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Mobile wallet and payment industry is expected to record strong growth in Japan over the forecast period

Mobile wallet and payment industry is expected to record strong growth in Japan over the forecast period

Mobile wallet and payment industry is expected to record strong growth in Japan over the forecast period

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Once a pioneer in cashless payment technology, Japan is at the back-end of the charts in terms of mobile payment adoption. People in Japan prefer using cash as opposed to digital payment methods. Despite being a futuristic and tech-loving country, every four out of five transactions in Japan are completed with cash.

However, the mobile payment adoption has been increasing over the last few years. According to PayNXT360, mobile payment transaction value in Japan expected to increase at a CAGR of 19.6% during 2018-2025. Over the forecast period of 2019 to 2025, the market is expected to reach US$ 187,668.1 million by 2025, increasing from US$ 68,474.9 million in 2019. Some of the key players in the mobile payment space in Japan include Line Pay, PayPay, Rakuten Pay, Google Pay, and Apple Pay.

With over 32 million registered users, Line Pay is one of the biggest players in the mobile payment industry in Japan. When started in December 2014, one of the biggest challenges the company faced was getting merchants on board to increase digital payment adoption in the country. The company focused on partnering with local merchants and SMEs through its Merchants App. Their strategy of not charging transaction fees to merchants for the first three years worked well, and the company has over 1.4 million merchants on its platform.

Over the years, Line Pay had some successful collaboration with Murphy and Tencent Holdings to increase its market share in Japan. Line Pay partnered with Tencent, allowing WeChat Pay users coming (from China) to Japan, to make cashless payment using their WeChat Pay account at Line Pay merchants.

The same strategy was adopted, when the company partnered with Naver Pay to ensure visitors from Korea can make digital payments in Japan using their Naver Pay account. These collaborations with mobile payment providers from different countries has helped Line Pay to gain market share and drive revenue growth. From the merchants' point of view, such alliances have resulted in an increased customer base at a lower cost. With Olympics 2020 being held in Tokyo, Line Pay is expected to form more such alliances from different countries.

While Line Pay continued dominating the market in 2018, Paytm (India's leading mobile payment company) formed a joint venture with Softbank and Yahoo Japan, known as PayPay. After launching in October 2018, the company has racked up 10 million users in 10 months, which grew to 19 million users in 13 months. The monthly transactions grew from 2 million in January 2019 to 85 million in October 2019.

One of the key drivers behind the massive success of PayPay is the reward program, offering electronic money equivalent to 500 Yen to all of its customers. All they needed to do was to download and verify their PayPay mobile application with a valid phone number. After this, PayPay also devised a cashback strategy for each transaction a customer makes through their platform.

In addition to this, the company also announced benefits for sellers and merchants. During the launch, the company said that they will not charge any fees for "User Scan" type settlements until the end of September 2021.

To drive further growth, PayPay is entering into the new segment by offering different services through its platform including tax payment, pharmacy, book flights, cabs, and hotels. It is the same strategy that worked so well for Paytm in India. One platform for all needs of users is one of the key differentiating factors of PayPay.

Launched in 2016, Rakuten Pay is another big player in the mobile payment space in Japan. The company recently announced its collaboration with East Japan Railway, allowing Rakuten Pay app users to make digital payments at more than 5,000 train stations and 50,000 buses in Japan.

Another collaboration that will certainly boost the growth and market share of Rakuten in the country is with Seven-Eleven. In September, the two companies collaborated, allowing the customers to make payment through the Rakuten Pay app at all of the 21,000+ Seven-Eleven convenience stores in the country. Apart from these three major players in the mobile payment space in Japan – Orgami Pay, Google Pay, Apple Pay, and Amazon Pay are also making strides in the country to get a piece of market share.

To know more about changing mobile payment market dynamics in Japan, click here.

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