Payments Landscape in Japan: Opportunities and Risks to 2022

Payments Landscape in Japan: Opportunities and Risks to 2022

  • April 2019 •
  • 53 pages •
  • Report ID: 5353551 •
  • Format: PDF
Payments Landscape in Japan: Opportunities and Risks to 2022

Japan’s payment landscape continues to be dominated by cash, which accounted for 76.2% of the overall payment volume in 2018. With government initiatives to promote electronic transactions and growing payment infrastructure, payment cards gained prominence during the review period (2014-18e). Card issuers and payment service providers are focusing on developing payment infrastructure via the expansion of the payment acceptance network. In addition, the market is witnessing new developments encompassing payment card security and convenient payment solutions, with card issuers and technology companies experimenting with advanced technologies such as blockchain and biometrics.

Debit card penetration is very high in Japan, with each individual holding over three debit cards in 2018, supported by the country’s strong banked population.However, debit card usage has been mostly confined to cash withdrawals at ATMs and are rarely used for payments.

Overall, ATM cash withdrawals accounted for 87.9% of total debit card transaction value in 2018. This is at least partly due to the limited awareness among consumers about the ability to use debit cards at the POS. Debit cards are also unpopular with merchants due to their longer settlement period.

Despite lower penetration compared to debit cards, credit cards are the preferred card type, accounting for 98% of the total payment transaction value in 2018.Credit cards are the most popular payment cards in Japan due to the associated reward programs, which are considered far more beneficial than those offered for debit and prepaid cards.

Another important factor driving this usage is the wider acceptance of these cards among merchants, with credit cards now accepted across all types of merchants.

Japan is one of the few countries with a crypto-friendly regulatory regime, and has officially recognized Bitcoin as a legal payment instrument since April 2017.The gradual rise in cryptocurrency acceptance at merchant locations can be seen as an upcoming trend in the country, with merchants increasingly opting for this method of payment due to benefits such as lower transaction fees, no chargebacks and cheaper payment acceptance from foreign tourists.

Large merchants such as Bic Camera and Yamada Denki in Japan are also now accepting payments via cryptocurrencies.

The report "Payments Landscape in Japan: Opportunities and Risks to 2022", provides detailed analysis of market trends in the Japanese cards and payments industry.It provides values and volumes for a number of key performance indicators in the industry, including cash, credit transfers, cards, and cheques during the review-period (2013-17e).

The report also analyzes various payment card markets operating in the industry, and provides detailed information on the number of cards in circulation, transaction values and volumes during the review-period and over the forecast-period (2018e-22f).It also offers information on the country’s competitive landscape, including the market shares of issuers and schemes.

The report brings together research, modeling, and analysis expertise to allow banks and card issuers to identify segment dynamics and competitive advantages. The report also covers details of regulatory policy and recent changes in the regulatory structure.

The report provides -
- Current and forecast values for each market in the Japanese cards and payments industry, including debit and credit cards
- Detailed insights into payment instruments including cash, credit transfers, cheques, and cards.It also, includes an overview of the country’s key alternative payment instruments
- E-commerce market analysis
- Analysis of various market drivers and regulations governing the Japanese cards and payments industry
- Detailed analysis of strategies adopted by banks and other institutions to market debit and credit cards

Companies mentioned: Japan Post Bank, Sumitomo Mitsui Financial Group, Mizuho Financial Group, Mitsubishi UFJ Financial Group, Resona Holdings, Rakuten, Credit Saison, Aeon Credit Service, Credit Saison, Orico, Shinsei Bank, JCB, J-Debit, Visa, Mastercard, American Express

- To reduce dependence on cash, in April 2018 the Ministry of Economy, Trade and Industry (METI) released the Cashless Vision document, with recommendations to achieve at least a 40% cashless payment ratio by 2025.

In this regard, the Cashless Promotion Association was established in July 2018, which aims to promote electronics payments in the country through various initiatives including the standardization of QR-code payments, raising awareness of electronic payments among individuals and businesses, promotion of cashless payments at self service kiosks, and the development and maintenance of cashless statistics.
- Due to rising demand among consumers and businesses in Japan, a new extension to the current Zengin System was made available in 2018, to allow after-hours faster payment transaction capability. Instant transfers are now possible 24/7 at the majority of financial institutions across Japan. Over 70% of Japanese banks have enrolled to use the new payment system. Unlike the earlier system, which allowed same-day money transfers in a specified time on weekdays, the new system now enables bank transfers throughout the day, including Saturdays and Sundays.
- To benefit from the growing preference for alternative payments, banks and payment service providers are launching new payment solutions, particularly QR-based solutions. In October 2018, the mobile payment solution PayPay was launched by the India-based payments firm Paytm, in a joint venture with SoftBank and Yahoo Japan. This solution enables users to make QR-based payments at merchant stores using their mobile phone. Previously, in September 2018, Amazon also launched its payments solution Amazon Pay in Japan, which enables users to make online payments using the stored payment card details, as well as QR-based in-store payments. In March 2019, Mizuho Bank launched the payment solution J-Coin Pay in cooperation with 60 other financial institutions; this solution enables users to make fund transfers and payments directly from their bank accounts.

Reasons to buy
- Make strategic business decisions, using top-level historic and forecast market data, related to the Japanese cards and payments industry and each market within it.
- Understand the key market trends and growth opportunities in the Japanese cards and payments industry.
- Assess the competitive dynamics in the Japanese cards and payments industry.
- Gain insights into marketing strategies used for various card types in Japan.
- Gain insights into key regulations governing the Japanese cards and payments industry.

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