LINE, Mizuho call off plan to set up mobile-only bank in Japan

LINE Corp. and Mizuho Financial Group’s plan to introduce an internet-only bank in Japan has fallen through about five years after they unveiled the plan, due to drastic changes in the country’s digital banking industry landscape given intensifying competition.

LINE on Thursday announced that it has decided to put an end to its joint effort with Mizuho FG to launch a “never-before-seen smartphone bank that would offer all its banking services within the LINE app” backed by Mizuho’s banking know-how, citing massive changes in online banking trends and tighter scrutiny over digital financial services in Japan.

“After much careful consideration based on these developments, LINE and Mizuho FG have mutually reached the conclusion that additional time and investment would be required to provide a secure and convenient service that meets customers’ expectations and that at present, this would not be attainable in a timely manner,” LINE said in a statement.

LINE is Korean internet juggernaut Naver Corp.’s Japanese subsidiary that runs a wide range of businesses in Japan from the LINE messaging app to the webtoon service LINE Manga.   

Mizuho FG also said in a separate statement on Thursday that it will call off the joint project with LINE to develop smartphone-based LINE Bank due to a lack of additional investment and delays in creating the service.

Following the latest decision, the partners will liquidate LINE Bank Preparatory Company, the 50:50 joint venture set up in May 2019 by their respectful subsidiaries LINE Financial Corp. and Mizuho Bank Ltd. to develop the mobile-only bank in Japan.

Their original plan was to introduce the “smartphone bank” by 2020 but put off the plan until 2022.

Various challenges in developing a mobile bank operation system and the intensified competition in the country’s digital bank industry have, however, led them to abandon their joint effort.

Rakuten Bank Ltd. with more than 13 million accounts and other mobile bank operators are fiercely vying to win customers in Japan with big fee discounts as it is getting hard to differentiate their financial services with technological innovation.

Despite the dissolution of the online bank JV, LINE and Mizuho FG will continue to collaborate to provide better services for users of LINE Credit Corp., another joint venture established by them to offer personal loan services in Japan, according to LINE. 

LINE Bank currently operates in other countries including Indonesia and Taiwan. It can be accessed via the LINE messaging app and offers a wide range of financial services. 

Write to Seung-Woo Lee at leeswoo@hankyung.com

Sookyung Seo edited this article.