Japanese Mini-Banks: Retail Banking Services through Convenience Stores

Abstract

This paper analyzes how leading Japanese convenience stores (CVS) have organized themselves over the last two decades to offer services more typical of retail banks. These stores act as mini-banks and offer loan repayments, utility bill collections, online purchase payments, funds transfers and credit cards. In addition, most stores offer more sophisticated financial services through automated teller machines and multimedia kiosks, often leveraging partner relationships. The main drivers in the evolution of mini-banks are CVS’ strength in the strategic application of information technology, opportunities in the Japanese financial sector resulting from a series of government-initiated reforms and the continued weakness of many Japanese banks following the collapse of the Bubble. Leading CVS have strategically combined these drivers in developing their mini-banks, while exploiting their 24 × 7 advantage. This mini-bank model creates value for CVS in three ways. First, it generates commissions from financial transactions. Second, it increases store traffic. Finally, it enhances customer loyalty through unique services for which customers come back to a particular CVS chain. This different business model thus potentially offers an interesting banking paradigm that could be replicated in other parts of the world if similar environments and opportunities exist. 7-Eleven appears to be experimenting with this in the US.