Promoting Regional Development with AI-Powered Gift Suggestions

Client Background

Furusato Nozei, or "hometown tax donation," is a Japanese tax system that allows residents to donate to local governments of their choice. In return, the donation amount is deducted from their residence or income tax. As a token of appreciation, donors can choose from a variety of thank-you gifts offered by the region, such as local specialty products, food, or crafts.

Introduced by the Japanese government, this system aims to address regional development challenges and, by revitalizing local economies, bridge the tax revenue gap between urban and rural areas. It also encourages donors to reflect on how taxes are used and empowers local communities to strengthen and promote their unique appeal across Japan.

Furusato Choice, operated by TRUSTBANK, is one of Japan’s largest platforms for the Furusato Nozei system. Partnering with over 90% of municipalities nationwide, it offers more than 760,000 return gifts (as of October 2024), ranging from local specialties and daily necessities to experience-based options such as activity tickets and accommodation vouchers.

Challenge

Despite its position as a leading platform in the Furusato Nozei system, Furusato Choice’s smartphone app faced several challenges that limited its potential.

• Lack of app-specific convenience and enjoyment: The app largely replicated the website’s content and failed to provide a distinct advantage or enjoyable experience for users, leaving donors unconvinced of its added value.
• Balancing the fun of gift selection with awareness of regional issues: While users enjoyed browsing return gifts, the app did not effectively provide opportunities to learn more about local communities or the issues they face.
• Limited exposure to lesser-known regions, leading to donation concentration: Donations tended to go to well-known municipalities or popular return gifts, reducing visibility for lesser-known areas. This narrowed the range of gift options and limited donors’ opportunities to connect with new regions.

Recursive’s Solution

To improve the user experience on the Furusato Choice mobile app—ultimately raising awareness of regional issues and helping donors discover new municipalities—Recursive partnered with TRUSTBANK to develop Choice AI, a personalized gift recommendation agent powered by Retrieval-Augmented Generation (RAG).

Deployed as a chatbot within the Furusato Choice mobile app, Choice AI engages users with a friendly greeting and asks clarifying questions to understand their preferences. It then analyzes user responses alongside internal data (e.g., demographics, browsing behavior, past donation history) and external factors (e.g., holiday schedules, seasonal trends). Using this information, it retrieves the most relevant gift options from a database of approximately one million items.

To further improve recommendation quality, Recursive implemented collaborative filtering, an advanced retrieval technique that suggests items based on how users with similar preferences and behaviors have interacted with various gifts.

To ensure data security and privacy, Recursive established a comprehensive information security policy aligned with relevant laws and guidelines. Choice AI is designed with multiple layers of protection, including encryption, access controls, vulnerability management, and log auditing. These measures ensure that users can confidently engage with Choice AI without compromising their personal information.

Performance Evaluation

Before deployment, Recursive tested Choice AI using Large Language Model (LLM)-based mock users designed to simulate realistic donor behavior, including characteristics such as age, gender, and hometown. Choice AI was evaluated across four difficulty levels:

• Very Easy: The user knows exactly what they want and provides relevant information without being asked.
• Easy-Medium: The user knows exactly what they want but only shares relevant information when specifically asked.
• Medium: The user is unsure of what they want and only provides relevant information when prompted. However, they can envision using the gift for a specific event.
• Hard: The user does not know what they want and only provides relevant information when prompted. However, they can be persuaded to choose a gift if it is well presented.

Choice AI achieved an impressive accuracy of 78%, significantly outperforming the existing recommendation system, which relied on weekly or monthly popular items. These results demonstrate Choice AI’s ability to deliver smarter, more engaging, and highly personalized recommendations, greatly enhancing the donor experience.

Results

The introduction of Choice AI enhances the functionality of Furusato Choice, providing donors with a more seamless and personalized experience in discovering donation destinations that match their individual preferences. This aims to achieve the following outcomes:

• Promote the use of the Furusato Nozei system: By providing personalized recommendations for return gifts and donation destinations, the system encourages more users to participate, helping municipalities secure additional funding for local development.
• Increase app downloads and user engagement: With a more attractive and intuitive user experience, the app boosts donor participation and engagement, ultimately strengthening financial support for municipalities. The improved convenience and appeal also help retain existing users and attract new ones.
• Improve donor satisfaction: Personalized recommendations and a smoother donation experience enhance donor satisfaction and encourage ongoing use of the platform.