Japan’s Kyash secures $8.5 million series A round for Visa-enabled P2P payments app


See the original story in Japanese.

Tokyo-based startup Kyash, the startup focused on offering remittance and payments systems, announced on Wednesday that it has fundraised over 1 billion yen (over $8.5 million US) in a series A round. This round was led by Jafco (TSE:8595) with participation from Sumitomo Mitsui Financial Group (SMFG; TSE:8316), Itochu Corporation (Itochu; TSE:8001), Dentsu Digital Holdings (DDH), and Mizuho Financial Group (TSE:8411). For Kyash this follows their previous 170 million yen (about $1.4 million US) funding in a seed round back in July of 2015, which was invested by SMBC Capital and two undisclosed companies.

In addition to the funds raised, Kyash will enter into business partnerships with SMFG, Dentsu, and Itochu. Also, Hiroshi Minoura, Sumitomo Mitsui Bank (SMBC)’s former Vice President and current CEO of US-based Greenhill & Co.’s Japanese subsidiary, will be appointed as an advisor to Kyash.

Since its launch back in January of 2015, Kyash has concentrated, almost entirely in stealth mode until recently, on the development of their mobile app “Kyash” which enables peer to peer money transfers (or C2C settlements), while developing a real-time push notification/history browsing system for mobile regarding credit card usage.

Kyash users can register their credit cards to their Kyash e-wallet app, charge their wallet with money from their credit cards, and then remit it to other Kyash users. Since it allows users to prompt other users to settle money owed, it is perfect for this season with all of the end of the year parties (for split-the-bill among participants)…is what I want to say but unfortunately the app has yet to be released with that announcement scheduled for January of next year. Currently the company revealed the product in Tokyo and has started tests using beta users. They have also started accepting pre-registration on the teaser site.

To further illustrate, it seems Kyash itself will function as Visa’s virtual credit card. This is made possible through contracting with Visa International which allows Kyash to issue credit cards and then enables users to use the money pooled in the Kyash wallet app to shop at Visa merchants around the world. Since Kyash is a virtual credit card it cannot be used in face-to-face transactions that require swiping like with CAT (credit card authorization terminal), Square, and Coiney, but they have the license to issue plastic cards so it can be expected that, rather than just sticking with P2P and online payment, they will venture into the offline payment scene soon. The company also plans to support Android and Apple Pay from next spring.

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In general, users who enter into contracts for electronic money wallets and credit cards are often charged membership fees, etc., and this becomes a major source of income for the companies that manage such services. In the case of Kyash the commission is completely free. This is due to Kyash being a card issuer. When a transaction takes place via Visa they can collect a fee, and furthermore, they collect any unused cash that has been pooled in a wallet, etc.

(When an electronic money provider in Japan keeps cash from users they are required by the Japanese Financial Services Agency to deposit the equivalent of 50% of the unused cash into an account at a trust bank. This is a measure to ensure that cash can be returned to the user even if the provider goes bankrupt. In managing pooled funds other than those deposited it is possible for providers to generate further profits, but Kyash does not mention this for now.)

An overview of the Kyash service (Image credit: Kyash)

Kyash’s Founder and CEO Shinichi Takatori is responsible for establishing overseas branches and overseas investment projects for SMBC, and has been involved in B2C operations with an American strategic consulting firm. As far as Takatori is concerned, Kyash has benchmarked the P2P service Venmo, which was bought by Paypal back in 2013. However, Kyash is most definitely the convenient choice as it can be used anywhere Visa is accepted, and he emphasized the possibility of fundamentally changing the way payments are handled. Among developed countries, Japan’s credit card usage rate is certainly not high, but in linking up with a system like Kyash an increase in the demand across credit card companies is expected. This high expectation is apparent in the fact that two leading financial groups signed on as investors this round.

In the same field, individual investor and serial entrepreneur Shinji Kimura revealed plans to launch mobile app Paymo, which is primarily for C2C transactions, within the year.

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Translated by Amanda Imasaka
Edited by Masaru Ikeda