to make them understand and see the value in having us (MUFG) as their partner or investor.
Also, there were many terms and conditions we could not avoid but to negotiate as we move forward. During that time, I visited their office several times every week to have meetings. It was so often that the receptionist remembered me and gave up taking my names. As they finally decided to accept our terms, they said “we are accepting it because of the trust we have for each other, and that’s enough, let’s do it”, and I will never forget this moment. This was when I re-realize that at the end of the day, the trust between the people is the strongest factor to work together than any other.
Aspiring to be a Global Pioneer in Financial Business
―Back then when cryptocurrency was not very common yet even in the US, how did you find it bringing that technology to your company? Wasn’t it very tough?
It was not easy. Some said we should wait for the financial institutions in the US to start adopting the technology. Also, there have been negative opinions about the area of cryptocurrency. But if we choose to keep thinking that way, we will end up getting nowhere. I wanted us to be a global pioneer among all financial institutions. Is it really right to only focus on the negative side of it and give up when there are so many things going on in this area, and the way companies are raising funds is becoming more and more diverse? If we want to be the leader of all the financial institutions in the world, we have to be tapping on to new technologies and ideas and persist through to the end. That was what the team and I believed. We see digital transformations by dividing largely into two categories: the innovation and the improvement. Digitalizing and improving are important, but we will not be able to survive as a business without developing new business ideas and services that are more innovative.
―MUFG Bank is one of the first company who taps on the area of blockchain as we can see from the partnership with Chain. Could you tell us about collaborating with Chain?
We conducted POC to see if transferring electronic bills into blockchains would actually work, and Singapore and Tokyo profited by the results as well. The speed of discovering new technologies is way faster when we are in Silicon Valley, and once we try out the new technology and if it works, we will share the information as well as the technology. This can be one of the options to work with startups, and a good example was the blockchain. When we started working on it, it was winter in 2015 when blockchain has started to be the hot topic and the increasing number of conferences were held focusing on it. Many were still in doubt of whether it really works, and we were the company who verify that at the early stage. Thanks to that, various projects have been derived from this project.
Finding something that fits the existing business
―We believe it is also important to be aligned with your company businesses in Japan in order to develop new businesses in Silicon Valley. How do you do that?
Much like building strong relationships with startups, I think the important thing is to gain the trust of existing business units in Japan by understanding their pain points, and to providing them with what they can handle. In some cases, we will choose to keep new ideas and technologies until the time is right before handing over to them. Recently, I spoke with a person in charge of innovations at Bank of America, and he said he spent 40% of his time communicating with business units. Regardless of whether if that is too much time or not, we can tell the importance of communication and working closely with the business units.
When it comes to the new business idea that was not offered by any of the financial institutions in the past, such as bitcoin, we will work really closely to develop the idea of how the technology can be applied into our business. There will be various ways to develop businesses. We tend to focus on the relationships with startups, but building strong relationships within your company and the existing business units is as important.
―Often, there are many representatives assigned overseas who face difficulties as they do not have the rights to make final decisions. How does your company solve this issue?
We also have to turn to Tokyo for final decisions. However, we do not see that as difficult as there are only a few layers before reaching to our CEO. The Head of the Digital Transformation Division, and the Chief Digital Transformation Officer (CDTO) between us and the CEO.
It can be time-consuming especially when you are used to the way things work in Silicon Valley, but we will honestly share how much time we need and ask for it when there is an opportunity of investment and partnership. It is possible to make the startups understand how important certain information is to be sent back to Tokyo (even if it takes time) if you have a strong relationship with them.
―Lastly, tell us the vision of your company.
These days, there are more FinTech startups focusing on partnering with existing financial institutions, which means there will be more opportunities for collaborations. Not just the FinTech and financial institutions, but all other industries will be looking to collaborate with each other. It will be important to create valuable collaborations in such an environment. The era of “Closed Innovation” is over, and the existing financial institutions are having a sense of urgency in the rise of many disruptive technologies, business model and trends. If we want to change for the better, we have to strongly aspire to be the pioneer and maintain our motivation to strive that.