SmartBank secures $26M for its personal finance management app

The majority of the aging population in Japan still prefers using cash for transactions, according to a recent report citing government data. In 2023, cashless transactions in Japan totaled 126.7 trillion yen ($885 billion), accounting for 39.3 percent of all spending in the country, said the Japanese government. The government hopes that number reaches 40 percent by 2025.

The Japanese government’s initiative to increase cashless transactions is being supported by a Tokyo-based startup called SmartBank, which offers an app and services that make switching to cashless payments easier for people.

Shota Horii (CEO of SmartBank), along with his twin brother Yuta Horii (CTO) and Jun Taketani (CXO), founded the company in 2019 after selling their previous company, Fablic, to Rakuten in 2016. While running Fablic, the three discovered that many users were still using cash for everyday financial transactions. The founders launched SmartBank in an effort to address a problem within the consumer finance industry in Japan.  

SmartBank’s primary target users are individuals in their 20s and 30s seeking to manage personal finances, as well as married couples looking to manage their finances. Now the company says it has more than 1 million downloads, but they did not provide the number of users.

Its core product is a prepaid card and a finance management app that offers a deposit account. Its prepaid cards include the B/43 My Card, the Visa-branded payment card for single individuals; the B/43 Pair Card for users to manage their finances with their partners; and the B/43 Junior Card for teens.

“Our core user base,[which was B/43 My Card], is now the B/43 Pair Card users…this is significant as banks in Japan do not provide joint bank accounts, and B/43 has become the go-to product,” Shimogawara said.

The startup said Tuesday that it has raised 4 billion JPY ($26 million), with 1.1 billion JPY ($7.2 million) coming from debt financing and 2.9 billion JPY ($18.8 million) from equity provided by its current investor, Global Brain. The equity capital is from a fund formed with SMBC, one of the largest banks in Japan. As of April 2024, SmartBank had raised a total of 5.93 billion JPY ($38.5M) in equity and 1.1 billion JPY in debt since its inception. The startup will use the new capital to double down on hiring from 49 staff in October to around 100 employees by 2025; half of the total workforce will be the engineering team, SmartBank CFO Yuta Shimogawara said in an exclusive interview with TechCrunch.

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The latest funding comes roughly two and a half years after its Series A, $20M, in July 2022. The startup has since then expanded its user base and product offerings with the goal of becoming a comprehensive financial platform like a bank, providing a wide range of financial services to users in the future.

Just last month, the company introduced an AI receipt reading feature by using generative AI technology to transform its app into an AI-driven financial advisor, said Chihaya Akaike, the director of business operations at SmartBank. This feature helps users better understand their finances, optimizes and automates financial activities, and enables them to use, save, and invest their money, Akaike told TechCrunch.

“Consumer fintech services in Japan have been slow to use AI, but our goal is to become the leading AI fintech company in the country,” Akaike continued.

On top of that, the company recently added a feature allowing users to connect their credit cards and bank accounts to B/43 to get a holistic view of their finances. “We will be making our service accessible to non-card users as we open it so that users can start using B/43 without issuing a card and by simply linking their existing credit cards and bank accounts, which will also expand our revenue stream,” Akaike explained.

SmartBank obtained a license for money transfers three years ago, allowing users to withdraw their deposits in cash. It also received a prepaid payment instrument license in April, enabling the startup to hold users’ deposits. The licenses help the company offer services like payments and P2P transfers.

Its peers like MoneyForward and Zaim cannot hold users’ deposits, which limits their ability to assist users in managing their personal assets, such as savings and investments, according to the company.  

The five-year-old outfit plans to diversify revenue streams beyond its interchange fees (IRF), where most revenue comes from. In addition to IRF, it has implemented other services like Buy Now Pay Later (BNPL), subscription (B/43 Plus), and referrals, Akaike said.