Aiming to Create a Cashless Society

Since its establishment, GMO Financial Gate, Inc. (GMO-FG) has specialized in face-to-face payment, providing a variety of cashless payment solutions. We have expanded market share by breaking the industry's conventional high-cost structure for both payment information processing centers and payment terminals while implementing a low-cost strategy aimed at returning profits to affiliated merchants and users. We were listed on the Tokyo Stock Exchange Mothers in July 2020. The following is an interview with President Kentaro Sugiyama and Chairman Akira Takano over their relationship with Mitsubishi UFJ Capital (MUCAP) and future prospects.

Background

—In an attempt to penetrate an oligopoly formed by two major players

Chairman Takano:Our company was originally established in 1999 as a data processing center offering outsourcing servicers of communications and payment for debit cards in the system called J-Debit. The company became an affiliate of GMO Payment Gateway, Inc. (GMO-PG) in 2010 and changed its name to GMO Financial Gate, Inc. in 2015 before becoming a consolidated subsidiary of GMO-PG in September 2016. In terms of business type, we have always been a provider of face-to-face payment solutions.
Ever since I started my career, I have constantly devoted myself to sales jobs. Starting with Casio Computer, I have worked at various companies with a primary focus on sales. I joined the predecessor company in 2010 when it joined the GMO Internet Group and I was appointed president. Mr. Issei Ainoura, the then president of GMO-PG, asked me to use my sales skills to help rebuild the company, which was in an earnings slump. Both President Ainoura and I once worked on the same team at IBM Japan.

President Sugiyama:I started my career as an IT engineer in 2001. At that time, financial institutions were undergoing active restructuring and the industry was in dynamic transformation. While I wanted to get engaged in making things, the movement of money was also a subject of my interest. That's why I joined IBM Japan, where I got involved in developing financial systems and architecture. This means that I followed the path of Chairman Takano and President Ainoura.
As I developed my career, I came up with the idea of utilizing expertise in making things to provide services to society. This eventually encouraged me to join GMO-PG in 2014, where I learned management skills while working on service development with particular focus on the field of E-commerce. I then joined GMO-FG in 2017, which coincided with the time when cashless services were about to grow further with an attractive market environment potentially offering big business opportunities. Another factor that encouraged me to switch careers was the presence of attractive people at GMO-FG, including Chairman Takano, which convinced me that a strong team would be put in place.

Encounter with Mitsubishi UFJ Capital

—Helping hand for last-ditch effort

Chairman Takano:Around the time when the predecessor company was established, the face-to-face payment market was in a state of oligopoly formed by two major leading companies. In such an industry, costs tend to remain high. So, we thought our low-price strategy would work to break the high-cost structure, and that will lead to win market share. This was how we started out, but we continued to face difficult times. I was later appointed president, but failed to turn the company around with particular difficulty in cash flow management. In 2011, we found ourselves in a situation where further bank borrowing would have resulted in our losses and excessive liabilities being transferred to the consolidated account of our parent company, GMO-PG. This made us realize that we had to raise funds on our own, but we also came up with another option: raising funds while committing to growth, which literally meant the last-ditch attempt. Then GMO-PG President Ainoura said, "I know a reliable person," and introduced to me Mr. Shimizu of MUCAP.
Mr. Shimizu was in charge of GMO-PG and was well aware of President Aiura's competence. Mr. Shimizu later said, "E-commerce has grown and prevailed just as President Aiura predicted. So GMO-FG has a good chance of being successful as it plans to do a similar business using face-to-face payment. Particularly reassuring is that you are in charge of the business as Ainoura gave his confidence to you." I truly felt indebted to Mr. Shimizu as he extended a helping hand to us at a critical moment.

Relationship with Mitsubishi UFJ Capital

—Confidence in your partner is the ultimate contribution

Chairman Takano:I was impressed by the fact that Mr. Shimizu of MUCAP consistently gave his confidence to us from the very beginning of our encounter. We were in a difficult situation and he extended support to us. He shared with us both concerns and dreams to the extent that we forged a trusting relationship. Mr. Shimizu's passion to learn more about our industry was outstanding compared with that of other venture capitals. He listened to us more carefully and asked us more questions of high quality. We noticed and learned a lot from conversation with people from MUCAP, including an analyst we met.
In contrast, some of the other venture capitals cut off contact with us after categorically denied our business plan. When I was at a different company before, I once had business with a venture capital related to a business company, which generously offered us funds but immediately tried to collect them by requesting us to buy their own products. I thought that any venture capital was more or less like that, but MUCAP was completely different. As far as we are concerned, relationship with MUCAP has been not just business, but person-to-person interaction. They gave us their confidence to the extent that we felt enthusiastic, determined not to leave our responsibility unfulfilled and to live up to more than their expectations. This encouraged us to achieve beyond our real strength. What I learned from Mr. Shimizu of MUCAP is that confidence in your partner is the ultimate contribution.

President Sugiyama: I also have had opportunities to have business with MUCAP after I took over presidency from Chairman Takano. People from MUCAP have attended monthly meetings of our board of directors on a regular basis. Every time we had to conduct some coordination with other venture capitals before we were listed, we always consulted with MUCAP in advance to ask for appropriate advice. Even when I talked with people from other venture capitals, they always asked me what perspective MUCAP had. I made sure that I talk as advised by MUCAP, which always resulted in an immediate agreement like: "Let's do what you have said." Mr. Shimizu's profound insight has always been a tremendous help to me.
Furthermore, as Chairman Takano mentioned, it is impressive that he has been a good listener, always trying to understand everything from the market environment to our growth strategy. MUCAP is the only entity that carefully listened to us and understood how the trend of cashless payment would play out in the future, including its social background. When we consulted with MUCAP to seek advice, saying "We want to take this opportunity to implement these measures and this requires us to postpone the date of listing," they immediately responded: "Yes, it should be postponed. We will discuss the matter in our company to gain understanding." I am truly grateful to MUCAP for their constant and step-by-step support to help us become a listed company.

Future Prospects

—Supporting the shift to cashless in all industries and business types

Chairman Takano:While we have become a listed company that can raise funds from the market, upcoming challenges will require us to make various decisions as we expand our business operations. In doing so, we will seek support from MUCAP that is certain to be instrumental in identifying reliable companies. We would appreciate continued support from MUCAP in dealing with various issues.

President Sugiyama:We are currently enjoying a following wind in the cashless market. As the working population shrinks due to the declining birthrate and aging population, there is an increasing need to reduce the cost of money management. Cashless has the potential to promote this trend. One example would be the operation of vending machines that are available in large numbers in the world. It requires the time and trouble to collect cash and replenish change, but the shift to cashless would reduce the entire operation itself. It would also be possible to monitor in real time what products are selling at each specific vending machine. This shows how we are seeking to achieve something beyond cashless. MUCAP has already introduced to us some companies that would potentially help create a synergy effect as partners. They also told us the other day that: "We will accompany you until you are listed on the First Section of the Tokyo Stock Exchange," which encouraged us tremendously. We would appreciate further support from MUCAP in the coming years.

Interviewed in October 2020

Company

GMO Financial Gate, Inc.
https://gmo-fg.com/

Primary business activities

Provision of cashless payment infrastructure for credit cards, debit cards, e-money, etc.

Company History