SMBC Nikko Securities, a top Japanese brokerage house, will allow clients to open an account without the need to provide 'hanko' seals on their contracts at all its branches starting this month. All they will need is a Nikko sales representative to fill in a form on an iPad and take photos of their IDs using the tablet.
The digital form sends an alert when it is not filled in properly, eliminating any need for it to be refiled. Information about how to invest in the account will be sent by email. "It improves both customer satisfaction and business efficiency," says an SMBC Nikko spokesperson.
Efficiency matters to SMBC Nikko, the brokerage and investment banking arm of Sumitomo Mitsui Financial Group, as it tries to offset a revenue slump related to the coronavirus pandemic with cost cuts. During the April-June fiscal first quarter, its net operating revenue fell 2% from a year before. But with a 4% reduction in operating costs, the brokerage house managed to report a 27% increase in net profit to 6.4 billion yen ($61m).
Hanko seals have been widely used in Japan since at least the nineteenth century as a way to authenticate contracts. The need for a stamp on contracts has been a reason why paper still proliferates in financial transactions in Japan. But financial institutions are moving away from the century-old tradition amid the pandemic and the recession.
The government of Prime Minister Shinzo Abe is now leading efforts to end the hanko practice, declaring that the government would use electronic signatures more widely in its own contracts. In June, the government published clarifications that e-signed documents carry at least as much legal weight as those with a hanko seal, and are arguably more secure.
The need to affix a seal on a document has sometimes made working from home difficult, even amid the pandemic. For example, a working mother seeking a nursery place for her child has to provide proof of employment, which requires a company seal.
Digitization is inevitable amid the coronavirus pandemic, which shows no signs of abating in Japan as the number of new cases surged to new highs this week.
"There are still customers who want to avoid in-person consultations," said Kazuhiro Notsu, senior managing director of SMBC Nikko, in a news briefing on Wednesday. "We haven't been able to do sales activity in the same way as we did before."
"We took emergency cost-cutting measures in the first quarter. A separate medium-term cost-control program is also in progress," he added.
Daiwa Securities Group has been offering a hanko-free account since late last year. Its sales reps carry a Microsoft Surface Pro tablet when they visit customers. The sales rep takes a photo of the customer's ID, then an app in the tablet picks out information such as the customer's address and date of birth, sending this on to Daiwa's back office for further processing. "It has cut the time needed for opening an account in half, to 30 minutes," said a Daiwa spokesperson.
