If Yahoo Japan’s most recent attempt at starting a joint venture and taking a position in an online bank succeeds, it could be a testing ground for establishing an online payment service.
Everyone in Japan seems to want to take deposits from customers. Sony and 7-11 both own virtual banks in the country, Reuters reported, and the rumored arrangement between Yahoo Japan and SMFG would place Yahoo in the mix.
While Yahoo has confirmed talks with SMFG and Japan Net Bank have taken place, details have not been provided. Should these prove fruitful, SMFG’s Sumitomo Mitsui Banking Corp and Yahoo Japan would form a joint venture in Japan Net Bank.
Though Yahoo would start with a minority share of 14 percent ownership in the joint venture, that would eventually rise to 50 percent. This will equate to a 30 percent position in Japan Net Bank held by Yahoo Japan, and should provide favorable benefits to Yahoo like reduced payment processing costs.
Owning a bank gives an enterprise control over the payment processing aspect of its business. Instead of paying a third party for processing credit card payments, a company bank does the work.
The world’s biggest retailer, Wal-Mart, has long wanted to have an institutional bank as part of its business. That prospect has terrified the commercial banking industry, and Wal-Mart has not yet been able to accomplish this.
Perhaps Yahoo plans to use the expertise it gains in Japanese banking in the US. Ebay has PayPal, and Google has been developing its online payments system. Yahoo has similar needs for payment processing for its auctions and virtual storefronts that it hosts.
Maybe NetBank will receive a call from Terry Semel, seeking to open discussions about a venture similar to that of Yahoo Japan and SMFG. The purely online NetBank would benefit from the influx of business from Yahoo’s users, while Yahoo would receive more favorable payment processing terms.
A joint venture should be simpler than writing a payment system from the ground up to compete with PayPal and Google Payments, too.
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David Utter is a staff writer for Murdok covering technology and business.
