Keep up with the latest FinTech and private market news, business tips, and thought leadership from industry leaders, mentors, and professionals.
Join our mailing list to receive information on upcoming Helicap platform updates and webinars.
If you're excited about the potential of private markets and fintech, we've got a job for you.
Justin Balogh, President and CEO of Toranotec, is a prominent leader in the fintech industry. With extensive expertise in investment strategies and financial technologies, he has been pivotal in fostering innovation and growth at Toranotec. Under his leadership, the company raised 2.9 billion yen (US$26.4 million) in its latest financing round in August 2021. This round was led by JIC Venture Growth Fund 1, managed by JIC Venture Growth Investments, and included investments from Seven Bank, Aslead Capital, AG Capital, and Sumisei Innovation Fund.1
His vision and leadership have not only elevated the company’s market presence but also paved the way for transformative financial solutions. Known for his strategic insights and dynamic approach, Justin continues to shape the future of fintech, making financial services more accessible and efficient for a global audience. In this interview, Justin shares his journey, insights, and vision for the future of fintech, offering a glimpse into the experiences and philosophies that have shaped his successful career. His expertise and forward-thinking mindset continue to influence the fintech landscape, inspiring both his team and the broader financial community.
2016 was a period in Japan and many countries where fintech and more specifically wealth-tech were starting to make progress. There had of course been several internet brokers in the Japanese market before that but many were more suited to those who had both an inclination and some experience with investing. Offerings suitable to newcomers were less prevalent. Industry data showed us that more than 60% of people in every age demographic in Japan still had not experienced any form of mutual fund or securities investment. Naturally, this percentage was even more pronounced for younger demographics. In such an advanced economy, the fact that so many people were still not exposed to investing or asset formation was a huge greenfield opportunity. The challenge we had to overcome was the inherent bias towards cash savings accounts and broad risk aversion. Japan is a paradox in the sense that on one hand there is a narrow client segment that aggressively pursues retail FX trading or cryptocurrency trading which carries higher risk and on the other hand there has been a broad lack of middle ground participation for long-term stock or mutual fund investing. This, however, has started to change over the past couple of years.
Prior to launching Toranotec, I was in an institutional finance role based in Tokyo. Whilst observing the opportunities in fintech and wealth-tech that were fast developing, I decided to take the initial step of starting the venture. Fortuitously, an opportunity to acquire an existing asset management company was presented. This allowed us to access all the licensing and regulatory frameworks upon which a technology platform could be built and was the final catalyst to accelerate the decision to actually begin.
From there we decided to develop a concept to make wealth management a part of everyday life. Our goal was to help the average Japanese people get over the latent psychological barriers to investing and their tendency to leave money in near-zero interest bank accounts. We pursued this through partnerships with a wide variety of companies that were in financial services but innovatively also in real economy sectors like retail, mass transit, entertainment, lifestyle, etc. We saw an opportunity to take a different approach and offer a softer, more accessible entry into the world of investing. By creating the first contact with investing that is found within and amongst brands, services, and sectors that people use in their everyday lives, we have developed a service where nearly 70% of our customer base were absolute first-time investors. Our company message was translated as “Everyone can be an investor” and we meant that literally. Through our service, it is possible to begin investing even without cash, by using rewards currencies such as loyalty points.
No doubt that managing the balance between work and personal life is a challenge nearly everyone faces, but something as simple as keeping a clear distinction between the working week and weekends has been important. Particularly in the early period of a venture, this is easier said than done with so much ground to cover but more so with a family. Carving out the weekends helps to ensure a separation between entrepreneurship and home. This is important for oneself but also for family and friends. This helps to ensure time and attention can be given to these relationships. A venture is an important undertaking and commitment to shareholders, customers, and employees but the challenges and responsibilities of entrepreneurship should not eclipse everything else in life.
Basic digital access to mutual funds or securities investing is a technology offering that is now broadly well-developed in many markets. However, we believe that opportunities still exist to evolve the type of access, improve delivery mechanisms, and apply creativity to ways in which people are brought into contact with investing. For example, a few years ago we developed an in-app technology solution for the first-ever program to allow airline mileage customers to directly convert their airline miles into investable currency for mutual fund investing. This allowed latent mileage balances to be utilized for investment. This concept was extended to many other loyalty and reward programs which became an easy on-ramp into investing and the base upon which greater cash-based investing behavior developed amongst our customers. There are still many more of these collaborations we can do. As primarily a monthly subscription-based wealth service, we also created many client acquisition partnerships that are unique in how customers come into contact with and participate in investing and we have also invested in the development of a series of activity-based satellite apps that allow customers to accumulate rewards and then convert those rewards into mutual fund investments.
Going forward, we continue to pursue wealth tech as an enabler to transform non-traditional channels, partnerships, and sectors into distribution channels for wealth management and customer acquisition. For example, through technology collaborations, we have had airlines, railway operators, retailers, etc that have become distribution channels and touchpoints for wealth management where previously it would be unheard of for them to connect investment products to their customer base.
In developing expertise in acquiring fully KYC-identified digitally sourced customers, we are also seeing more and more requests asking us for white-label collaborations where partners seek elements of our technology and customer acquisition strategies. Some of this has led to more idea evolution and harnessed a lot more potential in the South-East Asian region.
I think it’s fair to say that Japan is a unique and challenging market in general, but the often-described opportunity is that the market is still large, and the potential customer base is substantial. However, brand trust and validation in Japan particularly is an important cultural dynamic to be highlighted especially for our sector, where we are appealing to many newcomers to start investing. Fortunately, many well-known corporate brands supported us as shareholders and business partners from early on, boosting our credibility quickly. This aligned with our initial goal of building a network of recognizable names to enhance our reputation.
The core customer acquisition strategy has always been to bring people into investing by placing our investing app alongside recognizable lifestyle brands and services in technology-embedded service collaborations. Collaboration with partner organisations to display our logo resulted in a good hike in brand trust. Customers have discovered an entry point into the world of investing without relying on traditional financial service providers. This has helped us gain acceptance for our independent wealth service in Japan.
We also had to adjust some of the technical and operating elements of our initially imagined service to match some of the unique characteristics of the Japanese market. There are still some inefficiencies in legacy financial services industry infrastructure which influenced some functionality choices we had to make and work around. Also, the average technology levels in larger partner corporations are still very much quite dated which meant we had to make decisions on aligning our service scope and connectivity while still trying to offer something unique and new to the Japanese market.
That being said, making some progress in what is perceived as a tough market like Japan also brings an element of credibility that has also helped us in exploring collaboration opportunities in other markets.
I think for many venture companies, 2022 was a substantial change in the market and the broader operating environment. The sudden change in the ease of capital raising and accessing financing channels and the venture segment more broadly required many companies to adjust their business strategy. As a wealth management service, the business sector itself also became more challenging as financial markets were more volatile affecting investment confidence in general. Over the space of a few months more conservative business plans with different cost and operating structures had to be implemented given the change in expectations for the market outlook. This period coincided almost exactly with our first planned efforts in using mass media and television campaigns for mass marketing and the momentum and next phases we had planned to build upon from those campaigns had to be recalibrated as a result of how the environment had changed. It also led us to defer a couple of service scopes and product launches for a period of time. The obvious lesson was that a favorable environment could quickly change in ways that test business assumptions, which I think has also influenced how we have selected and decided upon priorities in the year or two that have followed.
This may vary depending on personality type but looking back, a key lesson probably is to try to maintain an even balance during the varying phases of building a company. Enjoy and celebrate them but don’t let the best moments lead to overconfidence and equally don’t be discouraged in the challenging moments. Maintain a balanced perspective and continue to make progress while keeping in mind that unexpected challenges may come and require some adjustments. Positive surprises will also certainly come along and bring new opportunities. For our team, as with any entrepreneur, it has of course been a learning process and adaptation journey. Some of the original hypotheses and expectations we had for our product and how it would evolve have held true and many have turned out to be different. In many ways, we were early and pioneered in our sector, in some areas we adjusted a bit later than we could have. Absorbing the lessons is important and always be open to retesting the assumptions and logic. It's also essential to choose the right partners who will remain committed and consistent throughout.
Motorsports and motorcycles have been an almost lifelong interest. It’s a great activity to clear the mind and Japan is a fantastic place to enjoy it with many great circuits and roads to enjoy all over the country.
1. Deepti Sri, Japanese investment platform bags $26.4m in JIC-led round, Techinasia.com, 2021, https://www.techinasia.com/japanese-investment-platform-bags-264m-jicled
.png)
Investment involves risk. Past performance is not necessarily a guide to future performance or returns. The value of investments and the income from them can go down as well as up, and you may not get the full amount you invested. Rates of exchange may cause the value of investments to go up or down.
Any forward-looking statements, prediction, projection or forecast on the economy, stock market, bond market or economic trends of the markets contained in this material are subject to market influences and contingent upon matters outside the control of Helicap Pte. Ltd. (“Helicap”) and therefore may not be realised in the future. Further, any opinion or estimate is made on a general basis and subject to change without notice. In presenting the information above, none of Helicap, its affiliates, directors, employees, representatives or agents have given any consideration to, nor have made any investigation of the objective, financial situation or particular need of any user, reader, any specific person or group of persons. Therefore, no representation is made as to the completeness and adequacy of the information to make an informed decision. You should carefully consider (i) whether any investment views and products/ services are appropriate in view of your investment experience, objectives, financial resources and relevant circumstances. You may also wish to seek financial advice through a financial advisor or and independent legal, accounting, regulatory or tax advice, as appropriate.
