#WTF57 - What The FinTech - Mercari Group - Merpay - Mercoin

Speaker A: Hey everyone. Welcome back to what the fintech your Fintech Feel Good show. Um, just a quick intro before we start this episode. This is his interview with Takeshi Nagazawa back in April. He is the CEO of FinTech of Mercury Group and this interview was quite eye opening for me. So I just hope that you will enjoy listening it. See you. I'm Mehdi from what the FinTech and I'm very glad to be here. Today I'm joined by Takeshi Nagazawa, CEO of FinTech for Mercury Groups, uh, the force behind MercPay in Japan's leading mobile payment platforms and Merkurons, one of the most important and fastest growing crypto exchanges in the country. Um, so thank you very much for being with me today.

Speaker B: Uh, thank you for inviting me.

Speaker A: It's a great pleasure for me. Did some research before, uh, uh, and I was very impressed by your background.

Speaker B: Thank you.

Speaker A: Uh, maybe before we start can you introduce yourself a bit? Where are you from, what have you done before and what bring you to this job? Okay.

Speaker B: So yeah, my name is Takeshi, I'm from Japan. Um, I started my career at um, telecom career and I worked there for seven years and then I did mba uh, in the US and then I joined Amazon. Um, uh, so that's where I started working on a consumer uh, product and then I moved to bitflyer which is the largest crypto exchange in Japan. So uh, that was the time I would say I joined the fintech world. Um, at the time it was like 2018 and I was really interested in blockchain technology and also Bitcoin itself. And I joined the uh, largest crypto exchange in Japan. Um, and they are expanding to global so I thought it would be really great opportunity. Um, and then I joined Merpay about four years ago, um, mainly focusing on a product development and also uh, growth of the uh, business.

Speaker A: Okay, very interesting. Just before we go into uh, the different aspect of the business, Merpay is like a wallet, like similar to what I was doing. Like for example line wallet. And Rakuteno is very different.

Speaker B: Yeah, it's a mobile wallet and that has um, a payment method, multiple payment method. So you have the wallet and you have money there. You can use it via QR code, payment via physical card, via um, yeah, some general um, payment method in Japan.

Speaker A: Very interesting. Yep. Um, I was doing some research before meeting you and I saw like Mercury is kind of digital marketplace in Japan.

Speaker B: Right, Right.

Speaker A: So it's kind of similar to Rakuten or it's very different from it it's

Speaker B: very different because it's a C2C marketplace. So Rakuten is a B2C. Right?

Speaker A: Yeah.

Speaker B: So sellers are mainly business users, whereas in Mercari C2C. So the sellers are consumers, individuals. So that's the point of the, like how Merpay starts. Um, so um, at Mercari millions of sellers are um, sell their product and they got money and they have some money on their wallet M. So before having the mail pay, they can use the balance, uh, money on Mercari or they need to withdraw the money to banks. So by providing Merpay M, they now start using it in the uh, external merchant, like uh, convenience store, supermarket. So that's where makeup Merpay uh, had started.

Speaker A: Uh, just the last question on the Mercury, it's like people are selling everything they want. So for example, like uh, all clothes, video games, cars. Yes. Okay.

Speaker B: Yeah. So all the things.

Speaker A: Okay.

Speaker B: All physical goods. Yes.

Speaker A: Okay. Um, so just to understand a bit more, what inspires the leap from the marketplace because uh, for example in France we have like different marketplace but we don't have the payment system like Merpay and Merkon there. What was the trigger, uh, there, what was the leap of faith that you did from there?

Speaker B: I see. So the Mercari's mission is to circulate all forms of value, to unleash the all the potential in all people. So that circulate part is very important. So um, our founder uh, really liked the idea of the C2C marketplace because someone um, don't want to use this product but the other side, someone wants to buy it. Right. So that's the idea. And uh, the reason why we started doing the fintech business is um, so again, um, they have money on their wallet and why don't we uh, enable them uh, to use it outside uh, of the app. So that's how started. And also uh, for Mercoin it's pretty much the same. So now customers can pay by at Mercati and pay in the convenience store supermarket. And why don't we uh, allow them to have crypto, uh, by exchanging the money on their wallet. So that is how we started uh, the fintech business.

Speaker A: And um, if you still speak about the marketplace, um, it's an ecosystem basically.

Speaker B: Right? Yes.

Speaker A: So how this marketplace ecosystems can create a unique advantage for you when you create fintech products.

Speaker B: Oh, it's on the marketplace side.

Speaker A: Okay.

Speaker B: Yeah. So if you want to build let's say QR code payment product from Xero, your customer needs to deposit from Your bank. So you need to do kyc, you need to deposit and then now you can use it outside um the physical shops.

Speaker A: Right.

Speaker B: But the starting point is the different at Mercari. Yeah. So again millions uh of sellers, they have money on their wallet so it's so they can, they just need to try um something um spend outside. Yeah. Uh physical shops.

Speaker A: So when you have like all the KYC done and you have also like the Railman, the payments done, it's easier for you to create new product and release them because we have to scale directly after.

Speaker B: Right? Yes, yes, right, yeah.

Speaker A: Oh this is quite interesting. Um, uh, if you take a look on the uh, fintech CEO role for Macquarie Groups that you are doing right now, what was your first priority when you came there and what challenge surprised you the most?

Speaker B: Yeah, so um, so Merpay started about seven years ago. Since then we focus on the Mercari app, um UX integration. So our customers can use very smoothly inside the Mercari app. So um, many, most of the Mercari customers use Merpay inside Mercari. But uh, the first priority about a year ago when I uh became CEO was was um how do we want customers to use the uh Mirror Pay outside of the app. It's possible uh, it's for customers, they can use it but there are many competitors outside the app. Yeah. So what we did there was uh issuing the credit card, uh using their balance and also using their credit. So by releasing credit card about two years ago our outside app uh spend increased really a lot and our credit card business is growing uh really fast. Actually we released, we issued uh about 4 million credit card already in 2 years which is I uh would say fastest growing uh base in Japan's credit card product. Um yeah so I think uh that was kind of first priority and yeah challenge and we try to solve that.

Speaker A: Yeah well it's quite impressive. 4 million credit card in two years is like m. Maybe more than some banks already know.

Speaker B: Yeah, yeah, yeah, yes. So in terms of number of issued cards. Yes.

Speaker A: So you just mentioned like me now is used uh across million of uh physical and online uh location in Japan. What make it more just than another like mobile wallet or credit card.

Speaker B: Yeah. So the first one is I would say uniqueness of the Mercari's um C2C marketplace M. So in addition to that kind of the uh experience I would say integrated UX of the flexibility of the payment. So we provide balance payment also customers can charge from banks and also we provide a deferred Payment, it's like a BNPL product. Mhm. And also we provide, install payment, revolving payment. So we provided those kind of the um, kind of complicated payment method. Uh, but we uh, provided that in one app and in a very easy way. So customers love our um, product experience. So that is I would say uh, one kind of differentiator compared to our competitors in Japan.

Speaker A: Quite interesting. When I was doing my research I saw some interesting fact about like uh, Smart Money, uh one of your features. So from our understanding this helps to do financial inclusion.

Speaker B: Is it correct? Right.

Speaker A: Uh, so if I'm well understood, you can correct me if I'm wrong. Um, so you use transaction data to offer access to credit especially to underserved users. Is it correct?

Speaker B: Yes. So Merpay M Smart M Money is a lending product.

Speaker A: Mhm.

Speaker B: Um, and the way how we uh, approach about the credit um business is kind of unique. So um, in Japan there are some credit bureau. So many lending companies uh get the data from the credit bureau and they score it based on mainly only using that data. But on top of that Mercati M knows how customers behave when they sell something and they buy something and that we know the transaction data and also we have some evaluation data of the sellers and buyers. So we leverage those data um, and we give some of the kind of original credit to the users. So if a customer um, have let's say kind of lower credit bureau score but if they are done a uh, good transactions history at Mercari, we give additional credit. So that is something what we're uh, doing business.

Speaker A: You're leveraging on data. Yes, very interesting also. So like you do also um, a few other features. Right. Deferred payment, flexible credit, loyalty points. Um, it's quite interesting because like banks try to do also like this kind of loyalty points or uh, other features but sometimes they have difficulties to do it. So you have created a full ecosystem there. So how do you maintain user trust and financial responsibility at scales when you have millions of uh, users?

Speaker B: Yes, so that's a good question. Um, so as I said so those um, payment method is um, convenient but sometimes for many people it's kind of complicated. Right. So what we do is we try to uh, be easy to use and understandable. It's easy to understand that is something uh, we care about. So that's one kind of a product principle for us. Um, so if I were the customer and if I don't know much about um, this payment method, so what would be the best way to introduce that? And if in this situation, how customer would think. And so that is something we discuss a lot and we provide um, the integrated UX and easy to use and easy to understand. So I would say that kind of approach um, uh is working for us to build trust uh while providing that kind of complicated product.

Speaker A: Um, I have an extra question based on our discussion here. Do you have some demographics or data information you can share with us? Are uh, users mostly in cities or are they mostly new generation?

Speaker B: Oh I see. Yeah. So Mercaria is a mobile app product and that it released about 10 years ago and from then uh our main user is I would say 60 is a female.

Speaker A: Okay.

Speaker B: Yeah. And uh, at the time of 20 to 30. So now it's like 30 to 40. Okay. So that's a demographic data and for um, areas we don't think there is any like um, bias about the region. Yeah. But in general uh, it's kind of skewed to kind of female.

Speaker A: Okay, interesting.

Speaker B: Yeah.

Speaker A: And do you know why it's female?

Speaker B: Yeah, it's because I think um. So my hypothesis is like a mini female uh started having a kiss like a 30 or 40 and if kids grows so there are some goods that they can't use. Right. So they started selling it. Yeah, that's a starting point.

Speaker A: Yeah, I'm right at that place. Uh, I just got a kid like seven months ago and we purchase and we sell as well. So if you. It's totally true. It's a good uh assumption here. Um, I have a last question for this part on Merpay and then we can go further on Mercury. My next question would be like do you see Merpay evolving further into a full Neo bank or seeing focus really on embedded um, and lifestyle finance.

Speaker B: Yeah. So we have considered a lot about uh, going to the banking business or even security companies, companies area. Uh but um, based on our current analysis, um, in Japan at least it costs um, to some extent and uh, whereas the competition is very hard m. So uh, for now we haven't uh decided to go into that space. Um but in future if there is any kind of a change regarding that um, entering a cost reduction or if we see some new potential we would consider it resonate with me.

Speaker A: So I live in Hong Kong and I live in Hong Kong and few years ago we had that virtual bank license. Uh and I think in terms of um, the cost to acquire new customers is quite high. Um, one or two of these virtual banks did very well at the very beginning with some promotion and giving away money by referrals. And fees. Uh, but the condition to get that license you need to have like 30 million USD in capital at the beginning and you need to have your office based in Hong Kong operation. So yeah, it takes more than just uh, like it takes a lot today to get that license. So I think it's similar to for Singapore, Japan.

Speaker B: Yeah.

Speaker A: Okay, interesting. Thank you for all the context here. It's uh, quite uh, uh great for me to understand where you came from, but when you introduce yourself, you mentioned you came from the crypto exchange world right at the very beginning.

Speaker B: Right, right.

Speaker A: So since you joined uh, Mercury, you had Merpay and now you have uh, uh, Mercury. Uh, and this become quickly from what I got the most registered crypto exchange in Japan.

Speaker B: Right, right.

Speaker A: What problem were you solving that uh, other didn't do to get so many users coming to your.

Speaker B: Yeah, sure. Because I worked at the crypto exchange, I kind of know uh, what is the main difference. So the main difference is so if you want to uh, acquire a customer, the customer needs to do KYC and then they need to deposit money and then start buying it. So that's the process. Um, all the crypto exchange other than us need to do. At Miracle, we leveraged our Mercari's customer base. So Mercari has a 1 trillion um, JPY in GMV, so which is US$7 billion um, in GMB and also 17 million KYC customers. So um, that is a very big advantage. So in Japan, um, that was our first challenge. But uh, we talked to our regulators uh, to make sure that we can use that EKYC data of uh, Mercari and Merpay to open account at Mercoin. And so maybe you will be surprised about the experience if you go to Mercari and if you are KYC to customer, you just need to click two buttons to open an account. So that's how we changed the uh, kind of the number of the accounts. Um, and in one year we opened 3 million accounts. We are number one right now. And another thing is deposit. So in a usual uh, crypto exchange you need to get the deposit. Um, it's kind of um, cumbersome. Right. Um, but at Mercati we have some points, loyalty points, and also we have balance, uh, that is earned by selling some products. And we can just say, hey, uh, why don't we change the 1% of your loyalty points to exchange to the uh, let's say Bitcoin. So that is something that we do and also we do some promotions and that's how we kind of um, leverage our ecosystem at Mercari.

Speaker A: Oh, quite interesting. Like you leverage on the full ecosystem that you have created.

Speaker B: Yes, very good.

Speaker A: Um, another question is most of the people from my understanding, uh, buying crypto do it for investment purpose. So my question would be do you see Mercury purely as an investment platforms or do you see like this has a part of a larger vision for digital assets in daily life.

Speaker B: So our vision is Lata 1. So again our mission is circulate all forms of value to unleash all the people. Ah, to unleash the people. So um, circulate value means not only physical goods. So we believe a digital asset could uh, be circulated more. So uh, we started from the crypto exchange and let them have actual crypto. But also we started um, NFT Marketplace. Uh, we tried this about some years ago but we closed it and this March, so last month actually we released kind of a beta version of new NFT Marketplace where customers can buy NFT um outside Mercari. So we aggregated the information from let's say opensea or some other NFT Marketplace as the customers don't need to make their own wallet. Mercari are buying NFTs instead of the customers and we are doing the custody business there. So that is something that we just started and we want to combine uh, the crypto use 3 million crypto users and some new like a digital marketplace, um, customers. So that is the vision for us.

Speaker A: Yeah, quite interesting. Any kind of nft, it can be like NFT on Ethereum, on like Solana or other platforms.

Speaker B: So we're currently uh, only dealing with Ethereum 1.

Speaker A: Okay, yeah, interesting. Yeah, most of the products are there. Right. Um, okay, I just want to come back to one of the fronts you mentioned just before you spoke about the uh, loyalty programs and how you leverage on it. And from, from my research I was looking at uh, growing interest on tokenized loyalty and payments. M. Um, so I understand like you can see Mercury uh, prints uh on the platforms and you can transfer them to what you mentioned just before, like crypto. Right. So do you see Mercury Prints evolving to something more like blockchain based in the future?

Speaker B: Mhm. Yeah, so that's been discussed again uh, for some years and so, but so for, for now, um, we don't see um, there are some uh, beneficial points but it also costs. Right for now because Mercari points is just used within Mercari and Mercaripoint is just issued by Mercari. So it's like an internal Existing point. So we don't need to uh, change it the blockchain base for now, but in future if you want to, let's say um, build some ecosystem outside Mercari so that other players can issue Mercari points or other players can use Mercari points, then um, we may um, change it to the blockchain base. But for now it's not okay.

Speaker A: I just want to ask a question in terms of product, you have like a great product knowledge. So ah, when you look at the key things that you uh, need to build trust in crypto for the mainstream Japanese, uh, consumer, what are they those key things also?

Speaker B: So can you say that?

Speaker A: Yeah. So what are the key things you need to create trust in crypto?

Speaker B: Uh-huh.

Speaker A: For the mainstream Japanese.

Speaker B: Oh, I see. Yeah. So I think uh, it's not easy to. When we explain what this is and what that means. And so our approach is more casual. So um, so why don't we try um, having a crypto. So that's the approach we took. Um, so opening account is very easy and exchanging uh, from loyalty point, um, balance, it's easy. And also there is very small amount. So let's try to have it and see how it goes. And actually um, when the price of the Bitcoin Ethereum increasing customers kind of engaged more uh, on our platform. So I think first let them have and then moving the price. Right. And then they started having interest what this is. So I think that is the, I think most very important thing for many of the uh, kind of newbie for the crypto.

Speaker A: Interesting, interesting. I think like a lot of companies try to get to this point at this moment. Okay. Uh, quite interesting. So we really speak about like Japan uh, right now.

Speaker B: Right.

Speaker A: Um, and Japan is often seen as a very careful country when it comes to fintech regulation. Um, how do you balance innovation that everything you are doing and compliance in Japan basically.

Speaker B: I see. Yeah. So, um, before becoming the CEO, I was not really engaged with uh, our regulators. But after becoming CEO I started talking to them and I understand that they are really open to uh, build a kind of innovative product, innovative experiences uh, in Japan. So what I would say uh, regarding this naked balance is first talk to Japanese fsa. So we keep communicating with them and uh, have a good relationship. So one example is as I said, that EKYC approach was something new in Japan. So in low, uh, it's kind of um, vague. Right. So we need to talk to JFSN if it's okay and if it meets the requirement and there are many discussions and finally we reached at the point yeah, be compliant but be very smooth and a good experience for the customers. So I think um, yeah we are very careful but uh, they are also open uh, to, to uh, try something new. So yeah, having great good relationship is a pretty important uh, between us and

Speaker A: so you can have a good influence in the regulation for the coming years.

Speaker B: Yeah, so they also want to listen to uh, uh, what we think about the regulations.

Speaker A: Very interesting. Um, and do you see some opportunities to take uh, Mercari's fintech products, especially Mercantile and Mapei just beyond? Because we spoke about Japan a lot but beyond Japan, like for example into Southeast Asia or other markets?

Speaker B: Yes, um, I see um, much opportunities here in Southeast Asia. I came to this conference last year and I understand um, there are so many fintech, um, business opportunity here. Uh overall Japan is a good country but the growth rate is still kind of like several percentage, uh like 1 to 2 or 2 or 3 or that kind of percentage. But in uh, these countries around this area uh, the growth rate is much higher. Right. And also when I talk to the startups in um, Southeast Asia or companies, um, their expectation is pretty high so they grow like um, I would say like 50% but that's a normal thing for like many of the new business. Right. Um, so I feel like uh, there is a big opportunity. So that's why I came here and tried to build a relationship and look for some opportunities. Yeah.

Speaker A: Okay, very interesting. So you spoke about partnerships. Um generally fintech need to have like a important partnership like for example with banks. We also spoke about regulators just before um, and you just spoke about like startups. Ah, right. So, so sometimes tech players also come into the ecosystems. So how this is important for you when you create your ecosystem skills for innovations to partner with banks, with fintech, with regulators and startup.

Speaker B: I see. Yeah, it's pretty important. Uh, we built a partnership uh when we run business uh in Japan as well the banks and uh, let's say the payment gateways and credit card brands. So I believe it's pretty important to build a partnership. If you want to talk about the global expansion that's definitely uh, we need to partner with some like a big players. Um so um, we have some assets, let's say that we have um, ability to build a good product and also we know like how to um, grow the business uh in C2C marketplace space or fintech space. But we don't have the kind of let's say a license here. Right. So um, if I want to, if we want to expand the business in this kind of new area, we will definitely need some partnership with local players. Very good. Yeah.

Speaker A: Um, can I ask you a funny question? Yeah. So I went to Japan recently again I think it was a few months ago and I was in Ueno and Shibuya and every time I go to for example Tokyo or other places, I'm sometimes shocked that they still uh, cash needed and they don't take credit cards or wallet. But you work on this kind of industry where everything is digital for you, how do you see this? Because Japan sometimes is like the country we show on TV and documentaries saying like it's the most advanced place in the world in terms of technology adoptions. But sometimes as well it's very traditional the way that they operate for payment.

Speaker B: Yeah. So the main reason is just people just believe cash is more secure.

Speaker A: Mhm.

Speaker B: And also they have more control, uh, as long as it's cash. Um, but it's actually changed. Um, I'm not sure if you know, but uh, uh, about like six or seven years ago the cashless payment rate was about 25% but now it's 42%.

Speaker A: Okay.

Speaker B: So it increased about like 17 or 18 points in 60 years. So uh, if you know that six years ago it was uh, worse. But uh, yeah, now I think uh, in convenience store, supermarket, many people use QR code payment. But before it was cash. So I think in uh, coming some years, uh, all the uh, cash places will uh, gradually uh, changing uh, to the cashless payment.

Speaker A: Okay, very good. I mean I was there with um, so my, my wife and my baby and we tried to go to a few places and directly they were like so we just take cash and we don't have enough cash on us. But at the same time I can see like some, some amazing like consideration for like uh, uh, pregnant women and, and newborn babies everywhere. Even inside some temples where you have like rooms for them. I'm like always like wow, this is so amazing. Like you have great things and suddenly they ask you to have cash. It's quite funny. Um, I have a few more questions for you. Um, and I would like mostly to speak about leadership, vision and the future. Um, so one of the questions for you directly as a CEO of uh, merpay and merkrant is what has been the most rewarding part of building fintech at the earth of Japan's largest CTC marketplace?

Speaker B: Yeah. Okay. So I think the reason is uniqueness of Mercari Group.

Speaker A: Mhm.

Speaker B: So there are Some CTC marketplace around the world. Right. But I don't think uh there are many uh, which is integrated with um fintech products like us. Um so I would say let's say ebay, uh in US actually have the PayPal. Right. But uh, it's not really integrated like this and also they don't have crypto exchange or crypto connection. So I feel like um, Mercari is pretty unique. Uh, I don't think there is uh no similar product uh around the world. So I think that's the most interesting part to me to work uh, as a leadership in this company. Yeah, I want to, I believe this is really interesting product and uh, maybe we can come up something new uh, that is never seen around the world. Oh yeah, very good, very good.

Speaker A: And what kind of leadership principles um you use when you create your teams um, that you know spend both traditional finance and emerging technologies like cryptocurrencies.

Speaker B: Mhm. Yes. So uh, in terms of the leadership principles, um, so we hire tech or uh, mobile app or that kind of the tech savvy people in the business product side and also engineering side. Whereas we've hired traditional finance uh institution experienced people uh in the uh compliance, risk legal so that kind of site and we try to combine uh those people in one team. And the point is I think so the culture is kind of different. But the thing is uh, we tell them um this is what we want to achieve and we don't know how. Let's come up something new because anyway the way how we build is something new. So we need to talk to regulators, we need to research uh and what's the best experience with customers and we need to think together and build one good product. So that is something I uh tell to my leadership team leader members um, uh to build something new and innovation, innovative product. Yeah.

Speaker A: And still speaking about this, um, if you look at new trends in fintech, so you have AI gen, AI web, three embedded lending. Do you think they are all overhyped or. Which are still very underappreciated at this moment.

Speaker B: M. Yeah. So I think um Genai is still uh underappreciated. Um so in my personal opinion Genai is going to change the world. Um, so I would say it's like a uh smartphone like 20 years ago. So you can't imagine what is going to happen in 20 years later. Uh but we believe this is going to be something uh, that would change the paradigm. So we invest a lot uh about figuring out how we want to approach, how we should approach uh, this new technology.

Speaker A: Very good. And looking ahead five years from now, what is your boldest predictions for where Merpay and Merkwin or the fintech space in Japan is heading?

Speaker B: Yeah, so, um, again our mission is circulate all forms of value. We still have many value that is not circulating. So in, um, let's say five years, we want to, um, tokenize many things and very smoothly, um, customers can exchange those values. So for example, if you go to, let's say, store, you may be able to pay, let's say using your cryptocurrency or NFTs or whatever asset that you have. So if everything, uh, is tokenized and value is seen in a flat way, then that would be possible. So I think that is something the boldest, um, uh, thing that I imagine.

Speaker A: Thank you very much. Takeshi San. It's, uh, the end of this interview. Thank you very much for this fantastic conversation with me. I'm very glad you accept to come. And it's clear that Mercury isn't just, uh, changing how we, we shop and circulate all the value, but it's reshaping the way that we think about money and trust and everyday finance. So thank you for joining me.

Speaker B: Thank you very much.

Speaker A: Thank you.