The day may be near when paper disappears from the rental property business. DocuSign Inc., a California-based company that offers a cloud system used for 90% of real estate contracts in the U.S. has launched a full-scale expansion into Japan. We asked Keith Krach, the company’s chairman, about the Japanese market’s possibilities and challenges.
Paper to disappear from the rental business
DocuSign Complete cloud-based contract system lands in Japan
Used by 300,000 companies in 188 countries
During busy periods, a mountain of paperwork forms on the desks of those in charge of processing contracts at real estate companies. Lease renewal agreements, property management agreements, personal property insurance contracts, invoices for costs incurred in returning properties to their original condition, and other paperwork keeps piling up. Their desks are like an airport, with contracts coming and going as they are put in envelopes and sent off to their relevant destinations, with some of those that return needing to be checked and stamped by a manager. Losing documents is unacceptable, and the responsibility of storing such a large amount of important paperwork is weighty.
The day that this sort of scene becomes a thing of the past at real estate companies is just around the corner. Paper will disappear, as well as the work of mailing documents. Contracts will be sent with a click of a button, and at a glance one can see who is currently holding up a transaction. As all completed contracts will be stored in the cloud there will be no need to worry about information leaks either.
DocuSign in the U.S. began its full-fledged entry into the Japanese market to innovate contract processing in Japan. DocuSign, an IT company in its 15th year, has 300,000 companies in 188 countries as its customers. The cloud-based platform it offers for what is called digital transaction management (DTM) allows contracts and related documents to be exchanged within the system, and even signed electronically. In other words, it is a service that enables transactions to be carried out digitally without using a single piece of paper.
DocuSign is now showing a strong interest in Japan’s real estate industry. It established its Japanese subsidiary, DocuSign Japan (Minato-ku, Tokyo), in 2015, and the company started operations in the fall of 2016. Sales of its services have already started with major Japanese trading companies serving as distributors.
In June, Meiwa Real Estate in Kumamoto City, Kyushu, which manages nearly 20,900 properties, began using DocuSign’s system for its lease renewal agreements, and there is the strong possibility that the system’s use will spread quickly throughout the leasing industry.
In six months, more than 100 businesses in Japan have introduced the system, including two major temporary staffing companies, Pasona Inc. and Recruit Co., Ltd.
“Until a few years ago, there were 150,000 new DTM users per day, but that number has now grown to 300,000” says Mr. Krach. “Our system is used in 90% of real estate contract transactions in the U.S. Even National Association of Realtors, with over 1 million member agents, declared that it would invest in our services to make them an official standard. I believe that we can realize a 100% share of the market. And we will most likely come to capture a share of the Japanese market equal to what we have in the U.S. The only question is when.”
Focused on Building Close Relationships
Mr. Krach came to Japan in 2011. He talked with people in the industry and learned about the differences between American and Japanese contracts. He came to know the importance of the tradition there of affixing seals to documents instead of signatures, and as a result announced an alliance with Shachihata Inc. He also worked to strengthen relationships with Japanese companies, and build credit worthiness by receiving backing from NTT, Mitsui, and Recruit , and other major Japanese companies. Additionally, he learned about the complexity of the organization of the Japanese real estate industry, and asked for advice from the government and experts. In February 2016, Mr. Krach spoke with a member of the Ministry of Land, Infrastructure, Transport and Tourism. He says that this individual showed an attitude of complete cooperation, pointing to a bundle of documents, and saying: “getting rid of these paper documents is a national effort. We would like DocuSign to come to Japan. We will do our part to work to make it easier for you to do business here, including amending legislation.” “With Japan’s aging population and fewer workers, our service will enable companies to increase productivity and improve workers’ lifestyles,” states Mr. Krach.
According to results of this system’s introduction in the past, 85% of documents are completed in one day. Per document cost was reduced by $36.44 (about \4,200) on average, leading to both time and cost savings. Additionally, the system offers a high level of information security with a mechanism that keeps individuals from entering the system when they cannot be authenticated, which also contributes to compliance. There are challenges as well. The Building Lots and Buildings Transaction Business Act needs to be amended, trust needs to be built with the Japanese real estate industry, and awareness activities aimed at users are necessary. However, the move to digitize contracts is inevitable. Mr. Krach mentions with confidence that Japanese customers are appearing that have purchased real estate overseas using DocuSign, and many say they enjoyed being able to use it. “Ariba, the IT business that I helped to build as one of its founders 22 years ago has become a company that handles nearly $1.3 trillion (\140 trillion) in commerce, and DocuSign will most likely grow to a scale that exceeds that.”