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Rakuten Group Inc
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[Interpreted] Okay. Thank you for waiting. Good afternoon, and thank you for joining Rakuten's 2019 Fourth Quarter and Full Year Financial Results Meeting for Investors and Analysts.
First, let me introduce those who are present here today. In the front row on your left is Hiroshi Mikitani, Kenji Hirose, Masayuki Hosaka, Yoshihisa Yamada, Tareq Amin. And the second row, starting from your left, Hyakuno Kentaro; Yasufumi Hirai, Makoto Arima; Kazunori Takeda, Hiroshi Takasawa. And the third row from your left, Koichi Nakamura and Noriaki Komori. These 12 executives will be present and available for questions at the end of the presentation.
This is going to be comprising 2 parts. In the first session from 4 p.m., Mr. Mikitani will explain overall strategy and our financial results for the fourth quarter. And from quarter to 5, Mr. Mikitani will explain our Mobile business strategy; and Tareq, about our Mobile business core technology. After a break, we will explain about our Commerce business at 6:15 and FinTech business at 6:45. And then there will be Media and Sports business session from 7:15. We appreciate the time is very long, and -- but we hope we can deepen understanding of Rakuten's business.
Now without further ado, I'd like to hand over the microphone to Mr. Mikitani.
[Interpreted] Good afternoon. As was just introduced, this is going to be a long session, explaining about different sections, different business functions. That is because I'm an internal person, so to speak. And from executive officers level, I have the regular reporting about the business. But the progress in different -- the part of Rakuten is progressing quite successfully. And under such circumstances, ecosystem, Rakuten Group is increasingly diversified. Therefore, to give you the clear view about overall picture because without that, frankly speaking, the aggregation value of our company in terms of different activities and the way it is evaluated in the market, from my point of view, rather subjectively. I have to say that there is a gap between the two. Therefore, on the part, I'd like to explain in details taking this opportunity.
First, about the highlights. Consolidated revenue, as you see here, year-on-year, it was up 14.7%, reaching JPY 1.3 trillion. Global GTV, everything included, it is up 24.3% year-on-year, reaching JPY 19 trillion. And domestic e-commerce GMS was up 13.4% at JPY 3.9 trillion. And Rakuten Card shopping GTV was up 27.4% or JPY 9.5 trillion.
For information, in December last year, we were seeing the higher than 30% growth. I think it was 40% in month of December. Anyway, the -- it was such a fast growth that we have seen, and we have 19 million members, the Rakuten cardholders. And for financing section, the ecosystem is working, including Rakuten Securities, Rakuten Bank, Rakuten Life Insurance, Non-Life Insurance. All of them are doing quite well. And then Mr. Arima later on will explain about Ad business. Now their Ad revenue is above JPY 112 billion. And the growth is essential, not just for our core businesses because that might lead to short-term profit, but we want to be the company that is competitive against GAFA. Therefore, we would continue investment in the growth phase businesses as well as investment phase businesses as well. And if it is core businesses alone, and in terms of revenue, the revenue was up 16.9% and operating income was up 19.5%. In other words, the more profit we are now enjoying with higher revenue and operating income for Rakuten Ichiba, Rakuten Securities, Rakuten Rewards, Rakuten Card, Rakuten Travel, you name it for main businesses, we're doing quite well. And for growth phase businesses, Kobo the -- the 3 businesses, the Kobo, Viber, Viki, they are now in black. And they are growing as revenue is being stabilized, and therefore, the -- it is not just about operation accounted business in overseas. In fact, those businesses are making profit. And in terms of the brand name perception or awareness, this is going to be explained later on as well, but in Japan as well. NPS spending 18 months, it was up 5.1 points in Japan compared to competitors. In terms of NPS, we outperformed the competitors.
And talking about brand. In fact, globally, the Rakuten brand is increasingly -- the spread, including Taiwan, 77%. This will soon reach 100% because of the professional baseball team. And also, if you take a look at other countries, the Spain or France, they are around 70% or higher. For instance, Rakuten TV is now being deployed in European countries. And in France, Rakuten shopping is performing well. That's a situation that we are seeing right now.
And then what about the ecosystem based upon points? Last year, we issued the 320 billion points, representing huge ecosystem for both off-line and online. And globally, now we have the 1.4 billion members. And in fact, I attended World Economic Forum as well. Rakuten Mobile and the complete virtual network is not just a mobile network. The -- it, in fact, makes an about-face change in terms of the concept about the mobile network. That is a network that is in perfect control by virtualization, a virtual network, and therefore, success in Japan. That is merely a showcase. And therefore, just like AWS, that was in operation globally, we also want to do the same for Rakuten Mobile. And the base station construction is progressing as planned. By the end of March, the Phase 1, that is we will have 4,400 base stations in Phase 1 area.
What's important is about the pricing plan. On March 3, we plan to release a pricing plan. And starting March 4 -- or March 3, we start receiving reservations. And then we'll start the operation of the network in early April. When we started with 5,000 trial users, there was some system trouble that was experienced during sign-up. But for new 20,000 support members, they are not experiencing any problems or issues at all. I think this is a proof of this scheme that would work. And for logistics, we advocate 1 delivery.
So we have to control everything. Otherwise, we cannot grow e-commerce. This is the background behind our fulfillment service. Until the end of 2021, 50% of Ichiba GMS coverage will be achieved by end of December 2021. On the other hand, on the last 1-mile delivery, it has to be done in a stable manner. So the population coverage is 61% already. We want to grow this to 80% as soon as possible. We don't want the kind of event that happened 2 years ago where JP or Yamato didn't receive the package. We want to be able to provide a stable service by Rakuten. The pricing and with an exclusion of large-sized deliveries, I think our prices are quite competitive.
So the newspapers are reporting about the investigation -- on-site investigation by FTC, but the shipping fee needs to be very clear. Shipping fee needs to be included in the price, and it has to be unified because that will be easier for the end users to understand, and they will be motivated to buy at the Rakuten Ichiba platform. So with the purpose of protecting consumers, we want to do that and we also want to improve merchant sales. Therefore, starting March 18, as planned, we will start the shipping-inclusive program. This is for the shipping of purchases over JPY 3,980. I believe that GTV may go up by about -- GMS will go up by about 10%. Now the reason for us doing this, let's take a look at this merchant. You have the same -- a similar product. The price is 1 year less, but the shipping is JPY 1,980 or JPY 1,890. There are only very few such merchants, but this exists. It doesn't protect the consumers. So we want to make the system as easy to understand as possible for the consumers, and that's why we want to include the shipping fee into the prices. Now the various dissatisfaction that consumers had towards shipping fees, I mean there's been a tremendous satisfaction. So this JPY 3,980, we believe, is a very good balance.
On the other hand, they have been accusing us of trying to utilize our dominant position, abuse that, but we believe that this pricing is -- well, we have always been telling our merchants that they can decide the prices. We have never forced the merchants to set their products in a certain way. We're not asking them to reach JPY 3,980 for their products. So we leave it up to the merchants. And therefore, well, we will continue to speak with the merchants on how to work that out.
In the meantime, we have received a lot of feedback from the merchants, large-sized, chilled frozen items, very costly, and they said that that will be difficult. So we said that will be exempt. Okinawa remote islands, well, the shipment fee is very expensive. Maybe in the future, Rakuten EXPRESS can include these areas. But for the moment, they are exempt or exceptions. Alcohol, books, music, CDs, which have the issue of the resale value, then we will exempt that -- those products, et cetera, et cetera. So we have set up various exemptions -- exceptions by getting feedback from the merchants.
Already, 80% of the GMS is free shipping or shipping is included. There's a 12% exception. But now that we are introducing this new system and shipping is going to be inclusive, that means, as a result, only 8% of all orders will be affected, which is only a very small part of the transaction that is carried out on Ichiba. So -- but having said that, some merchants will say that they won't be able to go along with this plan. Well, if that's the case, we will encourage them. If they are going to go to Yahoo! or Amazon, other platforms, other malls or maybe they might start their own business, then if that's the case, to the previous purchasers, consumers, we will announce that or we will even put our URL link to the new platform. So we will take into account the various economic constraints that the merchants may feel so that we can support them in whatever way we can because our motto is to support the merchant business. That is our main mission.
As for payment, Rakuten Card has surpassed -- cardholders surpassed 19 million people. The 9 million was suddenly picked up, and it reached 19 million. So it'll probably reach 20 million very soon. As for Rakuten Pay users, the total number of Rakuten Pay users, including the transactions done on Ichiba, has reached 46 million as of December 2019. So we are working together towards sustainable growth.
Now I would like to move on to the details of consolidated financial results. But Hirose will explain. But so far, if you have any questions, I would like to take your questions now.
Are you okay? No questions? Okay. Mr. Hirose?
[Interpreted] Now I would like to take over and take you through the consolidated financial results. This is the summary of the consolidated financial results: revenue for FY 2019 was JPY 1.2639 trillion; non-GAAP operating income, JPY 95.1 billion; non-GAAP operating -- excluding Mobile and other investment business was 90 -- JPY 72.7 billion, and that was IFRS OP. And then you may point out that the year-on-year change is negative for non-GAAP operating income. It is because of the Ebates rebranding of Rakuten. We spent JPY 12 billion as a cost. And also, there was a decline for other factors as well. That's why the -- excluding Mobile and other losses -- investment losses, we are -- have a negative number. And this is Q4 number. We have JPY 358.2 billion on revenue; and non-GAAP OI is minus JPY 32.2 billion; and non-GAAP operating profit, excluding Mobile and logistic and investment business, JPY 22.8 billion.
So on this line, we had a JPY 2.4 billion rebranding and JPY 2 billion because of the other reason. But even after that, for Q4 alone, we had a year-on-year positive growth for non-GAAP operating income, and this is the core business revenue and operating income. For the core business, we had a steady business, a 17.8% growth year-on-year in terms of revenue as well as 18.6% on operating income. And nonrecurring in investment business, as you can see, it was down 0.6% year-on-year and future growth investments is the one which is consuming some funding. This is quarter-to-quarter number. We see the similar trends here.
On the operating income line, there are some negative numbers. And also, net income is negative as well year-on-year. If you look at Kessan Tanshin reports, you can see the details. But for this, the investment-related business in Q1, there was a gain from sale of assets. And after that, we had other factors. And there was an appraisal loss as well, and minus JPY 30 billion was accounted because of that. And there was a one-time cost, as I explained. That's why the instrument business on a net basis was negative. But for the business operation, we would like to recover from here.
This is the non-GAAP operating income breakdown from last year's results. Excluding investment business, the base operating income, JPY 89.4 billion, and this is here. With FinTech, domestic EC and others, we had JPY 93.5 billion and increased to JPY 51.1 billion and -- after the investment for the future and the Mobile and others. We had a Lyft appraisal gain in Q1 in Mobile. And then excluding that, we had JPY 95.1 billion as a result. This is for Q4 alone. And from JPY 18.8 billion, we had JPY 17.2 billion. And we had the future investment, mobile and investment loss and other factors after JPY 20.1 billion. And JPY 22.6 billion, this is mainly buying Uber, Lyft and so forth. And the rider share-related markdown was the reason for JPY 20.6 billion.
On the other hand, for Lyft, we have equity method accounting. After that 40.6%, we have an unrealized gain of JPY 300 million, JPY 400 million at the current stock price. So we are not that worried about Lyft.
For investment business, monetizing timing is coming, as you can see from this chart. And we have been accumulating the portfolio of assets, and we are exiting from investments when the time comes. And at the moment, we have Pinterest. Careem was partially also down. And OverDrive subsidiary, those have been sold off. The timing is either in Q4 or Q1. As you can see, just about $140 billion was recovered from those divestitures. For the investment business as a whole, this is the overall performance, which is quite steady.
For Rakuten ecosystem expansion, membership value, at the moment, JPY 5.5 trillion, which is up 19.7% year-on-year and towards JPY 10 trillion target. We would like to accumulate more. For the last 1 year, active user number has increased and the growth ratio has increased. On top of that, we have NTB, CTC. Those are positive factors, and we attained the growth. For cross use ratio, it's up to 71.9% at the moment, so we'd like to continue to drive this number to increase the usage of membership value.
That was my brief explanation of the financial performance. Now floor is open for questions.
[Interpreted] Sugiyama from Goldman Sachs. In the presentation, Pinterest, Careem, monetization of $140 billion, I think, if I heard it correctly, but 4 billion for -- once it is monetized, what happens to that? Is that going to be used for another investment? Or is it going to be retained as a cash for entire group?
[Interpreted] We are currently quite avid in investment. We will continue to maintain the health of business, and some may be used for the investment. But the overall, that will be retained as such for future growth possibility.
[Interpreted] And you also mentioned about investment-related -- the loss in JPY 22.6 billion, is it due to the valuation loss of Lyft?
[Interpreted] Yes. So we do have other businesses as well. But overall, ride share market valuation went down. That was a major reason. Thank you.
[Interpreted] Any other questions? If not I'd like to now move on to mobile strategy session. Please wait because we're now making preparation for the next presentation.
[Interpreted] We have a video clip to facilitate your understanding.
[Presentation]
Okay. So we will launch our pricing plan on March 3, so please stay tuned. And next is our tech side from our CTO, Tareq.
Thank you, Miki. So I wanted to take a bit of time to give you an update on where we are as we approach April 1.
So certainly, since we started in June 2018 until today, we had over 150 global mobile operator coming to Japan. We have met with various government agencies to understand the tenants of the technology. And the first question they asked, "What are the key success factors? What differentiates Rakuten network?" And ladies and gentlemen, I think you have attended -- I see some of you have -- have came here many times before. Believe me, these moments are very special. I think this is the recreation of something much bigger than AWS. This is the opportunity to look at networks in a very different view. So for us, we started with things that matter financially. We started by saying the radio access network must be virtualized. This is where almost 75% of ad CapEx gets spent. So first thing that we had to do, we had to accomplish the virtualization of radio access. As I told some of you before, this is what we've been told before, it's impossible. It cannot be done. And this is the things that, I think, we have finished in the past 18 months. The radio access is done.
The other thing that we've done is the dream of almost every mobile operator, to have open, standardized, no vendor lock-in on any hardware. This operator business that we're in today has lots of complexities in how you deploy proprietary hardware, proprietary chipsets. Our entire network, as I told you before, only has 6 hardware types, and the hardware types are commoditized. Commodity means until builds this in millions. It gives us the ability to purchase IT-like servers, for network workloads, thus achieving a level of cost efficiencies that hasn't happened before.
The other thing that is critical, whether in today's network or tomorrow's network, is the edge. That's the next battle. When we talk about edge, it's also an afterthought, to be very honest with you. If you look at 5G deployment across the world today, with all due respect, I don't think that is what 5G is all about. It is about a marketing gimmick today to say, I have deployed 5G. But I believe, today, Rakuten Mobile is the only company that have deployed what we call the true 5G architecture, an architecture in which edge platforms is deployed with content closer to user. Delivering near 0 latency, this is the only mobile operator that does it today across the world.
The other thing that -- part of our culture, and you've heard also [ Sagiv ] when he talked about what we do, what we call Service Experience Center. You will never hear this word, by the way, in a traditional telco. Most telecommunication companies say, "I have network operations center." We don't look at just read the yellow green flags and knock, we look at service experiences. We have obsessive culture about automation. We build a lot of our resources around AI, machine learning to drive quicker decision-making, quicker resolution of problem. And this is what we have achieved to date, and that's what we're going with in April 1.
The core technologies is working really well. We have proven that this scales, and it works relatively well. We have proven that the efficiency that we achieve in operation is becoming the MV of the industry. And the fact to the matter that we met with every telco, whether small or big, asking us, "When will you be ready with your platform? Can we start taking your platform into our operations in this region and abroad?"
The other thing that I will tell you, this is probably the proudest achievement that we have done for this industry, not only for Rakuten, but the whole industry have been in search for an answer to how we open the remote radio heads, how do we open RAN. For some of you that looks at telecommunication industry and track it, you will understand that open RAN has always been thought about a dream, a dream that let's go on, collaborate and debate. But nobody wanted to take the risk to go enable this. In my video, to be very honest with you, I think I am extremely lucky to work for a company like Rakuten that has the right DNA, the right leadership, the right culture to believe that anything is possible if you bring the right people together. So to achieve open RAN, let me be honest with you, this was not easy. So it's not a very easy journey. Our objective was to achieve a level of reliability that Japanese consumers deserve, to achieve a level of efficiency that Rakuten wants and to deploy this in a disruptive manner that allows us to scale in Japan and outside of Japan.
So in this journey, we had many obstacles that we had to overcome. We are not talking about a proof-of-concept to support 1 single user. We're talking about the ability to support hundreds and hundreds of users attached to a single site, working on commodity hardware sitting on our edge data center. That is what I believed was always talked. To be very also open with you, we had a delegation from -- different government agency came in, they said, "This is great. Is this real?" That's -- I get this question a lot. "Is this real?" I said, "Well, please come to Tokyo. Come to Japan. Japan, quality is very different than any country in the world. We have over 3,200 sites on air. It's carrying live customer traffic, and that's what really -- if you want to see if it's real, please come here." So we started really a very open invitation to anybody that wants to see network capability.
So on the network side, this is, I think, what's our passionate project that we wanted to do because we think this is a creation not just about another network. This is a creation of a cloud network that you could take from Japan and go anywhere in the world. You could go away from deployment that takes 12 months to deploying an entire telco in a week. That's what's the possibility of the future that we're looking at. That's why I think the opportunities is significant. Japan is a showcase that will enable us to take this platform globally.
So when you look at our coverage, I also will tell you, we didn't design a substandard network. When you build greenfield network, there is 2 methodologies to build a greenfield network. One methodology, you are CapEx constrained, and you say, "I just want to build a simple coverage layer, not thinking about capacity." We have built probably one of the densest network that you could see today in mature markets. The site-to-site distance today in the initial launch area is becoming closer to 250 meters. If I give you an analogy in New York City today, the AT&Ts and Verizon’s and T-Mobile, their site-to-site distance is about 500 meters. So coverage is improving significantly.
When we talk about performance, so how the network is doing, you will hear and understand, in telco world, carrier-grade reliability. We have achieved carrier-grade reliability. What is the proof to this? Add more capacity. Add more subscriber. I'm going to share with you some interesting data point. I hope you take it and understand what's going to happen in Japan. I don't know if many of you today know what's the average consumption of data per user per month in Japan today. I was shocked. This is a mature tier 1 economy. Japan today is the lowest 1/3 in the world in data consumption. I was shocked. I said this is, to me, maybe the reason, maybe the data plans, maybe the way that we structure the plans, maybe people are afraid to use the plans because they will have limits on their data consumption. So today, in Rakuten network, on a daily basis, people are consuming, per day, almost 1 gigabyte of data per day. This is fabulous. It's amazing to see the start-up of data consumption, and we're able to cope with this. So there is no issues on scalability and capacity to the network.
So the other thing that we have done is probably -- look, I've done almost 13 build-outs in the United States. I went into India to build Reliance Jio. But I'll be very honest with you, I have never worked in a place that all the way from Miki to everybody down, we work as individual contributors. We work hands on, and we have a level of agility to understand our mistakes, fix our mistakes and move quicker into the learnings. So when you look at number of incidents and what is happening, we had to build an organization from nothing. When we started also in 2018, we were not talking about only technology. Remember that the organization was also not existent. We have assembled, over 14 nationalities came to Japan as local Japanese employees, completely working together hand-in-hand with local employees to go build a network the likes of none, but most importantly, we want to get even better. The expectation is flawless. It has to be 100% services up all the time, and there's a lot of learnings that we have went through from the early on to where we are today.
The other thing that I also tell people a lot when we talk about reliability, the resiliency of the network architecture on what has built, it's been implemented from day 0, which is the DNA of resiliency in the architecture. For us, the advantage that we have, because it's software, we could build N number of resiliency. Today, Rakuten mobile has 2 large data centers. Inside each data center for every network function, there is a redundancy in the software, double redundancy. We call them pods. And in another data center, another geographical redundancy and active, active, active, configuration. By the way, I could even do a lot more redundancy. That's the advantage of software. The ability for you to enable a level of redundancy in every application is much easier, much simpler because it's not about bulk hardware additions and migration that you need to do in traditional telco. So I think the resiliency journey was fantastic.
The other thing that I also believe is important. We've talked about this before. If any of you go to a typical mobile store in Japan, I also -- in my opinion, it's an unpleasant experience. Why would you need to spend 2 hours of your life in a mobile store? That's not, to me, innovation. The other elements outside of network that we have brought is a complete digitization on the technology software stack to deliver digital customer experiences. So you look at the approach that we have taken at our shops, if some of you have visited our stores, it is a mentality where everything is digital first. No need for you to look at manual paperwork. Myself and Yoshi actually had a very interesting experience when both him and I went to activate a SIM card before we did this. We received massive paperwork, massive contract, and I think the gentleman had like a highlighter. And he said, "Do you understand? Do you understand? Do you understand?" This is actually not, to me, 21st century technology. We completely revamped that, completely revamped it with digital-first onboarding systems, ultra retail experience. We're driving ours to -- we want to be even much better than what we have offered today. We want to go into the minutes for onboarding. Ability to have any type of channel transaction, complete omnichannel transaction from web to mobile to store should be seamless. Personalized video experience to our customers, that also has been launched part of our digital platform. And something very exciting that I will tell you, we are a company that is not afraid of divorcing SIM cards. We love eSIM because it's better for consumer. We will be one of the only mobile operators in Japan that has full on-prem, certified by GSMA security infrastructure for eSIM. When you look at the device, which is we built from the ground up, Rakuten Mini, we pushed it as an eSIM-only device to enable this pleasant experience of activation and should be in seconds, not minutes. And then the other pleasant thing that happened, Mini has become the most popular device today in our shops. If you compare it to other OEM devices, the impact and perception, I think, of what we've done on Mini and digital experience have helped substantially. But we're not yet stopping. I think you always have to innovate. And I think, honestly, we -- this is we started the journey, but there's much other good things that are going to happen. I think publicly, by April, MIC will allow what we call E-KYC, which is know your customer. Today, the transaction that you do, you go to a store, and I need to know who you are, so I need to verify your ID. So we will enable, through a very, very intelligent system, entire E-KYC that includes facial biometrics, and that will enhance the onboarding process.
The other thing -- I think Miki talked about this, please don't underestimate the technology architecture of Link. Link is going to reinvent and remove traditional what you see on your device as SMS. Think about this SMS. For 30-plus years, this SMS was a nonintelligent way to deliver communication to a device. Most web scale companies have started to think which communication services is where we need to do. What is behind our RCS platform in Rakuten is probably one of the advanced -- most advanced technology for voice-video messaging. We have the ability to integrate as traditional SMS, traditional MMS, traditional OTT services, deliver on voice, video, messaging, collaboration, and we are still scratching the surface about what's going to come in future releases of Link. This Link platform enables the communication freedom that a consumer needs. You no longer are restricted from looking at WiFi when you travel abroad. For those of you that travel abroad, imagine the ability would never have to look or never have to worry about data. Link is going to enable you to have real-time conversation with your friends, colleagues and family, and that's built on a very scalable, carrier-grade platform, and what the world has been talking about is this RCS. So we're very, very excited about what's going to happen in Link.
I also want to take one moment to talk about the coverage, which is something we are -- we talked about before. So on coverage area, last time, when you were here, I mentioned to you that product that you see now is live and active, which is the Small Cell. It's our indoor product. We build this at an extremely disruptive price versus traditional solutions. And then we said, "Look, no matter how good the network is, the fact, wireless networks, if you've really been building wireless network, coverage is always going to be a problem no matter how good your network is." So we needed to also be proactive. There will be some scenarios. Maybe some homes will not be covered. So proactively, what we have done is we've launched what we call Rakuten Casa. What I like about this product, if you go today to any electronics store in Japan and say, "I would like to buy a WiFi router." Actually, this product already has a high-end WiFi router capability. It has a full-blown LTE base station. You take this to your home, and we're going to give this for free
for people that have coverage problems. I have installed this at my house. It -- actually, to be very frank with you, I used to have a BUFFALO WiFi router. It outperformed the capability of what I have seen on the WiFi part. It's a dual radio, dual concurrent, 5 gigahertz, 2.4 AC today. We're working on an AX version of this. So this is how we also address the problem of coverage for home, and we have other solutions and basements and other areas. So I think we are really, really ready for April. I'm personally thrilled and excited. I can't wait because it's been a long, long journey for us. I hope this give you just glimpses now of what is to come.
What I put here coming soon, and I really wanted to -- it is unfortunate what has happened in China with this disease. But in Mobile World Congress, we were going to announce something very, very special. And hopefully, we will find time to explain this to you. The definition of Rakuten Mobile platform, RMP, which is the world's first cloud connectivity platform, I think, hopefully, in future sessions, we will show and demonstrate how this is going to change, not just the telco industry in Japan, but I think the opportunity, as we look abroad, the interest from many, many partners is very huge. And I think this is where the future is, but Japan must be perfected. First use case is in Japan. And then we go from Japan, across the world and export a technology that was built in this country to other markets.
So thank you for your time.
Thank you.
Any questions?
[Interpreted] Now questions. You can ask questions either in Japanese or English. Yes, there is a question in the front row.
Mizuho Securities, Japan. A couple of questions for the network capability. First on -- you mentioned that there is a 250-meter distance between the towers in Tokyo area. How is that compared to the incumbents, considering your -- that tower or base station's particular capability?
So I don't remember if you recall, last time I showed the architecture of our radio base station. I brought them into here. One of the advantage, I think, we have is the simplification of spectrum and bands. The incumbents today, it is hard to compare for 2 reasons. They have over 8 bands and 8 technologies, and each one of them requires different hardware and different coverage characteristics from low-band to mid-band to high-band. In my own experience, of course, they will have larger number of sites. But I don't think we need that much sites, frankly speaking, because we started with 2 differentiating items.
One biggest advantage is we started with probably one of the most advanced radio technologies today, which is something that today in the industry called 404R. This 404R is our remote radio head that transmits and receives for MIMO capability, increasing spectral efficiency. We also support 256 QAM, which also improves spectral efficiency, and thus, limiting our ability -- or not limiting our ability, mitigating our ability to have more densification than what we have done today. So I think it's -- don't read into the fact that they might have more base stations. It means that we are disadvantaged, just to understand that our technology is substantially different. Today, in Japan, I think they just started in a small percentage of the sites to deploy the same architecture in this 404R technology.
The second one is, so you have a limited bandwidth. You don't have a premium band. How many subscribers do you think you can support without any meaningful congestions at this current capability of the network?
So 2 things. I want to also remind you of 5G is coming soon for us. We actually think we have such a pragmatic use case for 5G. While the world -- of course, I have no doubt, 5G has some many, many beautiful things that's going to happen. But for Rakuten, when I say pragmatic, it's a beautiful data offload strategy. So we have 400 megahertz, as you know, in millimeter wave and 100 megahertz on 3.7 spectrum. And that, we will use and leverage to offload traffic from LTE to 5G. So I think -- I actually don't think we're going to have constrained as such in the capacity. However, this network from day 0, we want to be able to support 12 million customers, day 0. So if day 0, we get 12 million, it's very good. And keep in mind, what I showed you with Casa, the more we install this at the home, this is the products that we want to see almost at every home because it means an additional data offload additional capacity at the home and our network core has an ability to give you seamless handovers between LTE and WiFi. So when you see Link, Link works seamlessly on any access technology. It works on 1G, 2G, 3G, 4G, WiFi, and we made it completely seamless to you on handover. Actually, Miki sent me one-time messaging from his Link, and that's using satellite bands, so -- and it supports SMS, MMS and any type of OTT messaging.
[Interpreted] There is another hand in the back row.
Jason Mitchell from BofA Securities. So I'm just curious about your platform's usability outside of Japan. One of the kind of Achilles' heels of virtualization is it has a lot of fiber requirements. In Japan, you have a lot of easy access to fiber. So as you think about taking this platform to other countries, how do you get around the fiber requirements versus CapEx saving balance? Are there things you can tweak to lower data throughput or find...
Yes, great question, Jason. So actually, just to be honest with you, during also our journey to build this network, we also had -- even in Japan, as it is fiber-rich, we faced, I call it, some obstacles. The obstacles are very pragmatic. For example, the edge data center that we use ran out of space. So I cannot put servers in those. Earlier on, when I told you the level of agility that we have, I love the idea that we're creating products that don't exist in the industry. So we took a very simple concept, and we have a great relationship and partnership with Intel. We said that can we take a temperature-hardened product and create an ultra-low-cost solution that I could deploy as a bookshelf that sits at the site. Very, very small footprint. And this is a product that we call RUD, which is an R-U, radio interface unit. D stands for the DRAN solution. What is DRAN? It basically has the ability to do processing at the site. And as such, if you have maybe lack of fibers, we're able to limit the frontal requirement that you need for the edge. So that's -- when you look at the other markets, what fascinates them the most about what we have done and why the package seems so interesting to them is the automation on our platform. And especially when you consider how you run operation, I really would tell you, one day, we should host a session for you to see SXCR, Service Experience Center. I think this is the only, again, mobile operator that has a singular platform that engineering, customer support, everybody uses the same platform. So this concept of operation subsystems, we consolidate it, automate it and that is part of the entire package that's going to come into RMP.
Okay. And then just a quick follow-up question. As we get closer to the launch, I think at this point, you've got one of your test ones, you can see that the network's working. But maybe if you could talk about what you've done in terms of load testing. There are several choke points throughout Tokyo, where you can get a cluster of users on one tower you do have somewhat of a limited bandwidth today. So what have you done to kind of test those cases?
Absolutely. So 1 -- 2 things that we're doing. This honestly -- and I appreciate all of the effort that even what we call free supporter program. With the idea of why we started this free supporter program, just take the early days, even with 5,000. Look, we had many hiccups in the 5,000 just because we needed to refine the process, et cetera. We learned a lot. The 20,000 next, I mean, touch wood, I got to tell you, it's been effortless compared to what we had in the 5,000. These people, of course, they're testing and using our network, and some of them are testing in a heavy manner, however, we also took our own third-party testing and auditing mechanism to go to the key hotspot areas. And it's very easy for us to identify, primarily our data sets that comes from Rakuten Group, enables us to identify where is the hottest traffic area. When I talk about being proactive, what most companies do, they will never think about such a product maybe is after the fact. We thought about hotspot identification that's already been done, ensuring that the macro base station is already deployed and in now, what we are focused on is what we call the micro deployment, smaller hotspot products, that could be very, very focused, especially when you think about Shibuya crossing and other hot areas like that. Those are the areas that we focus a lot of energy to make sure that we have enough access points, enough radio sites to cover those areas. And I think this is still -- I will tell you, this is -- never have an end date. I mean the traffic will evolve, the traffic we grow as long as we are super aggressive in identifying those locations, and we have the right solutions that we could deploy quickly, I think we'll be in good shape. So if you look at the bottlenecks across the network from radio to core, I am very confident today all the core elements, we are in an extremely good position to ensure that -- I don't think we're going to have any capacity issues at any core elements, whether it is BSS, OSS, IMS, packet core and the areas that we spend today, most of our energy getting ready to April is on the radio side. And believe me, this hotspot identification is a daily review that happens with Miki. Every day.
[Interpreted] Thank you.
[ Debby Gibson ], [ Assets Advisory ]. Tareq, on your -- earlier on, you said about users using a gigabyte per day. Is that average or is that peak or...
Pure average.
On average?
Average, yes. So from 5 GB of data per month to 1 GB per day.
And looking at that, are you finding that 20,000 -- are they all new subscribers? Or are they MVNO users? I mean, is it -- how much is it really driving new interest from the...
No. I would tell you, some MVNO, but a lot less than I thought, to be honest with you. So I believe here -- I mean, look, we'll know very soon in April. I think my own view is, I think people will give us a chance to see how good this network is and especially that we will have a lot of good things for them to share very soon. But I want -- we all want to see data consumption increase. We think it's a good idea. It helps Rakuten, between you and me, in long-term because the group as a whole, as Miki started earlier, about the synergies of cross-selling across the entire group is so much valuable when this data consumption value increase. So it's a pleasant surprise. It's new. The MVNO migration is not as big as we thought.
And thinking about that 1 gigabyte again, do you think that's because that it's free, they're using more and so when you launch the network, actually, the demand is less?
Yes. No, I think 2 things. First of all, like, I imagine, I have now many colleagues that live in Japan and I notice like the -- I started getting obsessed about what they do with their mobile. And my feeling, I noticed that they are so worried about exceeding their allocated consumption per month. And so this issue about, they don't want to get beyond a data limit because they have to pay more money and I think it is, by far, the most expensive country for mobile. So I think optimistically, I don't expect data consumption to go down when we launch. I really don't expect that will happen.
And so you think you have capacity for 12 million users’ gigabyte per month per day?
Yes. Yes. Yes. So let me tell you about the -- because that's a really important point about capacity. We purposely have driven every site that we have, have dark fiber. We have an ability to put 10 gigabit per eNodeB. It's a massive capacity. We own the dark fiber for our backbone. Supports 8 tera of capacity. So in our own network, it's brilliant. I think we are ready. The choke points, I think that someone asked about earlier, is about the radio access because it has a limitation to spectrum. I also feel very optimistic that with 5G, we'll be able to do the necessary data offload. So I feel really, really optimistically that we will not have massive choke points. It does not mean that we underestimate the demand. I think we just need to have the right solution to do this data offload in short-term and midterm as 5G comes.
[Interpreted] The gentleman in the back.
Oliver Matthew from CLSA. Congratulations. It's been a long journey. So it's very exciting to see you're about to launch. I have 3 questions. The first question, could you -- I know you're going to announce the marketing plan later, the pricing plan. Could you tell us more in terms of the marketing strategy? Obviously, you were very successful with credit card having very low acquisition costs. So will you start targeting the kind of key or e-commerce user base. Is that the right way to think about the marketing?
So there's a several advantage as our MVNO service business in Japan, right? Obviously, our flexible and scalable and very economically efficient network. We are asking about the flexibility in terms of pricing and also not only pricing, but the service package. The second is Rakuten Group, if you think about not only Rakuten Card, now Rakuten Bank getting about 6,000 applications per day. Rakuten Life Insurance, growing really fast. So our ability to acquire a customer is unbelievable. So what we are concerned right now is over demand, not under demand. And at the same time, the -- we have to build massive supply chain management of the device and SIM and store and so forth. So I would like to make it online as much as possible, which is kind of frictionless for us. Of course, users need to wait 1 day to get a device, but we will deliver that device next day. If it's over demand, you have to wait a little bit, but that's awesome. More online applications. This will create maybe 3 benefits. One, much lower customer acquisition cost, right? The second, we will be able to overcome the capacity constraint of these stores. And three, these users are heavy Internet users. So they will buy more, they will use more Rakuten services. The synergy with that is going to be very big.
By the way, maybe you want to touch upon a little bit about the store experience, no?
Yes. Yes. So how many of you, by the way, have been to any of our stores? Okay. So I think what I advise to do is like the contrast between the old and the new. So this concept of what you hear in the industry called BSS, this billing subsystems, we call it digital experience platforms. So we have a fundamental new architecture for how we manage this onboarding. So if you come to, let's say, you start at your home, and you say you want to browse web page, you like something, we created a very powerful product catalog, allows you to browse, shop and you start at your home, you come to our store, your journey continues. And another thing that we have done is the removal of all of the paperwork at the store itself. So the idea is now you have complete digital journey with customized video that explains to you all the terms and conditions in a fraction of the time that you would have had to spend into other areas. So we ideally would love to see everything going online. I think that will be the dream: To make everything frictionless and put it through, but our stores will also offer a different experience. I think they will -- they are today much different in terms of their layout than what you see in other retail stores.
So for our MVNO, average onboarding was about 100 minutes. Yes, in the presentation that I did for this free supporter program, we said because of the BSS that Tareq just talked about, shortest onboarding will be 18 minutes, 18.
Including watching the video.
Yes.
Yes. And I was wrong. As a matter of fact, when we did it, shortest 16 minutes. 16 minutes.
And to be honest with you, we're still not -- we're still not happy about it. So when I talked about the next innovation, it's a really, really fascinating technology we're going to introduce. The ability to imagine you pull your mobile, it automatically recognize that you are who you are. This is something that is legally called E-KYC. Now I verify, you don't need to talk to anybody, completely now on-boarded, activated, and that becomes very frictionless. I think we also will be the first mobile operator in Japan to launch this full E-KYC, just slightly after we do our grand launch.
Second question, on the cost side. Obviously, this quarter, you have quite a large cost because you don't really have much revenue. Is this the kind of running cost we should expect, excluding marketing for the MNO? Or do you expect to see the cost to pick up?
No, actually, the cost highlighted are all CapEx cost, not operational cost. The operational cost is -- I mean, look, I think, arguably, probably across the 1,400-plus operator globally, you will never find operation cost cheaper than Rakuten Mobile. The CapEx investment, I think Miki also talked about it, we've already communicated to the markets in general, that we are on target to meet our financial plans and what we told for 4G and 5G. So we definitely will not go and ask for more money. We think we have even creative solutions that we're evaluating on how to continue to reduce CapEx cost as we go through. So for example, I'll give you one interesting data point. The approach is never to be content and happy about the technology. How do you evolve and advance. So majority of the cost that comes on us is actually in 2 buckets. One is about just the construction, about human beings and labors to go build sites. The second one is about this, what I call, 'IT servers'. This is now an evolution path that we have taken of how we constantly optimize cost targets for our servers, for our infrastructures and even for our future sites for phase 2 beyond our phase 1. They'll be dramatically, I think, cheaper because of the architecture we're going to build. Some of our concrete poles and towers will be a lot cheaper than deploying on top of rooftops. So these costs are not operational cost. These are just CapEx investment that we're doing today. On OpEx, we will start reporting this, but it will be remarkably, remarkably low compared to others.
Okay. My final question, on the exporting side of this platform, do you have any ideas about the business model? And Altiostar, obviously, that could be a very important part of it. Are those 2 separate concepts? Are you going to do the whole...
No, no, not at all. Not at all. I mean, think about this, for us, the first journey, I call it about learning, understanding. We as Rakuten, did what I call, 'system integration'. The second journey in RMP is our own -- so the difference between, let's say, what we want to do and where we want to evolve, RMP is our own cloud connectivity platform. We have certain IPs that we own and acquired and certain IPs that we'll continue to acquire to complete the technology software stack. So Altiostar is the fundamental part of this. But there's also other parts of things. Do not underestimate the criticality of what we call orchestration engine. This orchestration engine is almost the brain that's running this entire network. That is also an extremely unique IP that we have. And we think that is a big differentiator of how we go to other markets. I met with another operator yesterday, and we showed them how we manage our operations, how we manage -- today, by the way, in our network. I mean, we have over 6,000 virtual machines running and actually nobody -- honestly speaking, from an employee point of view, we hardly manage those. Because the orchestration engine itself is managing each element, managing auto healing, auto scaling. And so I think that's the IP that we look for. And I think, in 2020, post Japan launch, we'll have a great opportunity to exhibit and show this RMP platform. We wanted to show this in MWC. I think it would have been something very impressive for people to see. It is almost equivalent to what you'll see in front of you is a telecom app store. So the telecom app store for enterprise is what we will show in -- as months go through in 2020.
[Interpreted]
[ Debby Gibson ], again. Japan market, half of it's Android, half iPhone?
Yes.
Are we going to be ready for one support of iPhones in SIM basis for the launch? And secondly, selling of iPhone in stores.
Yes. I mean, on the iPhone stuff, we're under strict, strict NDAs. But I think here's what I will tell you. I mean, it's prudent for us to make sure that we support all -- portfolio of all devices, and we're managing to ensure that that vision is for both device portfolio, we need to be ready.
Okay. You mentioned the E-KYC. So for the Pay operators, PayPay and Line, they tried to do E-KYC and had big problems. Delays of 4 weeks. The processing system crashed. Why is that not going to be the...
I mean, I'll tell you -- if you -- why sometimes I'm -- I get a bit overexcited when I talk about this network for multiple reasons. I think if you look at the technology stack that we're using. And you go inside any operator and especially into this domain called BSS, you will find that it has been assembled by so many fragmented pieces of technology that when you put them together, it's really complex to deliver on the performance that you desire. So far, if you look at our technology stack, it is completely today built from one supplier. From billing to product catalog to our web portal. And to be honest with you for the E-KYC part, our selection also for supplier has been, go to the airports, look at who the airports have selected as the top supplier in the world, and we partnered actually with NEC today to supply us that technology. So on the seamless integration that we have done, we're testing at an unbelievable level of scalability. So I am pretty confident that the issues that maybe have experienced in the past. I don't anticipate any problems. But also, I will tell you, the concept of full E-KYC in Japan hasn't been regulatory approved yet. So that's coming April. And that's going to be very thrilling. But I'm pretty confident about the level of capacity and scalability that we have tested the system at.
And last one, operational costs. You're -- obviously, you're already testing system now. You're seeing the P&L impact. Besides marketing and running the SIMs, what if operational costs go up in response to 1 million, 2 million, 3 million subscribers within your system?
I mean, see, this is -- one day, I was giving a lot of people a lecture about cloud, actually, because I think there is a misunderstanding. They think that it's a -- as your ramp-up capacity, no matter what is the unit of capacity, there is no linear proportion between employees to capacity. I think the nice thing about our cloud architecture -- I mean, just take a simple concept. You have a virtual machine, it gets full. And then automatically, this is not a human-driven event. The system says, "Oh, you know your VM have reached 75%. Let me go and spin-off an additional VM." This concept of scaling do not require me to add individuals and people to the operation team. So the operation team today, most of -- if you look at the organization, it probably would surprise a lot of you to know that the average age into this group is very young. And they are one of the best software developers you could find on the planet exists in operation team. Maybe I will tell you something very funny. They don't -- when we were hiring them and say, we want to hire in operation, they will feel like insulted. I said, no, no, this is not operation of the past. Your job is you are an AI ops engineer. So this is a new world that we started with. And I would say, we're scratching the surface on the possibility of how you use modern technology such as AI, ML to constantly optimize, tune and automate this network, but it only could happen, only could happen because of one reason, we have a seamless data integration source for everything. We don't have fragmented data sources. So everything comes to a single repository. That's an advantage that is very, very powerful for us.
To clarify, it doesn't sound like there's a lot of incremental costs on [indiscernible].
I mean, I -- no -- there is -- I'll tell you today, frankly speaking, I am fixated about not increasing the operational headcount and spending more energy into the development of the platforms that drives automation efficiency. So there is no incremental cost that we foresee today as scaling up capacity.
[Interpreted]
So you kind of addressed the capacity and scaling there. But what about when it comes to roaming and handling those fees and those agreements with KDDI? I mean, if users are using 1 gigabyte a day, couldn't that cost start to really come down?
Yes. Of course, of course, I think 2 things. I'm sure you will understand that it is also to our advantage -- KDDI has been a great partner, but it's also to our advantage to make sure that all the lessons learned from Phase 1, meaning on the development, the site build, et cetera. We think for the phases and the -- and especially as we go outside of the denser urban areas, the phases of suburban and maybe rural, you will see platforms that we have built, and I think is very innovative of how we're building sites. Our ability to accelerate our builds, I think it's going to become a reality that we'll share very soon about the future phases. The quicker that we are to constantly expand our coverage, it is something we are extra motivated to do. And I think on March 3, we'll highlight a little bit more on the pricing discussion about roaming in general. So you'll see how we will control also the cost structure when you are outside of our network.
And then just on 5G, I think, originally, you said you were targeting a June kind of deployment scenario. Are you still kind of on track to meet that milestone?
Of course. Yes, yes. I think the only thing I will -- I just want to remind you, what is the difference about Rakuten versus, not only KDDI, DOCOMO, SoftBank, AT&T, Verizon, you know we are building our own product, right? So this is a product that is not purchased through an OEM. So our development cycle, we went through 7 months of hardware design cycle. Our development cycle to go into production is going to finish up in March. Actually, in March, we're going to do some very big ceremony about tape cutting for a product that's manufactured in Japan that we are so proud about. So this is a very, very big deal to us that it is not just about going to a large OEM and say, please give me this product. It is about inventing a very high-quality product at an amazing reliable price to help us accelerate 5G. Now that is something to be talked about, right? So when we talk about the world's first open 5G RAM platform built in Japan, at substantially lower cost and a product that's built in China, I think that's a really, really good story. And we're on target. And right now, there is no delays that I see as such. We just need to go and continue to validate simple things, critical things. What does the coverage characteristics of millimeter waves look like in Tokyo? How does millimeter wave and SUB6 work together? How does these technologies with LTE will work? How do they convert to the core? These are the tests that we will do from now till June to be ready. So -- but I'm excited about our approach to 5G. I really, really think this is not yet another marketing advertisement that we've launched 5G. There's something special about this platform.
[Interpreted] So thank you very much. Any other questions?
[Interpreted] With this, we would like to conclude the first session, mobilization. And up to 5:50, for about 15 minutes, we would like to take a break. Thank you.
[Break]
[Interpreted] Thank you very much for waiting. We would like to start the second session. The second session is the Commerce business. The presenters will be introduced. In the front row, Kazunori Takeda. In the back row, Ryo Matsumura. From the left, Akihito Kurozumi, Noriaki Komori, and Mr. Nohara.
Now Mr. Takeda will begin the presentation.
[Interpreted] Good evening. I'm President of the commerce company. My name is Takeda. Within my area, included is the Sports business. But today, I would like to focus on Commerce business. So it's been taking a long time, so we would like to make it as concise as possible.
First, this is a domestic e-commerce company related business, including Rakuten Ichiba, Rakuten Travel and the golf membership booking business, Rakuten GORA and the Rakuten C2C business and Dream business, [ Big Data ] and horse racing and bicycle racing betting service. There are just about 35 different businesses included. But in general, for those businesses, as you can see in the red area, this is a core business. And as explained by Mr. Mikitani, and the growth of marketplace business, this is core business, including Rakuten Ichiba, Travel and GORA and Dream because it's domestic. Rakuten Reward is not included here, but these are the businesses which are generating earnings and revenues. And in terms of the market share, we have meaningful market shares already. And GMS is growing at 11.3% year-on-year. So there's a healthy business in the existing businesses. So even those traditional businesses are growing fast.
On top, we have the yellow area, which is what we talk about from time to time, the investing for the future business as we try to develop the market. Mainly, we have Rakuten Direct. This is the first party, home-like product and Rakuma and the Rakuten Books. Fashion, last year, Rakuten Fashion. Well, in the past, we had Rakuten Brand Avenue. But now we are identifying this area, Fashion, to achieve a growth. And Rakuten Bic, this is a joint venture with Bic mainly dealing -- distributing consumer electronics, and we have Seiyu Netsuper. On this it will be meaningless unless we can grow. So there's about 30% year-on-year growth in terms of GMS.
Next, in terms of revenues, how does it look like? On the left-hand side, you see the results for FY 2018. And on top of that, there is a growth of marketplace businesses, which is adding JPY 6.5 billion to the performance. And on top of that, we have investing phase businesses, which is growing while improving costs. There is about 2 to 3 years' preparation stage phase and so forth. But finally, each of these businesses that we started about 5 years ago -- sorry, this is about the growth of marketplace businesses. Now they are improving profitability as well. And on top of that, in the logistics, we have made a significant investment. So including Rakuten Ichiba and C2C in the e-commerce business, we are putting this e-commerce business on top of the logistics network so that we can deliver the products whenever and wherever customers want. That's where we are investing. So in this area as well -- well, we are going to discuss the details later. The investment stage was last year, this year and next year. So as we expand, we will recover the investments. Therefore, going forward, we can expect return from these businesses as well.
And today, because we are supposed to discuss the details, it's not only myself but also each person in charge of each business, our Executive Officer is going to present. Well, first of all, Mr. Matsumura will cover Rakuten Ichiba and others and the Fashion and C2C as well as the overall marketing efforts; and Mr. Kurozumi is overseeing the commerce company as a CTO, he is responsible for development efforts. And Mr. Komori is looking at the first-party Netsuper business as well as logistics. So logistics is his main responsibility. There's another person, Mr. Nohara. Nohara is not presenting, but Mr. Nohara is on the corporate side and supporting the commerce company, supporting the customer center and others and the regional local area revitalization is also under his responsibility as well.
Now Mr. Matsumura will start his presentation.
[Interpreted] My name is Ryo Matsumura from the Commerce company. So I'd like to begin my presentation on Rakuten Ichiba and others. In short, Rakuten Ichiba, last year, had a very strong year. Every year, it's been growing. But in the last several years, last year's growth was especially strong. There are different key metrics that we are looking at. But for the growth of the mall, what is important is the number of customers. So the customer base has been growing steadily. But on top of that, the existing customers' frequency -- shopping frequency has been going up as well as LOB. So those are important factors. But for the growth of the shopping mall, the number of customers, that is the most important trigger or metric. And last year, we had a very good growth in these metrics. And from now on, I'd like to talk about 3 reasons why we had a strong growth in the number of customers. And I will talk about how we are further growing those 3 factors going forward.
The first important factor is the point collection. I mean, Mr. Mikitani talked about it, the number of points issued for the entire group was 320 billion points last year, and Rakuten Ichiba is the main player in the issue of points as well. And also other group services are using these. So there's a clear strength here. In terms of points, I think this number, you see this in many places, and our point collection program is a very attractive program. So that is the driver of the growth. And recently, many different companies are doing temporary marketing campaigns, but we are focused on sustainable growth rather than just a onetime spike in numbers. But still, with this quality, we have been achieving this high growth. Well, we need a sustainable growth, and it has to be supported by the mechanism. And one of the most important mechanism is SPU. We started 4 years ago, and it's been evolving all the time. And we keep -- kept adding different services to this.
Now we have 16x service at the moment, so as a continuous system, not only for the campaign period. So you can use this kind of program at all the times whenever you come to the Rakuten market. And you can get the strong point rewards through this program.
If you look at the numbers, so how many customers are using SPUs out of all the customers? As strong as 75% is the number. 75% of the customers doing shopping on Rakuten Ichiba are using the SPU program. So that means SPU has become a strong driver of the overall business.
The second element is the product service improvement. So no matter how strong the point program may be, the service and products have to be improved and that's what we have focused as well. And this perspective is represented by 2 keywords: diversity and the consistency. In terms of diversity, as you know, Rakuten Ichiba is a shopping mall with more than 50,000 merchants. So there is a uniqueness with each 1 of those merchants. And we are trying to focus and appeal this uniqueness of each merchant to the consumers.
In terms of the consumers, they are coming to Rakuten Ichiba for shopping. So if -- it would be great if there is a consistency in our services. Otherwise, it will very cumbersome. So the functionality has been consistent as well as the search function and screen -- the payment mechanism, and also now we are reviewing the shipping price as well.
There are certain services released last year. For example, the search filtering function was introduced last year. With the color or size, you can do the filtering as a refinement of the search function. On the shopping mall, this is a very big function to control because 50,000 merchants are registering their products. For example, even for fashion, in terms of the color, certain shops may register the color as wine red, but other shops may call the same color as renaissance red. But from the consumers' perspective, it's the same color.
And then we have to -- on the backside, we have to analyze the big data and we have to recognize those 2 as the same colors. So even if the names are different, we recognize those 2 colors as the same colors. That's how we control the data and realize the functionality. So with the huge amount of big data and using AI on the backhand -- backside, we do all the analysis and continue to refine the functionalities. This is 1 example.
Next is multiple image. When there are multiple pictures and then you might try to magnify that by using a cursor or the -- in relation to the product image guideline. With that guideline introduction, products that match the guideline would be registered by the merchant so that that would facilitate the search by the consumers. That's another reason why NPS is improving.
This is just scratching the surface or the tip of the iceberg, where those -- the various kinds of the improvement in services compared to 2 years ago that we are seeing improvement of NPS by 2.5x. So our strong point system -- but that would -- they'll handsomely -- they reward our customers, that's 1 feature. And on top of that, the product and service having steadily improved. So that, as a result, if you take a look at the various indicators to show the satisfaction by the customers, we see the improvement.
And then the third has to do with the kind of customer traction measure. Many customers would come to Ichiba directly. But inside Rakuten Ichiba, there are various mechanism to attract customers, consumers and they're growing. The most -- the familiar example would be about the large-size sale in SPU.
Nowadays, for consumers, I don't think there is many consumers who don't know about the Rakuten large-scale sales events. And so we're trying to promote that even more. So that last year, during Rakuten super sales, if you take a look at the GMS during the super sale event, was up by 20% compared to the same type of event during the same -- the previous year. And therefore, such customer attraction mechanism is also advancing, and we are implementing promotion, merchandise improvement, among others. Day by day, we carry out analysis and then try to make an improvement. So it is not like a kind of the silver bullet that makes remarkable growth. But rather, this is based upon the steady routine efforts that resulted in growth and expansion of the customer attraction mechanism.
And also from time to time, whenever necessary, we carry out the various efforts to capture trend-related demand like, for instance, the cashless type of the sales or also there was the affiliate revisions. This used to be a very long run project but then we made a revision this time. As a result, we hear that this gives a major incentive for advertising products on Rakuten.
And also, we see the growth in transaction evolving affiliates as a result. That's inside Rakuten Ichiba, there's kinds of mechanism to attract the customers, each of them is growing, leading to major growth of Ichiba as a whole that is about the points, service and products improvement and the customer attraction mechanism. Because of those factors, we are seeing increase in users. As a result, we enjoyed the growth in revenue.
And from now on, we will further promote those initiatives. First, about the benefit for our customers, consumers, we can think of collaboration with Rakuten Mobile. This is going to be quite significant. It may be a matter, of course, but are they because of a very strong lock in feature of Rakuten Mobile. And the -- in fact, the mobile phones are used very frequently by customers and given the LTV, the lock-in aspect is quite [ influential ]. And therefore, the -- for those Rakuten Mobile users, they would automatically buy products on Rakuten Ichiba. Therefore, we can increase customers or consumers based upon Rakuten Mobile subscribers. And this is going to be the major opportunity for us.
And then second, this is related to improvement of products and services for both diversity and unification. We are planning various measures for introduction this year, including the shipping fee threshold. This is a major feature of the unification-related initiatives, but of course, there are other efforts like, for instance, we are currently working on a renewal of the category page and marketing by genre because their search is quite important for attracting customers for purchase. And also, we have to improve the discovery opportunities for our customers.
As one of such mechanism for different genre the way the products are sold, approach that could be different, so that we are working on detail the meticulous design for different category of the products and to attract more customers. And in terms of the marketing, this is another area that we can make further improvement for a different category, for instance, super sale and shopping marathon, those used to be major initiatives that were quite strong, which is applied to Rakuten Ichiba across the whole, but -- then we can also subdivide by the market into different players. For instance, in January this year, we focused on Fashion for sales. Rakuten Fashion and Rakuten Ichiba Fashion category merged together, launched the TV commercial and then other initiatives. The result was quite good.
Rakuten Ichiba, as a whole, has various plans for events and also we are planning to promote different measures for different category or genre. And in terms of the customer attraction mechanism, the -- in terms of intensive customer attracting measures, the -- in addition to the major sales -- we can also think of seasonal measures. And the large-scale sale event was quite fast-growing, and we want to further promote the growth. In addition to that, the seasonal and the genre specific measures, this has a major potential for growth, for instance, in terms of the seasonal measures. The simple example could be as follows: By expanding a market or market share, including offering. From the point of view of market share, we introduced a seasonal aspect as 1 way of category, for instance, it could be St. Valentine's Day.
And then the online and offline, how much value it can create as a result of seasonal measures. And this is the area where e-commerce is yet to fully penetrate for such seasonal events, and this is something that we have not sufficiently captured. Therefore, with further improvement in addition to large-scale sales events, seasonal measures as well, it can further promote growth.
And in terms of the genre specific measures, this -- there is a room for further improvement, including fashion, for instance. And then basic customer attraction mechanism, we can use media both outside and inside. Technology is progressing day by day. And therefore, there are the various initiatives that we can think of for promoting such customer attraction.
So based upon those efforts, if I may repeat, last year, we did very well. And when you take a look at the key metrics, the -- we are seeing the major growth of the customer base. One is because of the Rakuten Super Points, which is what we're penetrating. This is not a kind of the one-off type of event, but rather, it is maintained in various initiatives throughout the year. And then the improvement in terms of the balancing, diversification and unification as a result of improvement. NPS is growing and we hear customers that favor our activities. And then third, that is about the customer attraction mechanism. Inside Ichiba, each one of them is now growing and strengthened, for instance, in the case of life-sized sales event, it is growing by 20% as a result. The GMS in Rakuten Ichiba has grown very strongly, and we would continue to focus on those 3 aspects so that we can maintain the sustainable growth. And that's all from me.
Thank you very much. We need to switch a PowerPoint for the next presentation. So please be patient.
[Interpreted] So Matsumura has just talked about the growth of Rakuten Ichiba. But from myself, I'm in charge of development. So I'd like to talk about the store systems to support further growth of different businesses.
First of all, I'd like to talk about RMS. This is a system used by the merchants in Rakuten Ichiba. So what kind of changes do we make? In the past, this is a system that we have been utilizing since the inception and that we have kept investing so that we can expand the system. But going forward, for further growth and for further competitiveness, we need more scalability for the system going forward. And 50,000 merchants and we have 300 million products. Even if these numbers double in the future, this system should be able to handle. So starting last year, for 3 years, we have been renewing this system but almost completed this year. So in the latter half of this year, we will be actually implementing the modified system to their production. And the product registration and renewal and these are the main functionalities of the system as far as the interface with the merchants. But expanding this system for online and so forth, we will have more connectivities with other systems. So that's what we are investing at the moment.
At the same time, the stores are using this URL, UIs, user interfaces, for their operations. And earlier, my colleague talked about diversification and unification. For Rakuten Ichiba, we had PC, smartphone and another one. There were 3 devices in the past. But for the apps, we were not diversifying the app so much in the past because merchants’ uniqueness was what we are focusing at the moment. That's why we would like to expand apps functionalities and we wanted to emphasize on the branding of the smartphone and the application areas. So that's the enhancement that we are going to make going forward.
And also newly, we are providing store operation application. And this was started last year, but we'll be enhancing this, this year. In the past, they were doing the registration work in front of the PCs, but we will make it easy so that they can operate the system from outside when they are out of the office.
Lastly, we are going to respond in -- respond to merchants' opinions more quickly. We are getting more and more feedback from the stores and for that, we can make improvements. The number itself is not that important. But last year, we have received 150 improvement ideas from the merchants and we implemented some of them. And this is one of them. In terms of the address that user's input, there was always an incomplete address issue but we made some improvement on this. And also, the free text entry space was provided for the stores as well to talk about their products. And these are the examples of how we are responding to the voices of the merchants.
And going forward, this is another request given it's about the paperless operation for the downloading function of the invoices. This was the request given from the merchants, and we made it possible so that we can keep improving our system for the merchants to use and expand the system going forward. So that's all from the development side.
Thank you. So the last presentation is from Mr. Komori talking about the logistics strategy.
My name is Komori from Logistics. I have 3 points I'd like to share with you. So the shipping inclusive pricing and 1 delivery concepts. Now those are the 2 items I'd like to cover. And the third item I'd like to cover in my presentation is the communication with the margins, and this was already explained.
That's about the introduction of the free shipping threshold effective March 18. As Matsumura earlier mentioned, we are now seeing the massive inflow of new customers once they buy. And if they like the simple process, then they will become eventually repeated customers. But there are many users who felt that the shipping scheme -- shipping fee scheme is somewhat complicated. And therefore, even when we successfully attract the first customers, they may not be retained. And therefore, we thought of introducing this measure so that we can retain them.
On the other hand, in the case of their frozen/chilled products or large-sized products, according to the feedback from merchants, we made some exceptions. The user interface is currently going through some transformation up to JPY 3,980 threshold. How close they are or also the exceptions, they could be presented immediately. And especially because this is about the new measures, we are also creating the guideline pages for users as well so that they can understand what is in there. Of course, in every step of purchase starting from search, product page, and then putting them into a basket, that's another area for improvement to make it easier for customers to use. So once again, I'd like to emphasize the benefit of this change because, with this, the shipping fee becomes easier to understand. And therefore, the first time consumers would eventually become a repeated customers, shopping marathon and a life-sized -- the sales events could be the other opportunities for those customers could -- that will be sent to different merchants. Because this is a new measure, we have been trying to explain about the changes to a merchants by offering different kinds of tools like the RUx video as well as the data-related tools as well.
And now on delivery, that's the logistics-related initiative. This is based upon experience of the package delivery crisis in many senses, the -- either the carrier service does not accept the packages for delivery or additional fees incurred for users. They want to pick up a product anytime, anywhere, that they like. And therefore -- and also for merchants as well by offering reasonable service, then the merchandising and product information is something that merchants can focus on and giving more effective information to users.
And this is related to merchants. Last year, we opened the delivery centers in Hirakata and the Nagareyama. And now we are seeing their system is in full operation. And once all the floor is occupied, then it's a good time for us to consider the further improvement, and because of many inquiries in Narashino and Chuorinkan we are planning to open new centers. And about the last 1-mile delivery, it is currently growing at 34 prefectures, covering 61% of population.
On the other hand, the area that is not covered is where we are working together with existing carrier services. It doesn't mean that we will not deliver packages which is not covered. But rather, for those areas, we are working together with the other partners. So it is not the matter of whether it is covered or not. Regardless of whether it is covered or not, there will be unified shipping fee structure. And ever since the change has been introduced, about 60% of users are currently using it. And we also received many inquiries at the time of the year beginning or the new year conversion, and we are seeing growth in shipment because of increasing coverage. The packages delivered by Rakuten EXPRESS delivery also growing. And we came up with a new shipping structure, the fee structure in summer last year. And then the many inquiries were placed ever since, that is because of difference compared to Amazon, for instance.
For the time being, we are not planning to raise fees to support margins. In addition to that, there are those that have their own logistics. So in that case, they might prefer pickup service or some of them might prefer to bring their products to a logistic center. Here again, the unified fee structure is applied for shipping. And this seems to be quite popular. Therefore, we are looking into the further expansion.
In the case of small-sized merchants, which don't have enough negotiation power, we worked on negotiation with JP on behalf of them, not trying to return favor to those merchants. So because we are expanding Netsuper, so refrigerated logistics delivery is something we would like to enhance and parcel locker and different functions we would like to provide to the users because other parcel companies are not providing these services yet or we can do the collective delivery because in super -- Netsuper's, they are delivering 1 by 1, but we can put them together, 2 or 3 orders together to deliver. That is another functionality.
Next, the voices of outlets. We would like to listen to. So in the last 2 years, we have visited all of the 47 prefectures. So the New Year conference is the 1 event where we listen to them. But we made one-on-one visits to them as well. And many voices said that they want more service from Rakuten. For example, compensation service or the suspicious user cracking down functions. So for their outlets, we would like to work on those areas as well together with them.
And also another is that for better outlets, we would like to appeal to the consumers. So we like to pick those blue-chip stores and recognize them. For the next 2 years, we would like to continue to visit those stores and listen to them. And there's a [ wrong ] conference room function where the stores can make comments. But now the comments are made only by a limited number of merchants so we would like to change -- make change so that we can assemble more voices. That's all for continuous growth, we would like to work together with the Rakuten members and entities. Thank you. Now we would like to move on to the questions-and-answer session. If you have questions, please raise your hand.
Oliver Matthew from CLSA. I have 2 questions. The first question, could you talk about the impact of the cashless campaign by the government? I think for SMEs, which, I guess, is most of your customers, they are giving a 5% rebate. Are you seeing that having a positive impact on e-commerce shopping for you? And is that impact increasing? It seems to me that many people still haven't really noticed. Or did your merchants all sign up to this?
So we have had a research regarding who are -- can apply to this 5% [indiscernible]. And so we have registered those merchant. And we think -- that kind of margin, if you have some deal with us, you will have a reback of 5% and so forth. And it's been going quite well. And it's been acknowledged to the customers so they could recognize which merchant has that kind of a 5% reduction in tax. So it's ongoing.
Can you tell us how many of your merchants are in that scheme? Or how much impact it's making to your GMV?
So in terms of the number of merchants, I'd share that numbers and get back to you later. But as for the GMV, they have got there that card mentioned, they're the impact from the SME merchant. But there kind of the long tail, the baron in the Rakuten Ichiba. So -- and the merchant would apply for that, the cashless campaign, basically the tail side. So accordingly, there is an impact but it's not -- there's huge impact on the entire Rakuten Ichiba Y-o-Y. So even we are going to exclude that numbers that are actually the GMV or the growth ratio itself, it now be changed so that much based basic situation. And in terms of the number of merchants of applied for that campaign are 28, that's all the merchants.
Second question. So it seems you're competing quite directly with fulfilled by Amazon with your new service. Could you tell us how the merchants have responded? Do you see your service as being very competitive with the [ FBA ]? Or is there still some gap that you think you need to fill?
Yes, I think merchant are things that our service is very competitive against that every year because, as you know, that [indiscernible] has 2 services. One, the Amazon's own and analyze that besides Amazon. So recall the [indiscernible] multichannel. So in comparing with the multichannel, so our prices are very much competitive. So that's why now many customers are going -- merchants are going into our services.
Basically, that -- if we compare with the -- not directly the year. I have to say, a company, our package is almost 30% cost risk for our competitor, of which is included in our presentation material on Page 18, I believe. Yes.
[Interpreted] Any other questions? Any questions? Please do ask questions if you have any.
The second question is about the FDC involvement. This time, inclusive of shipping fee in pricing as well as some adjustment [indiscernible] and talk about with these 2 measures, have you settled with the FTC?
No, nothing started yet, so it's not settled yet.
With the FTC, you haven't come to agreement yet?
No, it's just the investigation has just started. So we don't know anything else yet. On Monday this week, the inspection came. However, before March 18 -- because the system service hasn't started yet. So I'm sure that the FTC will be investigating different aspects, and we would like to cooperate with them in the investigation.
On March 18, the guideline regarding shipping inclusive pricing. We -- it's not that we are canceling this plan because of this.
For the Q4, domestic GMV, what was the trend for Q4? I haven't seen that information in any of the slides. What was the impact of the consumption tax?
There was some impact from the consumption tax. But for the fourth quarter, on a Y-o-Y basis, there was about 4% increase. So this 4% for marketplace and travel and others.
Could you break down?
So market place is 4% increase Q4, right? Is that okay? Domestic EC as a whole grew 8.1%. And Ichiba grew 4%. And travel and others, including everything, 8.1%.
Okay. How about the monthly trend?
If you look at month by month, in October -- October was down. November, it went back. And in December, we had a full recovery. After January, so you are on -- at a normalized speed. The temporary decline in October because of the booking was made in advance before October and people just used whatever they have bought up to September from the stock that they had in their households.
And then, of course, there is a recovery, especially when it comes to living items and food. So that trend is back.
Last question, if possible, please answer this question. Last year, there was 320 billion points issued or given to the consumers. Given the performance of this fiscal year, what -- how should I interpret that, especially 6 months ago, there was an optimism conference speech by Mikitani-san, JPY 500 billion -- JPY 600 billion was mentioned by Mikitani-san, in the near future, he said. So what is the positioning of this year vis-à-vis that goal?
The point issue amount itself, if you consider the nature of points, you will understand the overall GTV. It is going up and down in commensurate with the overall GTV. Therefore, the percentage would not go up and down in terms of the GTV.
My intent of the question is for the mobile.
You may use points as subsidies for mobile.
That's why I wanted to hear a comment.
You have to wait until March 3. There's 1 comment I would like to add to your second question regarding GMV. For the marketplace itself, the numbers has not been disclosed. But it is between 5% and 10% growth for the fourth quarter. As Takeda said, there was a drop in October, but it's coming back in November and December. In January, we had a normalized speed. Thank you. Yes?
Could I ask 2 more questions? For the new shipping scheme. Have you tested this? I know before there was an example of an overseas business case where the volumes went up. But for your own merchants, did you conduct internal testing? And did you actually see the impacts that gives you the confidence that you will see GMV double-digit increase? And a slightly different question. Just on this recent virus. Seems to be quite positive for e-commerce shopping. Are you seeing that impact?
First question, yes, we did. Yes.
I think on the question. I think, so mainly, for example, that mask or some kind of [indiscernible] good sense. But -- so unfortunately, some manufacturers is out of the stock. So that's why so impact is not so huge.
Yes. We have more impact to the travel business.
[Interpreted] So any more questions? Okay. Thank you very much. That was the presentation by the commerce business.
[Interpreted] Next is FinTech. But please wait for a while. We are setting up the stage. If anybody is leaving, please let us know because we will guide you to the exit.
[Interpreted] So let me move on to the presentation on the FinTech business. So basically, what is required of the FinTech business? It is to be able to conduct -- do a stable profit -- drive stable profit, growth and we have to see that each of the businesses, profit in a stable manner. And the other point is that Rakuten Pay, which is very strategic, we have to make sure that these investments in strategic areas maintain financial discipline, that we don't do any extreme investments. We have to be able to control that and this is the operating income over the 3 years. This -- before this year, the operating -- OI margin, was 18.6%. And then 2019 Q3, well, we had the typhoon, the impact from the typhoon. In particular, the general insurance business went down after that. Last year, especially the latter part of last year, the securities also didn't perform so well. So I think there are about 3 different causes for the OI margin decline. And so the insurance, because of the natural disaster, including typhoon, securities, because of the financial market environment, that was not good.
And then the payment business. Strategically, we've made a substantial investment. So the loss from that impacted the OI margin. So on a quarterly basis, the sales are going up. So if we return that to 18.6%, that means that we will enjoy some gains.
Now we have some solutions for that. First, the general insurance. 2 years ago because of the typhoon, we decided that we will emphasize reinsurance, so as to hedge loss. We did that last year. As for the insurance underwriting, we wanted to also try to bring back the loss to profit through the underwriting discipline. It's been announced in the newspapers to tighten underwriting standards and also the ecosystem-driven growth will be emphasized. That will also be in line with the underwriting standard.
Now the securities. The charge, the fees are going to be coming almost 0 but we want to expand the asset business, so that we can execute mid- to long-term goals. And as for the payment business, the short-term profit rather than focusing on short term benefits, we want to continue with the mid- to long-term goals.
I'd like to speak on the payment business separately. Mr. Nakamura, who heads this business will make the presentation later. Now the insurance group, SPU, will be used to pay. The subscription will be used to pay for the premium. This was introduced last year. In addition, Rakuten ID can be used to apply for the insurance. So this will be like a card that will be used for the payment of the insurance.
Now the 2 insurance business that we have: The life insurance and the general insurance. We are looking at 2 on a quarterly basis. The red bar is the life insurance profit. We have been able to maintain profitability, but there has been various cost reductions or other types of sale of the bonds but the life insurance looks like it will be able to expand its profit.
As for the general insurance, the typhoon impact has been quite large. And that's the downturn. But we are changing the underwriting standard so we are trying to make sure that the risk is curtailed so that we can turn around the business to make it profitable and make it more like the life insurance business to turn it around.
Paperless is the trend for life insurance. All the paper documents have now been -- are now transitioning to the paperless system which really cuts down on the costs. And whatever that we are successful in the life insurance business will be also implemented in the general insurance business. The asset business, the card, if you use Rakuten Card and pay the balance by Rakuten Bank account, then SPU program will provide you with 1% additional point.
Now as for the equities or, well, we have to work on a long-term basis, but point investments and using points buying [indiscernible] or other types of measures are introduced to expand the asset business. The card, the points becoming a trigger for the consumers to use the card, including the insurance business. I think it's doing quite well. Now from here, it's going to be a very important topic. 2 or 3 years ago, I mentioned -- or maybe it was 2 years ago, I mentioned about the trend towards a cashless state. The government, METI, is saying that the target is to achieve 40% cashless payment ratio. About JPY 50 trillion of -- that means 40% of a trillion means about the cashless market is going to be a major chance to double the business. I think I mentioned this point on the left-hand side. And once we launch this, and the cashless trend is accelerating. So we don't know if cashless is successful or not, but because of the cashless trend, it's like a tailwind or follow-wind for the card as well.
This is the summary from credit cards has a larger percentage, which is 63%. It has a larger market. That's a breakdown. QR code is not very big because it's something that didn't exist in the past. It's only 7%, which is quite large for QR code, and the rest is e-money and others. So the credit card market was JPY 50 trillion to start with. So that market is being impacted because of the cashless trend, I'm sure you all agree. And as a result of the introduction of this cashless trend, this red line is the Rakuten volume. And then the blue is the 10.2% that METI has announced. So excluding Rakuten Card, it's only about 10.2%. The rest is 8%. So actually 7.2% is the credit card industry, excluding Rakuten Card. So even though -- well, there is a so-called tailwind or follow-wind. I think Rakuten was the only company that enjoy the benefits of this cashless trend. We are seeing like a 4x growth in the card business because of cashless trend. So we don't want to stop growth.
As I said, the cardholders in 5 months, well, 1 million cards can be issued in 8 months. So that speed should not be stopped, and the revolving balance must not be cut down. And other, for example, the Rakuten Bank account must be -- the bank -- the account from which the Rakuten Card payment is withdrawn from, and then you can also increase the consumer's usage of the bank. So the members of Rakuten Card can be driven to the Rakuten Bank to drive profitability and growth. So the right-hand side is very profitable, and on the left-hand side, well, it's not that the profitability is low. The transaction zone is very important to acquire data, such as Edy, commission is low. But because of the cashless trend, growth is growing, Rakuten Pay is growing. So this will be a transaction zone where we can acquire data for future business growth.
And this is the overall Rakuten business. The Rakuten Card growth will impact EC, mobile and other businesses. We want to expand all our businesses through Rakuten Card. So this will be a recap. So the general insurance, because of the impact of typhoon, yes, the profitability was not good, but we will introduce various measures to make it more sustainable and to drive profitable growth, like Rakuten Life Insurance, which is doing well.
On the other hand, the power of Rakuten Card, the strength of Rakuten Card will be used to grow the number of accounts of the Rakuten Bank. So the growth of Rakuten Card, I believe, will not reach the peak yet. And as for Rakuten Pay, yes, it's under a lot of scrutiny, but we will give you the strategy for Rakuten Pay now from Mr. Nakamura.
This is Nakamura Koichi, in charge of the payment business. I'd like to give a presentation on our services, including Rakuten Payment, Rakuten Pay, Rakuten Edy, Rakuten Point, Rakuten Check and the Rakuten Wallet. After the cashless scheme was introduced, what is the current situation with the merchants?
This is a company in Toyama Prefecture. Their annual sales is about JPY 80 billion. They use the Edy Rakuten integrated point card. As you can see on this graph, after November, there was a huge growth in Edy payment ratio. Now Edy payment ratio is 55%, together with other credit cards. So the cashless ratio is now over 50%. And this is the average for all of the outlets. And in some of the outlets, the cashless ratio is more than 80%. So 40% target by the government is well exceeded already in reality.
So as you saw here, the cashless ratio is increasing. And then what customers want is that they can reduce the number of cash registers or they can reduce the cash handling work or tasks and procedures and the number of people who handle cash. And some of the stores are totally cashless already. This is a cashless stadium that we see and the demonstration is going on. And then they verified that the time consumed for the preparation of the cash and the change has been drastically reduced, and as a result, much more efficient operation. And they were able to reduce the number of staff members by 25%. And in the food and drink, and the store manager and cook's time for customer service and cooking has increased by a lot. Well, we were talking about the cashless ratio, but now we are talking about the improvement in the operation. And we have a point card program. So how does it benefit the marketing too?
This is a donut shop example. We accumulate the data for each SKU, so we can have an in-depth analytics of each SKU. For this donut shop, we have the customer profile. We have customer DNA database, customer type A, B and C. For example, dormant users may have a purchase or female in the 30s maybe purchasing a lot of certain products. So we can find a lot of these insights out of this analytics. And furthermore, we can utilize those insights in marketing.
This is for Rakuten. Rakuten AIris is our in-house AI tool. And we can identify customers who are similar to the existing loyal customers.
In summary, there are different settlement choices and the cashless ratio is going up, and then that allows Rakuten to do more in-depth analytics and active utilization of online data and big data. So there's a positive cycle here. We are charging fees to merchants. That's our business model. So the merchants pay fees to us. That's why we can give a reward to the users. That's the basic business cycle, and -- which is unchanged. Maybe other players do not have the same basis. They have a different monetizing scheme among the competitors. But in our case, this is basic. We always charge fees to the merchants. We don't change this. Because of this base, if we stop reward and then we can immediately make us profitable. So on top of this fee, we do the advertising, coupon and the financial service monetization schemes on top of this. But for the payment, together with the merchant fee, we will continue to earn stable income. But on top of that, we can introduce our services to FinTech so that we can get more monetizing sources.
Today, we have credit, bank, and there are synergies with them already. But after this, we would like to achieve synergies with other entities going forward. What I'm showing here is the Rakuten Pay application money source, source of payment. Rakuten Card, Rakuten Bank and Rakuten Point account for more than 90%. If you think about other players, competitors, for us, Rakuten Payment, we pay to Rakuten Card or Rakuten Bank and Rakuten Point. But overall, our profit stays within the Rakuten Group in any case. But in other players, that is different.
Also, there's a mutual benefit. This is a Rakuten Card monthly usage. If you use Rakuten application, you will use 90% more for the Rakuten Payment. So there's a synergy here. And the new customer registration in 2019, 30% came through the off-line payment. So that means if you -- we go to the offline payment, and then we can contribute to the Rakuten economy. And this will also lead to the usage of Rakuten Ichiba and other Rakuten entity services.
Well, so far, I talked about the operator side perspective as well as merchants’ perspective. Let's look at the user side. There are 2 campaigns we launched. You think that this is nothing special, but we intentionally do these campaigns because our policy is to make the campaign simple. And Rakuten Point always emphasize. Those are the 2 basics. Compared with other companies, you will now see how simple this is. And this covers all of the merchants. And we use the same percentage, and payment sources do not matter. So over the long term, we continue with these campaigns. As a result, customers evaluate these campaigns. It's not sexy campaign, but it's steady and stable and user-first and easy to understand and simple. And parents of small kids gave us the fast position in ranking and as well as senior people. It is because of the simplicity of our campaigns.
Just the other day, on a certain TV program, they had a comparison of a -- they personified the pay scheme of each company. And the PayPay-kun was a bubbly boy, and the LINE Pay is the person who is popular among young people, and the [ Middle Pay ] is the payment system, who is -- it's like a boy popular among the females. And Rakuten Pay was a person who is very stable and steady, and that's how they personified each payment skit on this TV program.
And when this image is becoming stable among the users, and then -- and we don't have to do a big campaign anymore. Because within the ecosystem, as long as we continue to provide stable service, customers will follow. So that's why we'd like to continue with this.
2019, this is a 120,000-people survey, which is a very big survey in Japan. We won the first ranking in terms of customer expectation, perceived quality, perceived value, customer satisfaction, intention to recommend and loyalty.
This is a Nikkei '20 Magazine, 85 pages, smartphone, settlement and payment scheme edition. And the smartphone payment, first place, Rakuten Pay and so forth. On Page 85, we got the first place. And this is the total conclusion. The biggest player in the cashless age, Rakuten Pay plus Rakuten Card, that's the first place. So we got the first place in many evaluation aspects.
So now I'd like to go back and talk about the basic strategy. There are 3 layers in our strategy in terms of payment. Source layer, IDIF layer and the protocol layer. In terms of the source layer and the protocol layer, we have an open strategy here, we would like to expand on. But for the core asset, IDIF layer, we will focus only on the Rakuten members and utilize the Rakuten member's ID everywhere. That's the core asset. So based on this 3-layer strategy, and this is the definition of Rakuten Pay. Once again, Rakuten Pay is the payment, which is done based on the registered Rakuten ID. The protocol can be diverse, the sources can be diverse. Protocol means FeliCa and others. So that's the philosophy. And the feature of the scheme is that people can utilize -- save and utilize Rakuten points. So on the real and on the Internet, people can use this and believe this as the stable and steady payment service. And also, we can capture the customers' payment information and the behavior.
And as Mikitani-san said, Rakuten Pay monthly settlement number. This is the first time we are disclosing this number. This is the totally monthly active user number. In December, we had 46 million people, so that means this is a very powerful number.
So various mass media has been talking about the corporation, but it's not the total number that we are seeking. Rakuten will use a completely identical ID, et cetera. From the user's point of view, it's not just usability friendly, but we can ascertain the accurate number of users and so forth. The profiling is very accurate. Finally, on the future enhancements for 2020, I have 4 points. This was launched on February 6. So this is the addition of protocol, the Edy-SDK will be -- has been included in Rakuten Card. And we also have another cooperation with Suica. So you can charge a Suica and then even earn Rakuten points when you charge a Suica.
Well, some people ask, well, if you do Suica, does this mean that you can do Pasmo? The fact that we're working together with Suica means that we are going to be compatible with other transportation cards. So by cooperating with Suica you can ride on all these transportations listed here, and you can even use electronic money and you can even ride buses.
So we are looking at the compatibility with other transportation IC cards, the population coverage by Prefecture is 94.8%. So smartphone settlement, well, if you look at China or Southeast Asia, I think it is you -- might have this image that you need some cooperation with taxi services in Japan. What are some of the mainstream transportations used. So it means that here, railway is the biggest public transportation in Japan. Annual ride per year is 25 billion. If you'll include taxis, it's another 1.5 billion. So that means that the service will cover all of this. It's a tremendous service. The third point I want to mention is about Rakuten cash online settlement. The synergy with Edy, as well as Rakuten Card will be introduced in the summer.
Now there's another function called Check-in Passport. Rakuten Pay app will be used as an authentication application. So without writing your name or your information, detailed information, this is the Gora golf course that has more than 1,000 courses. If you use the Rakuten Card, you can do automatic check-in. It's not very well known, but this will be called Rakuten Check-In Passport. And then by stage, we want to expand that to Rakuten Travel, which is the #1 online GTV in Japan, and that is how we would like to expand our service. Thank you very much.
Thank you very much. Now we'd like to entertain questions for FinTech and payment.
From Citigroup securities. You disclosed the monthly active user number, I have a question about that. How much do they spend per person per month? For example, what is the transaction amount? PayPay is saying 100 million times, but how about the amount? Maybe JPY 1,000, I suppose, per time per transaction. So for their -- compared with their transaction value, where are you?
46 million is the monthly active user number, so including repeated users. So if you use once a month and then count it as one. For service, we count the frequency. For Rakuten Pay, the frequency is very high in the convenience store usage. We are not disclosing the breakdown. But if you think about your own lifestyle, you can tell, it's not that you go to the convenience store only once a month. You go like 3, 4x a week. So that's the kind of scale. But because we include online, if you order a pizza online with Rakuten Pay online, but you don't do this every day, so it depends. But our strength is that for a single user, we can cover different activities and behaviors of the single user.
Could you go to the previous page, I want to clarify something, there was a definition of Rakuten Pay.
It's the settlement using Rakuten ID. So it does -- it means that it's not only the QR code. So that's the premise of the number.
Now, I understand. That goes to my second question. How much is of offline in the total number? If you break down like that, for example, QR how much, or FeliCa how much?
People try to breakdown that way, but in our mind, we are not trying to look cool, but could you go back to the 3-layer strategy because we are truly thinking about the business in these 3 layers. In the beginning, there is the Rakuten Pay, 1 package offering. This is a slide that we have been using since then. So the basic strategy is unchanged. ID interface layer, Rakuten ID. This is the core asset. And because on top of this, we can put different services one after another. And then we don't care what the source of payment is or what the protocol is as long as we keep this ID layer. We think there's a huge potential. That's why we can collaborate with Suica.
If we only think about the protocol layer, we already have Edy electronic money. From Edy, we are a competitor. So that's not so easy. But on this big picture, we -- as long as we secure the ID interface layer, we can work together with any other company. So please keep this big picture in mind. That's part of the reason why we are not disclosing detailed breakdown numbers.
Thank you very much. Any other questions?
Okay, thank you very much. That concludes the presentation from the FinTech business. Thank you very much.
Next is on media and sports. If you are going to leave now, could you please let the staff know?
I'd like to move on to presentation of strategy of Media & Sports Company.
Good evening. My name is Arima. I'm sure you're quite exhausted by now. I would try to be succinct and easy to understand. As Mr. Nakamura explained earlier, AIris is based on the AI that is the augmentation technology. I suppose that there are 100 buyers on Rakuten's site. And then out of 100 million IDs, the people with similar features would be extracted. The perfect concordance that will be 100%, and high level of concordance that will be 90% and so on.
And in conjunction with the mobile, I think there was a question about marketing strategy. Once we start mobile servers, for instance. Suppose that there are 1,000 users or 10,000 users, and then we'll try to identify similar users out of 100 million based upon gender, demography, address and so on, based upon attributes information as well as purchase history that Rakuten has can help us identify look like people. And then we can target at them, send mail, for instance, or launch ads for them to attract mobile users. That could be another way of using that. For advertisement and technology, 2 teams work together. And recently, at the time of the IT, the price extension that has a history of 30 years or more, and we were honored to be the recipient of the IT award. And I'd like to explain about how this is helpful in our activity.
So first, turning to the main topic, that's about advertisement business. As Mr. Mikitani explained earlier, last year, we finally topped 100 billion mark. And in fact, the growth rate is higher than the average of the entire group. I'm sure you're familiar with this slide. There are 4 quadrants for analysis sake. Whether it is about analysis, a strategy, we always use those 4 quadrants. Horizontal axis represents inventory, ad inventory, whether it is within the Rakuten or it is outside inventory. And vertical axis represents the internal advertisers toward the bottom, that is -- it would be Ichiba merchants or Rakuten Travel hotel operators, for instance. So they're called internal advertisers. And then, in general ads, it has a history of robust growth and a few years ago, when I joined this group, the business, the external advertisers are the ones that we're also promoting because there are numerous manufacturers who sell their products in Rakuten marketplace. And therefore, we thought this could be a good opportunity for them to run their ads.
And as you see, the right bottom quadrant shows a very high-growth rate that represents the high-growth of the advertisers. And we're also seeing the growth of external advertisers as well. Since 2016, in terms of CAGR, well, this year, it was 16.7%. While it's not indicated as CAGR, yet. In fact, the growth rate is higher than the Rakuten Group in average.
Now let's change a different perspective to step back and to look at the ad market, which is typically announced around end of February by Dentsu. And 2 years ago, JPY 1.9 trillion for TV and the Internet, that was JPY 1.7 million. But it is almost certain that last year, the Internet-based ad outnumbered that of TV. And just like according to the mattresses rule or whatever, once you reach a certain threshold, then all of a sudden, your growth would be accelerated. And therefore, we expect further growth in the segment. And this shows the high-growth rate. However, about ad business that we are engaged in, that is the ad to be launched on EC platform. And it turned out that it was not included in that statistics.
So we have been presenting our views whenever there was an occasion. And last year, finally, Dentsu conducted a survey and made an announcement in the form of news release, and they indicated that last year, the market size agreed to about JPY 140 billion. What Rakuten number is not specifically decided, but we assume that our share would be about 2/3. And eventually, this is going to be included in the ad budget statistics. And once it starts to be included. And then that means this -- some -- the subsegment of the market is going to be recognized. And in fact, there are only a few players that have more than JPY 100 billion as a sales for ad market. And therefore, all of a sudden, we will become 1 of the top runners in ad markets in Japan.
Now turning towards the future, we want to achieve JPY 200 billion in 2021. Well, to do that, I have to say that year-on-year growth was slightly lower than we expected for 2 years ago and last year, but we will not give up trying to achieve the target that we have identified.
So the 4 quadrants that I mentioned, this year's growth strategy is indicated here. I won't go into any details. But in particular, the external advertisers, the revenue from them, and we want to grow that to 85%. On the left-hand side, I mentioned about the Rakuten Super Points, the data obtained from Rakuten Super Points, let's say that a particular manufacturer's product isn't just bought on Rakuten Ichiba, but it can also be bought at drugstores, and that data will be included. So that data will be merged, and how much is that product being sold in our Rakuten ecosystem?
Well, if we can identify that, then we can come up with a specific strategy to grow that part. So AIris targeting 100 million users can be used. For example, someone is using -- buying a particular shampoo offline, maybe we can conduct a kind of marketing strategy where we can reach that target online to make he or her buy a more expensive product. This is called Omni data. So if Ichiba and Omni commerce data can be merged, then I think we can contribute to the marketing strategy itself. So that is the -- providing data to the external advertisers. And we can also use the Rakuten data. And regardless of where the inventory is, we can provide the advertiser with value. Of course, the left-hand side will generate more profit. But overall, in terms of the inventory, well, if our data, Rakuten data can be utilized, then business can be expanded.
So one other topic that I need to mention, Google also mentioned this, about -- within 2 years, that the third-party cookie will no longer be used for targeting. That was announced. This is a privacy policy infringement. CCPA, GDPR, these are some of the restrictions that we must abide by. So third-party cookie is a way in which you can identify the individual, and that's something that we saw with the scandal with Recruit company. So the fact that Google has announced this has a very strong impact. Chrome has the largest share, and they are not going to allow third-party cookies. So it will have a major impact. I will go into it later. But according to Google, 52% of the people who are doing advertisement, in other words, top 500 global publishers, 52% of them will be impacted. Digital marketing in the world of digital marketing, especially in the display area, they rely heavily on the third-party cookies. So as an ad tech player, DSP, SSP, DMP, the agencies, advertising agencies, they don't have a media. So they will have to use the third-party cookie and incorporate that into their own data. That's their strategy. But they will no longer be able to rely on the third-party cookies.
For Rakuten, we have a lot of first-party cookies, and we have an ID. We have our own ID. So we don't have to rely on third-party cookies for our data. We are very competitive in that sense. So by utilizing our advantage, we can do marketing, advertisement not related to -- or depending on the third-party cookies, I cannot disclose the names, but we are looking at some partnerships to use a DMP building on Rakuten ID that will not depend on the third-party cookie. We are making some of -- we are actually getting offers from some companies.
Now when this becomes something that we can announce, maybe we can disclose numbers. So in Japan, a JPY 600 billion market, JPY 600 billion is the so-called display market size that will be affected by this third-party cookie restriction. So our target is to have an impact in this market, which is equivalent to JPY 600 billion. So needless to say, x and -- a company and x company merged, they -- and we hear that their number of IDs will be close to 100 million equivalent to ours. But the quality of our ID, because it is EC-based, the profile is very accurate. The address is always accurate. The Rakuten Card, Rakuten Pay connection link will enable points to be earned by the consumers and KYC is quite precise. The demographics are very, very precise and accurate.
In other words, the quality of the ID is very high. In addition to that, we have online, offline purchasing data. Of course, it depends on the person. There are like several hundred or several thousand so-called data per person. I don't think anyone has ever seen this kind of enormous data. This is a very valuable asset of Rakuten. Because of the restriction on the third-party cookie, I know I may sound a little like bragging, but we have very high-quality and very voluminous data.
So that concludes my presentation on Media & Sports Company and update. Thank you.
Thank you for attention. Now we take questions.
Just 1 question. Sorry for monopolizing the microphone so often. You mentioned about e-commerce and the platform created by Dentsu, the growth rate and market share, yes, this is the one. It appears that the growth rate is somewhat comparable to that of the market. It appears that the growth is somewhat slowing down for the current fiscal year. What are you planning to do in order to further accelerate, once again, the growth?
Well, rather than slowing down, I would say that because we have 2/3 of the share, the growth rate of ours is actually the major driver of the entire market. But anyway, the key is about external advertisers, how we can grow it further.
Yes. Eventually, it will boil down to this. On the left, that's internal inventory that could be further utilized. And in fact, even without ads, there are many pages that consumers are viewing without ads. And therefore, that may be where we can introduce external advertisers. That's what is represented on the left. And on the right, the AdRoll that is a retargeting company that we created the joint venture with last year that was complete for distribution platform. So this is going to be the major driver for growth on the right-hand side. And next year and so on, the third-party cookie restriction, for instance, that could be affecting the industry and also mobile communication network with more users. Then, of course, the value for ads that will be increased even further and also position location information that could be gathered, of course, that requires permission from the users, but that is a unique advantage of the mobile phones. And therefore, that's also we're expecting as well. But for the time being, JPY 400 billion as a goal, MNO ads and third-party restriction that's not included in here. As of now, we only included what has been done so far and expect that we can achieve that growth.
Any other questions? Additional questions? Since there aren't any other questions, thank you very much for your patience. It's been a long day. This concludes the financial results for Q4 2019 and the strategy session. Thank you very much for your participation.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]