This article summarizes the sessions from MUIP Innovation Day 2024, organized by MUFG’s corporate venture capital arm, MUFG Innovation Partners (MUIP), on October 18. With a focus on open innovation, the panel sessions explored synergies between innovative startups and MUFG companies.
On October 4, MUFG and LayerX, a company driving digital transformation for businesses with its corporate expense management service “Bakuraku”, announced a business partnership. The top management from both companies took the stage to discuss the goals of this collaboration, which has garnered attention as a new model of alliance between startups and large corporations, and the key factors for ensuring its success.
Overview of the LayerX-MUFG partnership
The partnership between LayerX and MUFG focuses on four main areas:
- Improve operational efficiency for clients - Providing LayerX’s SaaS service Bakuraku to MUFG’s corporate clients to help them streamline tasks such as invoice processing and expense reimbursement into a unified AI-supported workflow.
- Corporate expense management and bank payments - Integrating Bakuraku services with MUFG Bank’s payment services and conducting joint marketing initiatives.
- Integrating system and transaction data - Integrating system data from Bakuraku with transaction data from MUFG companies’ corporate card offerings to enhance expense management efficiency.
- New business based on expense management data - Exploring new business models by combining Bakuraku usage data and MUFG’s payment data.
Takayuki Noro, Head of Payment Planning and Digital Strategy at MUFG, outlined the vision for the partnership:
First, we aim to transform our clients’ operational experiences through the delivery of Bakuraku. Next, we plan to connect LayerX’s services with banking payments and MUFG’s financial offerings, such as Mitsubishi UFJ NICOS cards. Finally, we hope to leverage data in the business spend management domain to help solve our clients’ management challenges.
Reflecting on the challenges of providing solutions that genuinely transform customer experiences, Noro described how multiple discussions with LayerX transformed initially vague service concepts into concrete services. Through this collaboration, MUFG seeks to simultaneously digitize client workflows and leverage commercial and financial data to create new business opportunities.
The significance of corporate partnerships for startups
“A shift in mindset from competition to collaboration is taking place,” said Yoshinori Fukushima, CEO of LayerX. “In the past, startups often aimed to replace existing systems with innovation.” However, as the startup ecosystem developed over the past 20 to 30 years, “the areas where collaboration is possible and where competition is necessary have become clearer.”
Fukushima acknowledged that startups face limitations they cannot address alone, while large corporations have distinct social roles to fulfill. Building relationships that allow both sides to complement each other’s strengths is essential for future alliances.
This is particularly true in the financial sector, where such collaborations are becoming increasingly important. For software service providers like LayerX, entering the financial or banking industry alone poses significant challenges. While MUFG holds financial licenses, LayerX has transaction data related to daily invoice processing and expense management. Combining both has the potential to not only improve operational efficiency but also transform future lending practices and payment systems.
Fukushima emphasized that true collaboration cannot be achieved if it is driven solely by a startup’s desire to gain customer referrals from a bank or by a large corporation’s focus on the profitability of a software service. Instead, it is important to create a relationship that creates mutual value.
This approach resonated with MUFG. Noro recognized increasing interest from startups in expanding into the fintech and financial sectors. He noted that the banking industry is becoming more conducive to forming partnerships with startups, helped by growing mutual dialogue and understanding.
Leveraging LayerX’s strengths
On why MUFG partnered with LayerX, Noro shared that he was particularly impressed by LayerX’s dedication to transforming workflows. In the past, digital transformation solutions offered by banks to their clients often entailed merely introducing SaaS services. “What I find especially impressive about LayerX is its thorough commitment to detailing workflows. LayerX’s service focuses intensely on improving customer experience by eliminating challenges customers face in their operations,” Noro explained.
The idea of “adapting the system to human needs and experience” was particularly salient with LayerX. By leveraging AI, LayerX seeks to shift from the traditional model, where people adjust to the system, to one where the system adjusts to the people.
This approach takes on a new perspective when considering the characteristics of Japanese companies. Noro pointed out that business workflows in Japanese companies are extremely detailed and carry their own unique nuances. MUFG itself, once focused on improving its own unique workflows. However, such unique workflows, while optimized for the company, proved difficult to change.
LayerX’s solution proposes a new customer experience through the combination of data-driven UI and AI, This became the deciding factor for the partnership, according to Noro.
Key initiatives for successful collaboration
Still, this partnership took over a year to be realized. Both parties gained valuable insights throughout the process. Fukushima highlighted the most important factor for the success of the collaboration as commitment from both top management.
The key to this collaboration was Noro. To put it casually, you could say that we ‘clicked.’ We had a similar sense of urgency and shared the same vision. We were able to divide roles effectively within that framework. (Mr.Fukushima)
A common pitfall in open innovation with startups is that an alliance manager is appointed while the executive team is not heavily involved. However, in the case of this LayerX-MUFG partnership, both companies’ executives were directly committed. In sharing the same vision, they were able to make decisions to facilitate progress in the partnership.
Fukushima also emphasized the importance of avoiding a mere client-vendor relationship. Startups may find themselves at a disadvantage simply as a system development contractor. Instead, the key is to build an equal partnership where both sides aim for the same risks and returns.
Both companies engaged in deep discussions about the core purpose of their collaboration, sometimes exchanging bold ideas and exploring practical ways to make them feasible. Through this process, they were able to identify a common vision not just focused on sales goals, but on the creation of new value.
A partnership that addresses clear market needs
The response following the announcement of the partnership exceeded both companies’ expectations. In particular, the large number of leads generated immediately after the announcement has been noteworthy, demonstrating the significant scale of customer needs and challenges.
Since the announcement of the business alliance on October 4, we have received many inquiries and responses. I don’t recall having experienced this kind of situation in our past efforts. Based on ground feedback, it’s clear that the service is very easy to understand and resonates well with our customers. (Mr.Noro)
This early success points to the fact that the partnership goes beyond just a technical collaboration. Noro pointed out the importance of a clear vision: “We want to provide a better experience for MUFG’s valued customers. Ultimately, we want to improve customer productivity and streamline their operations.” This partnership is a first step towards achieving that vision.
Open innovation and collaboration between large enterprises and startups are rarely straightforward. One common challenge in large companies is the risk of projects losing momentum due to staff turnover. Noro highlighted the importance of passing on the values enshrined in any project. Specifically, “by embedding the core goals of a collaboration - what it aims to achieve and the new value it provides - into the organization, it becomes possible to ensure continuity even when personnel changes.”
Despite the various challenges, the fusion of a startup’s innovative potential and large enterprises’ wealth of assets presents great opportunities. Given the promising start, the insights gained from this partnership could serve as an important benchmark for new partnership models between financial institutions and startups that are built on shared vision and values.
