Looking Eastwards for Payments Opportunities
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13 January 2014Zilvinas Bareisis
Last week I published a new report called "Retail Payments Market in Japan: A Land of Contrasts and Opportunity" - an overview aimed primarily at those seeking to get an introduction to payments in Japan. Our clients know that we don't publish country-specific reports that often; instead, we tend to focus on themes and topics that have relevance in multiple markets. However, I had the opportunity to take a closer look at the Japanese retail payments market as part of a consulting engagement last year. Given how different and interesting the market is, I couldn't resist the temptation to share the findings with our clients. It really is a land of contrasts. Despite Japan’s deserved reputation as an advanced payments market, it 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 it has a number of unique payment methods, such as konbini. Japan is often presented as an advanced case of mobile contactless payments, but those have been based on a proprietary standard (Sony Felica) and only now the country is starting to migrate to NFC payments. The report explores all these and other trends in much more detail. It's also a land of opportunities. Based on our analysis, we see opportunities falling into three categories with different risk and investment profiles:
- A mobile app with sophisticated capabilities for cardholders to manage their cards and engage with their finances should be a "no regret" move for nearly all issuers.
- Some opportunities require a clear business case decision. Examples include card-based money transfer services, m-POS services, and targeted offers, coupons and rewards.
- Finally, Japanese issuers and their partners should make careful decisions where to place their bets and what kind of business model to pursue in mobile payments, as those opportunities represent relatively high investment and risk.