Message from the President

We will continue to change with the times and our custmers.

A look back at fiscal 2019 and a review of business results

As the ATM platform business grew on an increase in topping-up transactions for cashless payment, revenue and profit increased from growth at consolidated subsidiaries in Japan and overseas, for record earnings

The move toward cashless payments received a boost in fiscal 2019 from the reward points program implemented with the consumption tax increase. In addition, as banks strove to improve earnings, there was a move to review transaction fees for customers at partnered ATMs, making fiscal 2019 a year of sweeping change for the ATM platform business’s operating environment.
Still, the success of initiatives carried out under our basic policy of “achieving growth in our main business as we diversify our operations” led to revenue and profit growth for the full year on both a consolidated and non-consolidated basis.
In particular, we saw substantial growth in the number of topping-up transactions for cashless payment using our ATMs, a service we launched with the aim of providing customers greater convenience amid the shift to cashless payments. As a result, the average daily number of transactions per ATM was 92.1, and the total number of ATM transactions continued to grow, by 20 million from that of the previous year, to 849 million.
Investment for business diversification in fiscal 2019 resulted in equity in losses of affiliates of roughly 5 billion yen as a result of pursuing the challenge of new businesses. Going forward, we will learn from this unfortunate experience.
Against this backdrop, we were able to achieve our highest net income since commencing operations, which made this a year that gave us great confidence.

Developments in “business diversification” (overseas)

Our locally incorporated companies carrying out ATM business in the United States and Indonesia both turned profitable on improved efficiency and business growth, contributing to consolidated results

During fiscal 2019, FCTI, Inc., our consolidated subsidiary engaged in ATM business in the United States, carried out a major restructuring that included consolidating its three bases into one and shedding unprofitable ATMs, greatly improving management efficiency. At the same time, the average number of transactions per ATM steadily increased, laying a foundation for solid profitability.
Aiming to expand our business in Asia, a region where growth is expected, we are also beefing up our business at PT. ABADI TAMBAH MULIA INTERNASIONAL (ATMi) in Indonesia, which has recorded solid growth. As of December 31, 2019, the company had 200 ATMs installed with the daily number of transactions per ATM close to 90, and with an additional boost from improved management efficiency, it achieved profitability

Developments in “business diversification” (domestic)

Applying our pursuit of safety and security developed in ATM operations to new financial infrastructure functions

The number of customers at Bank Business Factory Co., Ltd. (“BBF”), our consolidated subsidiary for on-commission back-office support for financial institutions, grew to 23 at the end of fiscal 2019 (from 14 at the fiscal 2018 year-end), and earnings steadily grew as well. BBF provides subcontracted operations including account opening and countermeasures against money laundering and fraudulent transactions to companies newly entering the settlement business, and takes pride in being able to reduce these companies’ workloads and contribute to their ability to launch services quickly and reliably.

The number of contracted companies using ATM Receipt (a cash receipt service), launched by our consolidated subsidiary Seven Payment Service, Ltd. (“7PS”), grew to 276, with a solid increase in the number of transactions as well. The subsidiary is steadily reducing losses and is expected to become profitable in fiscal 2023, as initially planned.

Toward further “achieving growth in our main business as we diversify our operations”

Making progress in laying a foundation for sustainable growth, shifting from sowing seeds to the nurturing phase

The previous Medium-Term Management Plan coincided with a period of major changes in our operating environment, and unfortunately results fell short of the plan’s numerical targets. Nevertheless, we created new services, introduced fourthgeneration ATMs for new styles of ATM use, and steadily ventured into new business fields. I believe we were able to move forward with creating a new foundation and sowing the seeds for growth in our core ATM platform business while also diversifying our business. We will maintain this course going forward as we shift from sowing seeds to a phase of nurturing, with the aim of full-fl edged profitability.

In our core business, we replaced older ATMs with fourth-generation models (see page 40), which will bring about a world of “ATM+.” This multifunction platform will offer new services that create new styles of use and propel the role of ATMs as social infrastructure. In addition, as a bank, we cannot neglect investment in systems for continuous, solid growth in our existing businesses. We are approaching a period of upgrades for systems including account systems, ATM systems, and data centers, and will make investments to strengthen our management foundation.
In terms of business diversification, we have designated five areas as priority domains for the domestic business. The first is to expand our business of financial products and services for individuals who visit Group company stores.
The second is to provide financial services for non-Japanese residents of Japan. Non-Japanese persons working in Japan are seen as essential to the maintenance and growth of Japan’s social structure, and we will strive to be a reliable provider of financial services to these individuals, primarily through Seven Global Remit, Ltd. (international money transfer services) and Credd Finance, Ltd. (credit services).

These two domains are business-to-consumer businesses for individual customers of services carried out by Seven Bank itself. We will also consider tie-ups with new business operators, while creating new values by developing products and services unique to Seven Bank from our position of having roots in the retail industry.
The third domain is business process outsourcing (BPO), which we will strengthen further as a common infrastructure. We will further reinforce the BPO domain by expanding the business of providing outsourced operations to a variety of business operators using BBF’s back-office robotic process automation (RPA) functions.
The fourth domain is providing services in the area of security. As payment methods diversify and become increasingly online, digital, and remote, needs related to security will increase. We believe this will make personal authentication more important. Our newly launched subsidiary, ACSiON, Ltd., will use Seven Bank’s expertise to develop specific security services and authentication services that, I hope, will be used by a variety of business operators.
The fifth domain is providing companies with infrastructure for settlement agency. In addition to the Bank’s services for moving funds, we will package services and businesses including real-time money transfers, 7PS’s ATM Receipt, and the settlement agency business of Metaps Payment Inc., in which we have an equity stake, to provide settlement-related services primarily to small- and medium-sized companies as one of our business domains.

These three domains of BPO, security, and corporate settlement agency are similar to our ATM business in that they provide convenient infrastructure services to a variety of business operators, and we will work to expand these business-to-business businesses.
With regard to the overseas business, we are working to develop businesses in the growing Asian region, in addition to those in the United States and Indonesia.
We are also looking at the new social challenges that will arise from coexistence with the novel coronavirus, and will embark on restructuring our entire organization to accelerate business expansion. If we can implement transformations to match this new environment, including internal operational processes, work styles, ways of thinking, and management frameworks, and enhance our human resources development and increase productivity, I am confident that we will achieve sustainable growth through the business diversification that we are pursuing.

Reaffirming our social responsibility as financial infrastructure

Considering the global spread of novel coronavirus infections

The spread of the novel coronavirus is triggering environmental changes including shifts to remote and online transactions, digitalization, and cashless payments, changes that are advancing more swiftly that previously imagined. This trend is posing a major threat to services that had relied primarily on cash deposits and withdrawals, and we see ourselves facing a difficult operating environment. Nevertheless, all people do not want the same things, and we see the new age as one in which people will seek a variety of choices. There are significant needs for bridges between digital and analog, and virtual and real, and we believe these needs are an opportunity for the realization of an “ATM+” world. Even in this new age, we hope to contribute to creating an environment in which all individuals can live their lives in ways that meet their own individual expectations for peace of mind and convenience. This truly inclusive society in which no one is left behind is one way that Seven Bank believes it can play a role from the perspective of SDGs.

In addition, BPO, security, and corporate settlement agency will become increasingly important in a world that requires online, remote, and other transactions and services that do not involve face-to-face interaction. I believe the new business domains that we are currently addressing will be even more necessary in the post-coronavirus world.
To date, our business growth has been driven by scale expansion, by increasing the number of ATMs installed and the number of business partners. Going forward, I believe it will be important to work from the perspectives of seeking diversity, building on this base by adding new functions and services, and enhancing quality in the ATM business as well as in other areas.

Strengthening corporate governance

Reviewing the concepts of officer structure and compensation, and the compensation system

From the perspectives of separating oversight and execution and further strengthening the oversight function, we have introduced a system in which the Representative Directors are the only persons who serve as Directors with executive authority over operations and a system in which independent outside officers constitute the majority of the Board of Directors. At the same time, authority and responsibility for execution are given to Executive Officers, allowing them to carry out their responsibilities quickly and fl exibly. We have also clarified the evaluation system for officers and tied officers’ compensation more closely to business results, so that evaluations and treatment will appropriately refl ect the extent to which they take risks in pursuing new challenges.

In terms of a succession plan, we are giving Executive Officers and others seen as candidates for the next generation of senior management more opportunities for dialogue by having them actively participate in deliberations including those of the Board of Directors, conduct business briefings, and respond to questions. We are also encouraging their participation in seminars and educational programs to expand their networks outside the Company.
On another topic, there has recently been discussion of cases in which both a parent company and a subsidiary are listed companies, and at Seven Bank we believe there are significant benefits from the parent-subsidiary listing. On the basis of our being a bank, we are regulated by the Banking Act and the Financial Services Agency, we have the backing of our parent company without being subject to excessive infl uence, and the parent company does not misuse its position to infringe on the rights of minority shareholders or put them at a disadvantage. The business synergy that allows access to the Seven & i Group’s customer base is extremely important. At the same time, I believe that maintaining our own listing contributes significantly to increasing our name recognition, gaining the trust of markets, motivating employees, and ensuring management transparency.

Message to stakeholders

Management laying the foundation for second stage of growth

Since commencing operations in 2001, we have created new markets, primarily through ATMs, and have come to be recognized as part of the social infrastructure.
Just as we are transitioning from a growth stage to a mature stage, the Bank’s operating environment is undergoing drastic changes. We have positioned this period as one of preparing for a second stage of growth, and will strive to achieve further growth in our established core businesses while also diversifying our business through investments in new areas.
We will also endeavor to continue providing returns to shareholders, including a stable dividend that takes into account a balance with investment for growth.
Acting on the core principle of “responding to change while strengthening fundamentals,” we will make every effort to maintain the positive corporate culture we have cultivated, deepening relationships with all stakeholders including customers, vendors, business partners, and employees, to create new value. I ask for the continued support of shareholders in these endeavors.

the President and Representative Director
Yasuaki Funatake

舟竹 泰昭