Block invests in Japanese challenger bank Kyash in $41 million round

Kyash, a Tokyo-based challenger bank, has raised a $41.2 million Series D from investors including payments company Block (formerly Square), Greyhound Capital and Japan Post Investment Corporation.

The deal is Block's first investment in the Asia Pacific region, according to a report in Nikkei Shinbun today. 

While challenger banks have become commonplace in Europe, with users ranking in the millions, banking in Japan is still dominated by megabanks with online offerings that are often clunky and prone to system failures.

Through the Kyash app, however, customers are issued a card that is linked to their bank account. They are then able to make online and in-store payments, which are categorized. The app also offers money transfer and budgeting tools. 

According to a release, the company will use the extra financing to hire staff and seek further collaborations. 

"Challenger banks are a core theme in fintech and the unbundling of traditional banking has become an irreversible trend globally," says managing director of Japan Post Investment Corporation Shinichi Takatori. "Through rebundling financial services with technology, we believe Kyash’s user-first and mobile-first philosophy and product architecture will allow it to evolve into a key platform."

This latest challenger bank raise follows several rounds globally. Last week, Nordic neobank Lunar raised $77 million as it rolled out crypto trading. In February, UK neobank Atom raised $100 million with a view to IPO.