Why Has Japan’s Banking Market Been So Difficult to Change? Vol.2

From the perspective of overseas companies, Japan’s banking market is often seen as conservative and slow to change. That impression is not entirely unfounded. Replacing systems that support core banking operations naturally requires caution, and it takes time for new operating models to gain broad acceptance.
However, Nomura, who led the launch of nCino Japan, argues that this explanation does not fully capture the reality of the market.

In his view, Japanese banks did not remain unchanged simply because they were conservative. Rather, even when institutions wanted to change, they lacked the practical “tools” to do so.
What, then, became the trigger for change? We asked Nomura how the landscape looked when he first entered the market, and how today’s Japan differs from what he saw then.

Q: When you first entered Japan’s banking market, what was your initial impression?

Nomura:
At the time, financial institutions were still operating very much with a scratch-built mindset. Even now, I would say that remains the dominant view for many institutions. That said, the landscape today looks entirely different from what it did five years ago. On that point, I can speak very clearly.

Q: So in your view, the market cannot simply be described as “conservative”?

Nomura:
That is correct. Of course, there is caution, but that alone does not explain the situation.
At that time, if you looked across Japanese banks, there was not a single institution using a foreign service to operate a core function such as lending. More fundamentally, the very idea of adapting business operations to SaaS did not meaningfully exist in the history of Japanese banking.

Even when people spoke about cloud adoption, in many cases the discussion remained at the infrastructure level. So before we even reach the question of whether the market would or would not change, the reality was that this type of option simply did not yet exist.

“Even if Institutions Wanted to Transform, They Had No Real Tool for Doing So”

Q: In other words, the issue was not that banks were unwilling to change, but that they lacked the means to do so.

Nomura:
That is exactly right. The structure of the workplace also plays a role. When organizational mechanisms shaped by the high-growth era remain in place—such as employment systems premised on lifetime employment or other legacy personnel structures—it becomes inherently difficult to create strong incentives for large-scale change.

That said, it is not at all the case that there was no need for transformation. In practice, the number of people available to do the work is shrinking because of Japan’s demographic trends, while top-line performance still has to be maintained or improved. That creates a real contradiction for the people working in these institutions.
The issue, in my view, was that there was no visible, realistic option for resolving that contradiction.

Q: And that is now beginning to change.

Nomura:
Yes. One of the most important changes is that there are now actual nCino reference cases in Japan.
Five years ago, there were no banks using foreign services for core functions such as lending, and there were zero nCino users in the market. Today, that has steadily changed: first one institution, then two, then three, then five, then ten—and we are now approaching the fifteenth.

That said, the market did not expand in its current form from the outset. Within a year and a half of my joining, we had signed our first three banks, so at the time I thought, “Perhaps we can build momentum more quickly than expected.” Looking back, I feel that those early wins were possible precisely because the banks that decided first had particularly innovative organizational cultures and a clear willingness to lead the way.

Most banks, however, do not move that way. They generally want to see proof of success at other banks before acting. Regional banks, in particular, watch other regional banks very closely. Accordingly, even after we had signed our first three banks, the broader market did not move immediately. Instead, we entered a period in which we revisited our approach in preparation for a full-scale market takeoff.

Reference Cases Became Powerful Only After the Proposal Itself Changed

Q: Was there a particular turning point that caused the market to begin moving in earnest?

Nomura:
In the early phase, we structured our proposals around the practical reality that many banks felt they could not replace their existing core systems. As a result, we proposed leaving the back-end systems in place while using nCino only for the front-end UI layer.
At the time, that approach had a certain logic to it. However, if the back-end systems remain untouched, the underlying cost structure does not fundamentally change. A new investment is simply added on top, which inevitably makes the ROI logic weaker.
The limitations of that approach became unmistakably clear when one major opportunity was escalated all the way to the bank president and then rejected. That was the turning point.

Following that, we held extensive discussions with headquarters and shifted away from partial improvement toward what we regarded as the proposal’s proper form: rethinking the lending process more comprehensively. A full-scale transformation naturally requires a corresponding degree of effort and commitment, but it also creates the possibility of reducing total cost, centralizing data, and explaining productivity gains much more convincingly to management.

Only at that point did it become possible to demonstrate, in a more compelling way, that even Japanese banks could achieve the expected—or in some cases greater than expected—ROI by adapting their operations to SaaS.
Once results like that begin to emerge—greater operational efficiency, shorter time to lending—other banks inevitably take notice. That is why the market’s momentum has gradually begun to strengthen. In my view, the single biggest difference between five years ago and today is that those successful early movers have become visible in a tangible way.

More Important Than the First Customer Is a Case the Market Wants to Emulate

Q: Then would it be fair to say that, in Japan, securing the very first logo is not necessarily the most important thing?

Nomura:
Yes, I would say that is true. Securing the first customer is, of course, important. But what matters even more is whether you can create a form of success that the market itself wants to emulate.
In Japan’s banking market, the fact that “someone has already done this, and that it has clearly led to results” carries tremendous influence. That is precisely why I believe the accumulation of nCino reference cases has played a meaningful role in the market’s recent shift.

To be continued in Vol. 3