Japan's banking sector is currently experiencing a significant transformation, largely influenced by AI. According to the Financial Systems Report, the use of generative AI is spreading rapidly, with about 30% of the Japanese financial institutions already using GenAI, about 60% including those currently on trialing, and about 80% including those considering trial or use. Although the potential of this technology is gaining traction worldwide, many financial institutions in Japan still struggle to align with the increasing consumer expectations.  

Transforming customer experience with AI 

AI is quickly becoming a force in driving innovation across Japan’s banking sector. The main drivers behind AI adoption are clear: the urgent need to boost productivity and the growing pressure to address demographic challenges, particularly Japan’s aging population and shrinking workforce. Although labor force participation rates are already high - 76% for women and 25% for seniors- above the OECD averages of 67% and 16%, respectively - the country still struggles to meet growing labor demand. Thus, financial organizations increasingly turn to AI technologies to boost productivity and enhance customer experiences. According to a 2025 Financial Services Agency (FSA) report, approximately half of Japanese financial institutions already use general-purpose GenAI tools, often with minimal customization. Customer service has emerged as the fastest-growing segment, with AI-powered chatbots and virtual assistants now commonly deployed to handle inquiries, offer real-time support, and guide users through digital banking services in Japan.

For example, a Japanese multinational banking financial services institution is piloting AI-powered digital avatars in its corporate call centers by leveraging a technology solution that converts human appearances into avatars to provide telephone-based explanations of products and services. The use of avatars is seen as a way to humanize digital interactions and could set a stepping stone for the future of customer service in banking, as global tech companies are exploring similar technologies for more engaging, voice-based customer support. The corporation also developed AI-driven forecasting and advisory services for its corporate clients. By integrating advanced machine learning tools, the bank aims to help clients navigate challenges such as rising wages and material costs to provide more accurate business forecasts. 

Strengthen security in banking with AI

In addition to improving customer experience, Japanese financial firms use AI to strengthen cybersecurity and IT operations. For example, in collaboration with IBM, one of the leading global banks in Japan tested a GenAI-powered solution to improve incident response management. In a three-month proof-of-concept trial, the AI system achieved 98% accuracy in monitoring and responding to IT error messages, significantly reducing the time to identify root causes and restore operations. Powered by IBM’s watsonx platform, the system enables flexible configuration by on-site staff to ensure high security and operational control. 
Another of Japan's leading regional banks has deployed an advanced AI-based fraud detection solution known as “AI Zero Fraud.” This initiative was launched in response to the growing complexity of financial crimes in Japan, particularly special fraud schemes targeting elderly customers and fraudulent internet banking transactions, which resulted in losses of approximately 3.22 trillion Yen in 2024 (equivalent to 22 billion USD). AI Zero Fraud leverages machine learning to analyze transaction behavior and identify characteristics indicative of financial crimes. Compared to conventional methods that rely on predefined criteria to flag suspicious transactions, the AI-driven approach enables the system to learn from evolving criminal tactics and adapt to even more complex scenarios. 

Current obstacles to leveraging AI among Japanese banks 

Data security challenges 
Despite AI’s potential, security concerns remain. Japanese technology giants have started imposing restrictions on generative AI tools such as ChatGPT within their business operations, primarily due to information leaks and data security concerns. These moves highlight a growing unease in Japan’s corporate sector about the potential risks of sharing sensitive business information with third-party AI platforms, especially as these tools become more deeply integrated into daily workflows. However, several companies continue to invest heavily in AI technologies to boost efficiency and gain a competitive edge. 
Consumers want AI — Are Japanese banks ready?
Despite the global momentum around AI adoption, Japanese banks are cautious in their investment strategies. In 2025, Japanese companies are expected to invest just under 23 million USD in genAI, which falls well below half the global average of 47 million USD. This restrained investment reflects broader hesitation across the industry: 63% of business leaders in Japan believe their organizations are not advancing GenAI strategies quickly enough, indicating concerns around scalability, implementation, and return on investment.

At the same time, consumer demand for AI-driven banking services is growing rapidly. A global survey by Personetics in 2025 found that around 75% of customers preferred AI-powered features such as double billing alerts, overdraft warnings, and automated savings nudges. There is also a strong interest in AI-powered chatbots, virtual assistants, and intelligent financial coaching that can provide tailored product recommendations, smarter credit decisions, and real-time customer support. In Japan, 47% of consumers believe online banking services need significant improvements within the next 12 months. To close this gap, banks and technology providers need to prioritize building consumer trust through transparent communication, robust privacy protections, and clear demonstrations of how AI can enhance financial well-being.

Overcoming AI concerns - What policies are in place?

Several AI policies have been implemented for banks to ensure its safety and transparency. In March 2025, the FSA published an AI Discussion Paper titled “Preliminary Discussion Points for Promoting the Sound Utilization of AI in the Financial Sector,” which outlines the agency’s commitment to supporting the effective use of AI technologies. The FSA encourages financial institutions to adopt AI while emphasizing the importance of robust governance, regulatory clarity, and continuous risk management to prevent operational and reputational damage. The FSA has also established a new AI Public-Private Forum in mid-2025 to facilitate dialogue between regulators and financial institutions, fostering a secure environment where best practices can be shared and practical challenges collaboratively addressed.
Furthermore, the Bank of Japan stressed the need for enhanced AI governance frameworks and the integration of advanced security measures, including post-quantum cryptography, to future-proof the financial system against evolving cyber risks. Both regulators recognize that the rapid adoption of AI requires ongoing review and adaptation of policies to address new challenges related to data protection, model risk management, and the ethical use of AI. 

Accelerate AI innovations for banks and financial organizations 

Partnering with a technology provider is crucial to drive transformation in the Japanese banking industry. In April 2025, FPT announced a strategic partnership with Sumitomo Corporation and SBI Holdings - Japan’s leading conglomerates in the finance and industrial sectors – to accelerate AI adoption through the FPT AI Factory ecosystem. 
With FPT’s cutting-edge AI technology, which includes advanced GPUs, ready-to-use models, and tools for deployment, FPT AI Factories help organizations make the most of their own data, knowledge, and identity. Notably in June 2025, FPT's AI factories, located in Japan and Vietnam, are placed No. 36 and No. 38 among TOP500 world’s fastest supercomputers. The inclusion in the 65th edition of the prestigious TOP500 list recognizes FPT’s AI factories for exceptional computing power, engineering expertise, and service quality. With extensive expertise in BFSI, a comprehensive suite of AI services, and a talented team of over 1,000 AI professionals, FPT is well-equipped to be your trusted partner in this journey.  

Discover our future-proof solutions for banking and financial services here: https://fptsoftware.com/industries/banking-and-financial-services