Banking With the Dinosaurs

Banking With the Dinosaurs

It’s time for Japan’s banking system to get competitive


Originally published on on February 2010

I was recently in China on a business trip and, like everyone else who visits the country, I was astounded by the rapid economic growth I saw everywhere. Sure, China is still less developed than Japan in many areas, but in others it has already sailed past its neighbor.

Take, for example, retail banking. Almost all Chinese banks in urban areas have ATMs that accept most cards, both foreign and domestic, 24 hours a day. Many banks stay open past 5pm, and some even have hours on weekends and holidays. In other words, in China banking is the way it should be—fast, convenient and reliable. Those of us who live in Japan can only wish that were the case here.

Let’s start with ATMs. For some mysterious reason, Japanese “automated” teller machines keep hours similar to their human counterparts, and most of them won’t even read a foreign card. Those banks that do have ATMs available after hours do incredible things like charging fees for making a deposit. And then there’s the quasi-public postal banking system, which does have ATMs that accept foreign cards. But, like good public servants, the machines don’t work overtime.

As inconvenient as the ATMs are, a trip to a teller window can be even more frustrating. Banks are only open on weekdays, never on holidays or weekends, and most only from 9am-3pm. You must take time off to visit the bank, unless there happens to be one close to your work and the lines are short enough for you to visit during lunch.

Unfortunately, this is rarely the case. Thanks to the web of non-standard furikomi fund-transfer fees, which can vary based on the banks involved or even the time of day, you need multiple accounts, lest you get smacked with a fee for just receiving your paycheck. As a result, most people in Japan end up with accounts at several banks, plus the post office, and it’s unlikely these are all within walking distance of where they work. For example, I have a special account at a third-rate bank whose closest branch is nowhere near anything, just because it’s the only way I can furikomi my rent to my landlord without paying a fee.

I asked an upper-level manager at one of Japan’s bigger banks why they close so early. “The staff have things to do in order to close up shop at the end of the day,” he replied.

I am not satisfied with this answer. All businesses have to “close shop” at the end of the day; why must banks start that process two or three hours before everyone else? In other countries, big city banks often have branches open past 7pm, as there is enough foot traffic to make this profitable. Last time I checked, Tokyo was a big city.

And then there’s banking bureaucracy. How many middle-aged men sitting at desks in the back of the room does it take to “oversee” tellers who should be capable of working on their own? For a country that places so much emphasis on labor-saving automation, Japan’s banking procedures are strikingly manual.

For example, I recently signed up for electronic banking, a process that was anything but “electronic.” After filling out three different forms in triplicate, which involved a teller and two senior employees and a couple of phone calls to clear up their mistakes, I managed to get my account set up. But then I was told I would still have to come to the bank, during business hours only, to use the ATM to put money into the account.

It’s not just that Japan’s system is inconvenient as compared to that in China or the West—it’s inconvenient compared to practically everywhere else. Of the 60-odd countries I’ve traveled to, only two had ATMs less convenient than Japan’s: Myanmar and North Korea—and that’s because they didn’t have any. Even in small post-Soviet countries like Tajikistan, or in war-torn Afghanistan, it’s easier to find an ATM that accepts foreign cards and stays open late.

The commonly heard excuse for all this—that Japan is still a “cash-based” society—doesn’t hold water. The same is true of most of the world’s 200 countries. Japan is famous for championing industrial policy and the state-sponsored advancement of high-tech industry. If that’s what it takes to get the banking system whipped into shape, then perhaps the bureaucrats over at the Ministry of Economy, Trade and Industry should take a hack. Otherwise I know a solution that would work: open up the banking industry to more direct, unregulated foreign competition from firms like Citibank, HSBC and the Bank of China, who understand the concept of 24-hour ATMs and convenient retail banking. This would force the dinosaurs to evolve or face extinction.

Illustration by Ben Turner