Payment Infrastructure Trends in Japan
Implications for the Future of Financial Services
As the first installment of this series on payment infrastructure, Part 1 of this report examined developments in the retail payment infrastructure related to the extended Zengin System operating hours and operation of the EDI system. In Part 2 of this series, the focus shifts to BOJ-NET (the Bank of Japan Financial Network System) to examine primarily developments in wholesale payment infrastructure.
Japan’s payment infrastructure has been steadily evolving in line with a policy proposal produced in 2015 by a working group operating under the Financial Services Agency’s Financial System Council. Part 1 of this report examined the extended operation of the Zengin System and its significance in the retail sector as a foundation for building new payment services that bring together financial elements and IT. In Part 2, Celent considers advances in payment services that support corporate growth through the effective use of BOJ-NET.
There exists a duality to the network system that undergirds the FMI. One facet of this is linking FMIs and payment systems and securities settlement systems operated by central banks, financial authorities, or industry groups; the second is linking providers of financial services and payment services, such as financial institutions. The history of Zengin System and BOJ-NET renewals is in a sense the history of updates to the systems that connect the payment infrastructure. In other words, this has been a story of efforts by payment service providers to respond to enhancements in services provided by industry groups and the central bank.
These system renewals ostensibly have been conducted solely according to the needs of the payment infrastructure schedules, with the financial institutions relegated to a position of falling in line with this. The overarching policy measures put forth by the Financial System Council go beyond payment infrastructure connections linking payment service providers (financial institutions) and have their sights set firmly on the end-users of payment services (individual and corporate customers, such that expectations should be high that they will be increasingly proactive in seeking to meet user needs. Indeed, at the heart of this discussion are the themes of advances in services and effective use in payment infrastructure.
At the same time, we hope that you will continue to harbor high expectations for this series of reports as we continue to delve into trends in the payment infrastructure.