Payid Japan Big Tech Takes on Fragmented Market

In Japan, the payment market is highly fragmented, with many different types of payment methods available, including cash, credit cards, and mobile payments.

This fragmentation has led to a lack of standardization, making it difficult for consumers to use their preferred payment methods across different merchants and online platforms.

Big tech companies in Japan are taking on this challenge by developing their own payment systems, such as PayID Japan, which aims to simplify and standardize payments across the country.

PayID Japan is a joint effort between several major Japanese companies, including NTT Docomo, KDDI, and SoftBank, which are working together to create a unified payment system that can be used by consumers and merchants alike.

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Japanese consumers use a wide breadth of payment methods, ranging from credit cards to cash over the counter and beyond.

Bank transfers still remain popular in Japan, alongside credit cards. Recent changes in the popularity of cash over the counter and ewallets like Rakuten Pay and LinePay are worth noting.

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Companies around the world see tremendous potential in the Japanese ecommerce space, and supporting popular payment methods will increase conversions and introduce new consumers to the international marketplace.

Accepting popular payment methods will allow businesses to share in Japan's ecommerce growth, which is expected to continue as the country's cashless vision starts to come to fruition.

The use of ewallets like Rakuten Pay and LinePay is becoming increasingly popular in Japan, and businesses that accept these methods will be well-positioned to take advantage of this trend.

According to JP Morgan, bank transfers, credit cards, and ewallets are the four major payment categories in Japan, and understanding these trends is crucial for businesses looking to enter the Japanese ecommerce market.

Japan's Ministry of Economy, Trade and Industry is actively promoting the use of cashless payment services, with a focus on introducing these services in municipalities across the country.

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In Japan, the regulatory framework for PayID is overseen by the Financial Services Agency (FSA).

The FSA has established guidelines for the use of PayID in Japan, which aim to ensure the secure and efficient transfer of funds.

PayID transactions in Japan are subject to the Payment Services Act, which regulates payment services and sets out requirements for payment service providers.

The Payment Services Act requires payment service providers to implement robust security measures to protect customer information and prevent unauthorized transactions.

In Japan, PayID transactions are also subject to the Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) regulations.

PayID Japan is gaining traction in the Japanese market, with many banks and financial institutions adopting the service. In fact, over 50% of Japanese banks have already integrated PayID into their systems.

The adoption rate is largely driven by the convenience and security PayID offers, allowing users to make payments using just their mobile phone number or email address. This is especially appealing to the Japanese population, who value ease and speed in their financial transactions.

One notable example is the major Japanese bank, SMBC, which has seen a significant increase in mobile payments since implementing PayID.

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Mobile payments are on the rise in Japan, with nearly 21% of the population using them in 2020. This number is expected to jump to one in four by 2023.

QR code payment systems are becoming increasingly popular, making it easier for consumers to make cashless payments. The Japanese government's cashless rebate program is also incentivizing consumers to use mobile payments, offering up to 5% of their transactions in cash back or points.

Businesses need to offer popular digital wallets as payment options, considering the billions of dollars in transactions that mobile payments can account for.

Several large U.S. tech companies are increasing their presence in the Japanese market, with Google acquiring the Japanese payments startup Pring for between ¥20 billion and ¥30 billion in mid-2021.

Google was likely interested in Pring for two main reasons: to provide financial services independently in Japan and to tap into Pring's large corporate customer base, which included 50 Japanese banks and the 7-Eleven convenience store chain.

Stripe, another U.S. payments sensation, is deepening its presence in Japan by supporting Furikomi and Konbini payments. Furikomi lets businesses securely transfer funds directly from their bank accounts and is the most popular B2B payments method in Japan.

Stripe will support Konbini at 34,000 convenience store outlets in the country, which makes up 18% of the nearly US$167 billion annual online B2C payment volume in Japan.

Different tech giants will aim to lure merchants and consumers into their respective ecosystems, but the lack of significant differentiation in the user experience could make user growth dependent on subsidies for a long time.

Paidy offers a convenient deferred payment service that can be used without a credit card.

This service allows users to make payments on multiple sites and consolidates them into one bill.

The billed amount is notified to the registered mobile phone by email and SMS on the 3rd of the following month.

Users can pay the billed amount by bank transfer or convenience store payment by the 10th.

A remittance fee will be charged depending on the payment method.

Automatic debit by direct debit is also possible.

Paidy Plus, launched in April 2020, implements identity verification and usage limit setting functions.

This service is currently available at over 700,000 stores, including popular online shopping sites like Amazon and Qoo10.

Paidy is unique among buy-now-pay-later providers because it allows Japanese consumers to purchase items online and pay them off in person at local convenience stores.