They are the busiest fintech investor among the big Japanese banks. Mitsubishi UFJ Financial Group (MUFG) had already backed several startups when it spun off its corporate VC MUFG Innovation Partners (MUIP) at the beginning of last year. The USD 185 million fund has since invested in 16 AI companies, mainly in the US, Southeast Asia, and Japan, president and CEO Nobutake Suzuki told viewers of KrASIA’s Venture Matters TV on Wednesday evening.
The bank landed a major deal in Southeast Asia earlier this year when it invested USD 800 million—according to Suzuki—into the super app Grab. “We expect some kind of exclusivity in providing financial services,” Suzuki said and explained why the company is so attractive: “Grab has a huge amount of data.” It has millions of drivers and knows how much money they make, how safe they drive. MUFG—through its partner banks—will be able to provide loans to drivers, for example for a new motorcycle, using Grab’s data to build their own credit rating.
The region as a whole appeals to the bank, not only thanks to its demography. MUFG controls several entities such as Bank Danamon in Indonesia, Krungsri in Thailand, and CB Finance in the Philippines. “You don’t need the branches to deal with customers,” he said. “We can directly focus on smartphone banking.” MUIP participated in the USD 50 million Series C round of the Malaysian car-dealing platform Carsome and the USD 23.5 million Series C of Indonesian peer-to-peer lender Investree, in line with its focus on fintechs.
The real deal is China though. Suzuki visited several fintech companies in Beijing, Hong Kong, and Shenzhen. “Chinese AI companies are so advanced, I’m impressed with the technology,” he said. The social implementation of AI might also be easier in China, according to him. There are a huge amount of applications and easier access to big data, which he finds very “sexy.”
“How does it feel to compete with Chinese capital for investments in Southeast Asia?” host Robyn Tan asked him. Suzuki pointed out that there are certainly Tencent and Alibaba which are pumping money into the region. “Chinese and Japanese investors have different ideas when investing in startups,” he said. “In some cases it might create a mutual relationship.”
Another of MUIP’s areas of interest is blockchain technology. As early as 2016, the bank invested in the major US crypto exchange Coinbase. “You might have heard about the rumors of its IPO,” he said, adding that it’s not easy overall to work with these companies citing anti-money laundering and KYC regulations.
MUFG to issue digital currency
Security tokens though, applying blockchain technology to existing financial instruments, appears to interest him much more. The bank is planning to issue its own stablecoin later this year, to use it for mobile retail payments. “This can cut costs and increase liquidity,” he said indicating that it’s time to overhaul the “current inefficient analogue system.”
MUIP already has an interest in US companies such as Figure, which securitizes mortgage loans, and token platform Securitize. Suzuki sees a lot of potential in Southeast Asia for this too—and also buy-in from the governments. “MAS in Singapore and other regulators in ASEAN are aggressive in utilizing new technologies for financial transactions,” he said. “We might see significant outcomes in 3 to 5 years.”
Suzuki was finally asked for the advice he has for startups in the region. They should first look for synergies with partner banks here, he said. He also wants his portfolio companies to be scalable, which means that they will need to expand into other ASEAN countries. It might take longer to get investment from Japanese VCs. But there’s also an advantage: “They are patient and have a longer view.”
The “Venture Matters” webinar series will return on August 13, 2020 for the 5th episode with Ntasha B, co-founder and partner of Venture Gurukool.