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TOKYO: Japanese chat app operator Line Corp will set up a bank with Mizuho Financial Group Inc and also partner China’s Tencent Holdings Ltd to offer mobile payment services: plans which saw its stock rise 13 percent on Tuesday.

Pending regulatory approval, the bank will provide financial services to Line’s almost 80 million users from 2020, Line and Mizuho said, without detailing the services to be offered. Line will hold 51 percent of the bank with Mizuho owning the rest.

Separately, Line said Japanese retailers offering Line Pay services will be able to process payments from Chinese tourists using Tencent’s WeChat Pay beginning early next year.

The moves come as Line seeks alternative revenue streams to offset stagnating user numbers for its eponymous flagship app, expanding into areas such as payments, stock broking, insurance and cryptocurrencies.

“We expect financial services to start contributing to profit in the medium term,” Line Chief Executive Takeshi Idezawa said at a strategy briefing. “We are making big investments in fintech and AI,” he said, referring to financial technology and artificial intelligence.

Japan’s tech firms are increasingly looking for growth by offering financial services to their existing user base. The trend has also been seen at retailers in recent years, with convenience store operator Lawson Inc entering the banking sector just last month.

For traditional lenders such as Mizuho, hamstrung by years of low interest rates, tie-ups with tech firms offer an opportunity to attract younger, tech-savvy customers.

“It will give us a point of contact with a young generation, which we megabanks are not good at reaching,” said Mizuho’s head of retail banking, Toshitsugu Okabe.

Mizuho joins another of Japan’s financial giants, Nomura Holdings Inc, in teaming up with Line. In May, the country’s biggest brokerage and investment banking group said it would set up an internet-focused securities brokerage with Line.

News of the tie-ups on Tuesday lifted Line shares to close up 13 percent, adding about US$1 billion to the firm’s market value. The stock is still down more than 16 percent this year. Mizuho and Tencent’s shares were flat.

With its growing number of Chinese tourists, Japan is increasingly attractive for China’s tech titans, with Alibaba Group Holding Ltd affiliate Ant Financial and ride-hailing firm Didi Chuxing announcing services in recent months. Both Alibaba and Didi Chuxing are portfolio companies of Japan’s SoftBank Group Corp.

Japan has been slow to move to cashless payments, with a rush of entrants such as Line Pay and SoftBank-backed PayPay encouraging consumers to use QR code-based payments, which have become widespread in China, India and elsewhere.

Source: Channel News Asia (Reporting by Sam Nussey and Taiga Uranaka; Additional reporting by Chang-Ran Kim; Editing by Muralikumar Anantharaman and Christopher Cushing)

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