Japan’s retail payments market is characterised by contrasts and unique traits which might be difficult for outsiders to grasp, yet it also presents opportunities for players both inside and outside of the country, says Celent.
The analyst firm’s report, entitled ‘Retail Payments Market in Japan: A Land of Contrasts and Opportunity’, is aimed primarily at those seeking to get an introduction to payments in Japan. The market overview is organised into three main sections: Cash, credit and debit cards; electronic money (e-money), contactless and prepaid instruments; and the e-commerce market and key payment instruments
Japan’s ‘rich and distinctive’ culture has always posed a challenge to foreigners seeking to understand its ways, says Celent. Despite a deserved reputation as an advanced payments market, Japan remains a cash-heavy society. Credit cards are popular, although the numbers have remained flat in recent years.
On the other hand, transactions on debit cards are virtually non-existent. Credit cards are issued by a broad range of companies, not just banks, and most serve as both issuers and acquirers. The e-commerce market is large and fast growing and has a number of unique payment methods, such as the convenience stores known as ‘konbini’.
“Domestic and international players interested in the Japanese payments market have a number of opportunities with different risk and investment profiles,” said the report’s author, Zilvinas Bareisis, a senior analyst within Celent’s banking group.
“For example, in Celent’s view, all issuers should be considering a mobile app with sophisticated capabilities for cardholders to manage their cards and engage with their finances. However, some opportunities around mobile payments are likely to be suitable for selected players only.
“Although mobile banking in Japan has had relatively low adoption so far, this is an opportunity for the card issuers to deliver a world-class application for their cardholders, incorporating the latest digital trends and truly differentiating the offering,” added Bareisis.
Japanese consumers typically make payments in shops using cash and coupons or rewards; it is also sometimes possible to pay by charging the customer’s mobile phone bill. The report suggests that the gradual shift of electronic commerce (e-commerce) in Japan towards mobile channels is shifting banks to cooperate with popular reward schemes, which can increasingly be used online and via mobile.
In the report, Bareisis cites last June’s agreement between Shinsei Bank and the Culture Convenience Club (CCC), which runs a popular Japanese rewards point network called T Point, to introduce financial products and services to T Point users.
The T Point network is allied with Yahoo! Japan, the country’s largest web service with 46m active unique members. Under the deal, Shinsei Bank and CCC provide members of the scheme with credit cards, shopping credit, auto credit and rent settlement. The bank also plans to explore more options such as adding credit card functions to T Point membership cards.
The report offers three recommendations for those seeking to enter the Japanese markets. Firstly, to consider a mobile app that will help customers to manage all their cards in a single location. Secondly, to focus on card-based money transfer services, mobile point of sale (m-POS) services and targeted offers, coupons and rewards, which could yield lucrative returns – deemed a medium-risk choice. The third option is to focus on investing heavily in mobile solutions.
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