Nippon Shinpan Co., Ltd.

1951–1960

One of Japan's leading consumer lending companies, Nippon Shinpan Co., Ltd. deals not only in consumer credit cards but also in loan guarantees, loans, and bill collection. More than 14.5 million of its NICOS credit cards have been issued. The company also offers loans for automobiles and other durable goods and has some 200 branches throughout Japan. Nippon Shinpan hopes to boost e-commerce in Japan in the 21st century.

Arrival of Consumer Credit in Japan: 1950s

When Mitsunari Yamada convinced four Japanese department stores to accept coupons in lieu of cash in 1951, he started what would become Japan's first and largest consumer credit company, one that today handles credit cards, loans, credit guarantees, real estate, financing, and leasing. Yamada pioneered Japan's credit industry during a time of high consumer prices and economic uncertainty. In the years following World War II, Japan faced not only rampant inflation, but a shortage of resources amid a boom in population. This economic plight was ripe ground for Yamada's credit services. With the founding of Nippon Shinpan's forerunner, Nippon Shinyo Hanbai Company, in Tokyo in 1951, Yamada offered consumers a chance to pay for goods on installment. Yamada had negotiated an agreement with four major department stores to accept Nippon Shinyo Hanbai's coupons as payment for goods. In the years to follow, the company, which soon changed its name to Nippon Shinpan, gradually added stores to its network, to make credit payment more convenient and appealing to consumers.

Just five years after launching its credit business, Nippon Shinpan moved into another industry, real estate, marketing Japan's first luxury condominium in 1956. The successful endeavor led to handling mortgages and selling homes and home sites.

Nippon Shinpan's housing business would prove vital after the Ministry of International Trade and Industry (MITI) in 1959 set restrictive guidelines on credit services. Designed to help small retailers, the MITI guidelines limited coupon use geographically, severely curtailing Nippon Shinpan's credit business.

Growth and Diversification: 1960s

The company responded to the stringent MITI guidelines by stepping up its housing-related activities. In 1960, Nippon Shinpan became the first company to offer housing loans, with more housing and condominium development to follow. Taking a bold step, the company also began to guarantee unsecured cash loans made by other financial lenders. The move brought new opportunities to consumers and, according to the company, the service grew "phenomenally" after it was initiated.

Net income for the fiscal year ended March 31, 2003, was ¥896 million ($7.5 million), a drop of 71.2 percent compared with the previous year.

1963–1981

By 1963, Nippon Shinpan had found a way to sidestep MITI guidelines by offering "shopping loans." These loans involved no coupons and as a result were not covered by the MITI rules. Under the procedure, consumers would apply for credit at member stores. Once credit was approved, Nippon Shinpan would pay the purchase price for goods and consumers would pay the loan back in installments.

Nippon Shinpan began issuing credit cards in 1966, launching what would turn into its largest business. Also during this time, the company made plans for an extended network of offices and branched into loans backed by securities.

International Expansion: 1970s-80s

The 1970s marked Nippon Shinpan's first ventures abroad. In December 1969, the company struck an agreement with MasterCard International (then Interbank Card Association) to make the Nippon Shinpan card accepted internationally. By June 1973, Nippon Shinpan was issuing MasterCards overseas.

Its ventures overseas prompted the company to establish liaisons with retailers and banks in Hong Kong and Hawaii, two popular Japanese tourist destinations. Leisure had already become an important sideline for Nippon Shinpan. In 1971, the company opened its exclusive U-Topy tennis club in the resort area of Karuizawa.

Foreign bonds became company business in the late 1970s; Nippon Shinpan issued Swiss franc bonds in 1976 and deutsche mark bonds in 1978.

In 1981, Nippon Shinpan entered a joint venture with the BankAmerica Group to set up the International Factoring Corporation, a financing concern targeting small and medium-sized companies. The newly formed company focused on purchasing debt and servicing accounts. Japan's sluggish loan business prompted BankAmerica to pursue the partnership, according to the Financial Times.

1984–1997

Although continuing to expand both its financial and real estate businesses, growth in the credit card arena was Nippon Shinpan's signature for the 1980s. During a four-year period between 1984 and 1988, card circulation grew from ten million to nearly 18 million. Member stores in Japan hit 334,000 in 1988. The company also entered joint card agreements with Japan's Postal Savings system, a major savings organization, as well as MasterCard and Visa International.

The Visa deal, in 1987, put the Visa logo on the 13 million cards Nippon Shinpan had in circulation in Japan at the time. Most of the cards were private-label cards for such companies as Shell Oil and Shiseido, a cosmetics retailer. The remaining cards Nippon Shinpan issued itself.

In 1988, the company established the International Credit Card Business Association, an organization with a goal of promoting MasterCard and Visa credit cards, ensuring that credit cards would continue to be the backbone of Nippon Shinpan's business well into the next decade.

New Challenges in the 1990s-2000s

Continuing to diversify, Nippon Shinpan acquired a 50 percent interest in Equitable Life Insurance Co., a subsidiary of U.S.-based Equitable Life Assurance Society, in 1991. The purchase was Nippon Shinpan's inaugural foray into life insurance. The company hoped the addition of life insurance would complement its existing services.

In 1996 Nippon Shinpan adopted a medium-term business plan that called for developing its consumer credit business into a core operation. The credit card business would remain the primary unit, but the company believed bulking up its consumer credit business would increase profitability. Nippon Shinpan hoped to increase the balance of consumer credits from about ¥230 billion in 1996 to some ¥400 billion by the end of the decade. It also aimed to boost the credit card business from ¥1.62 trillion to ¥2.2 trillion.

In order to meet its goals, Nippon Shinpan was forced to do some reorganization. Some of the company's affiliates, namely Rotary Service Co., credit association Nippon Shinpan Shinyo Kumiai, and lender International Factoring Corp., had amassed considerable debt, and Nippon Shinpan chose to write off these bad loans, which eventually totaled some ¥107.6 billion. This extraordinary loss affected Nippon Shinpan's bottom line, and for the first time since it had been listed on the Tokyo Stock Exchange, it reported a net loss. The loss amounted to ¥65.1 billion for the fiscal year ended March 31, 1997.

1974–2005

Reacting to increasing debt and a poor Japanese economy, Nippon Shinpan focused on strengthening core businesses and shedding poorly performing units. In 1998 the company announced plans to liquidate a number of subsidiaries, including Nippon Shinpan Finance (U.K.) PLC and Nippon Shinpan Finance (U.S.A.) Co. Nippon Shinpan also shut down its U.S.-based resort development unit Monarch Bay Resort Inc. after selling its assets, which included golf courses, to Capital Pacific Holdings Inc. of the United States.

In addition, in the late 1990s, Nippon Shinpan decided to exit the mortgage loan market and, in reaction to lower demand for new automobiles, to shrink its automobile loan business. In 2000 the company said it would be out of the real estate business completely within a year or two. The value of real estate in Japan had declined considerably during the 1990s, which hurt Nippon Shinpan's bottom line--the real estate division posted a loss of about ¥300 million in the fiscal year ended March 31, 1999. At the time of the announcement, Nippon Shinpan held some ¥80 billion worth of available real estate in Japan, as well as ¥50 billion worth of real estate abroad. It also had about ¥50 billion in mortgage loan credits. Nippon Shinpan was expected to lose about ¥40 billion in its divestment plan.

Nippon Shinpan ran into additional problems with affiliates in the early 2000s with the bankruptcy of Inter-Lease Corporation, a leasing unit that had been established in 1974. Inter-Lease had some ¥300 billion in outstanding loans in the early 1990s, and its debt only climbed. Nippon Shinpan, with an 8.8 percent stake in Inter-Lease, was its biggest shareholder. In 1997 Nippon Shinpan launched a ten-year restructuring plan for Inter-Lease, but by 2000 it was clear Inter-Lease could not be revived. Inter-Lease had about ¥800 billion in liabilities. Nippon Shinpan's investment amounted to ¥45 billion, and it also had guaranteed about ¥27 billion worth of Inter-Lease's loans.

As a result of its financial struggles in the late 1990s and early 2000s, Nippon Shinpan underwent a restructuring and implemented a four-year plan that focused on streamlining operations, divesting noncore businesses, and cutting personnel. The plan, known as the NicoS V Plan, aimed to lower liabilities from ¥2.6 trillion in 2000 to ¥900 billion in fiscal 2004. The plan called for shedding 41 percent of its workforce, about 3,700 jobs, by the end of 2004, as well as the reduction of its affiliates from 36 to 18.

Nippon Shinpan seemed to be on the road to recovery when it was slammed with a scandal. In November 2002 a number of its top officials were arrested by the police for allegedly making illegal payments to a corporate racketeer, known as a "sokaiya." The officials were accused of paying about ¥28 million to the racketeer between November 1999 and September 2002. Although President Yoji Yamada was not among the accused, he tendered his resignation to accept blame for the scandal.

Net income for the fiscal year ended March 31, 2003, was ¥896 million ($7.5 million), a drop of 71.2 percent compared with the previous year. Sales reached $2.54 billion, down 1.5 percent. The company sustained an extraordinary loss of ¥20.82 billion. Its workforce decreased by 7 percent, to total 6,184.

Although things were bleak for Nippon Shinpan, it was still among the largest credit card and consumer credit companies in Japan. In late 2003 UFJ Bank, which owned 7.69 percent of Nippon Shinpan, announced that it would gain a majority interest in Nippon Shinpan by March 2005 and make it an operating subsidiary. UFJ Bank sought to expand its credit card business, and the combination of UFJ and Nippon Shinpan would increase its cardholders to some 23 million.