SmartBank Secures $26M Funding to Enhance Cashless Payment Solutions in Japan

Smartbank Funding News

SmartBank, a Tokyo-based fintech startup, has raised $26 million in a new funding round to bolster its personal finance management app. The capital injection includes 2.9 billion JPY ($18.8 million) in equity from Global Brain—a fund backed by SMBC, one of Japan’s largest banks—and 1.1 billion JPY ($7.2 million) in debt financing. This funding round brings SmartBank’s total equity raised since its inception in 2019 to 5.93 billion JPY ($38.5 million), complemented by 1.1 billion JPY in debt.

SmartBank was founded by Shota Horii (CEO), his twin brother Yuta Horii (CTO), and Jun Taketani (CXO) after they sold their previous company, Fablic, to Rakuten in 2016. During their time at Fablic, the founders noted that many people in Japan continued to rely on cash for everyday transactions despite the growing global trend toward digital payments. SmartBank was born out of their vision to modernize Japan’s consumer finance landscape by making cashless transactions more accessible and efficient.

Japan has been traditionally known for its cash-centric economy, particularly among the older population. Government data from 2023 showed that cashless transactions totaled 126.7 trillion yen ($885 billion), representing 39.3 percent of all spending. The government aims to increase this share to 40 percent by 2025, signaling a push towards digital adoption in financial activities. SmartBank’s offerings align with this vision, positioning the company as a critical player in supporting the shift towards cashless payments.

The startup’s flagship product is a finance management app paired with prepaid cards, branded as B/43. The app’s primary users are young adults in their 20s and 30s and married couples who want a streamlined way to manage their finances. SmartBank’s B/43 card suite includes the B/43 My Card for single users, the B/43 Pair Card for partners managing finances together, and the B/43 Junior Card designed for teenagers. According to Yuta Shimogawara, SmartBank’s CFO, the B/43 Pair Card has seen significant uptake, filling a gap left by traditional Japanese banks that do not offer joint accounts.

“Our core user base, which started with individual users of the B/43 My Card, has shifted to couples using the B/43 Pair Card,” Shimogawara noted. This development underscores the startup’s unique positioning in a market where joint financial management options are limited.

SmartBank plans to use the latest funding to scale its workforce, aiming to increase its staff from 49 employees in October 2024 to around 100 by 2025. Half of the expanded team will be engineers, reflecting the company’s commitment to continuous product development. “We see this investment as a stepping stone to not only grow our user base but also enhance our technological capabilities,” Shimogawara said in an exclusive interview with TechCrunch.

Since its $20 million Series A round in July 2022, SmartBank has made strides in broadening its product offerings and expanding its user base. The company aspires to evolve into a comprehensive financial platform, ultimately delivering banking-like services to users. A significant step in that direction was the recent launch of an AI-powered receipt reading feature, which leverages generative AI to help users better understand and manage their finances.

“Our goal is to become the leading AI fintech company in Japan,” said Chihaya Akaike, SmartBank’s director of business operations. “While consumer fintech services here have been slow to adopt AI, we’re committed to using this technology to optimize and automate financial activities for our users.” The AI feature functions as a digital financial advisor, simplifying expense tracking, offering insights, and empowering users to make informed financial decisions.

In addition to integrating AI, SmartBank recently introduced a feature that allows users to link their credit cards and bank accounts to the B/43 app. This update aims to provide a more comprehensive view of users’ financial activities. “We want to make our service accessible even to non-card users,” Akaike explained. “By allowing users to link existing credit cards and bank accounts, we’re expanding our revenue model and broadening the app’s utility.”

SmartBank holds both a money transfer license and a prepaid payment instrument license, enabling it to offer services such as cash withdrawals and P2P transfers—capabilities that distinguish it from competitors like MoneyForward and Zaim. These companies, while popular for budgeting tools, lack the licenses needed to hold user deposits, limiting their scope in helping users manage assets and investments.

To diversify revenue beyond interchange fees (IRF), which currently account for most of SmartBank’s income, the company has rolled out additional services. These include a Buy Now, Pay Later (BNPL) feature, a subscription plan called B/43 Plus, and referral programs. “These new services are part of our broader strategy to create a sustainable revenue stream while offering more value to our users,” Akaike said.

SmartBank’s expansion and product innovation come at a time when Japan’s fintech landscape is evolving. While digital financial tools have gained traction, there is still significant room for growth compared to other advanced economies. The company’s dual focus on technological advancement and user-centric design has enabled it to carve out a niche in a competitive market.

The introduction of features like the AI receipt reader and linking of existing accounts is designed to cater to users seeking more sophisticated financial management tools. By integrating AI and expanding its service offerings, SmartBank aims to position itself as a leader in Japan’s emerging cashless ecosystem.

“We are excited to continue building a platform that not only meets the needs of today’s consumers but anticipates future financial trends,” Akaike concluded. As the Japanese government pushes for greater cashless adoption and fintechs continue to innovate, SmartBank’s strategy places it at the forefront of this transformative period in the country’s financial sector.