Japan Payments Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

The Japan Payments Market is Segmented by Mode of Payment (Point of Sale (Card Payments, Digital Wallet, Cash), Online Sale (Card Payments, Digital Wallet)), and by End-user Industries (Retail, Entertainment, Healthcare, Hospitality).

Market Snapshot

Japan Payments Market
Study Period: 2020-2027
Base Year: 2021
CAGR: 6.4 %

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Market Overview

The Japanese payments market is expected to register a CAGR of 6.4% during the forecast period (2022 to 2027). Payment preferences for e-commerce continue to evolve away from cash and credit cards and toward digital wallets and buy now, pay later (BNPL). The rise of alternative payment methods, volume shifting to credit- and debit-linked digital wallets, consumers opting for interest-free credit in the form of BNPL, and credit-centric verticals like travel still recovering from pandemic impacts are all contributing factors to credit cards' declining share.

  • Japan has a well-developed e-commerce market that has had consistent growth over time, thanks to high mobile and online penetration and a high preference for online transactions among consumers. Online payments are progressively replacing cash payments.
  • Due to the security benefits, Japanese retailers are choosing on-premise digital payment solutions. On-premise digital payment solutions assist businesses in increasing security and, as a result, customer satisfaction. Furthermore, several platforms operate in Japan, offering a diverse range of products and services.
  • Cards are the most common method of payment for online shopping in Japan. Prepaid cards, such as BitCash and Mint, are popular in Japan in addition to debit and credit cards. When making an online purchase, credit cards are more likely to be used than debit cards.
  • As the Japanese government announced a state of emergency in response to the pandemic COVID-19, the online payment business in Japan has been rapidly growing since the first half of 2020. Furthermore, due to Japan's social distance laws and the closure of many brick-and-mortar establishments, buyers have adopted internet channels even for everyday purchasing.

Scope of the Report

The Japanese payments market is segmented by mode of payment (point of sale (card payments, digital wallet, cash), online sale (card payments, digital wallet)), and by end-user industries (retail, entertainment, healthcare, hospitality). E-commerce payments include online purchases of both goods and services, such as purchases made on e-commerce websites and online booking of travel and accommodation. The scope of the market excludes online purchases of motor vehicles, real estate, utility bill payments (such as water, heating, and electricity), mortgage payments, loans, credit card bills, or purchases of shares and bonds. As for point-of-sale, all transactions that occur at the physical point of sale are included in the scope of the market. It includes traditional in-store transactions as well as all face-to-face transactions, regardless of the location of the transaction. Cash is also considered for both cases (cash-on-delivery for e-commerce sales).

The study tracks key market metrics, underlying growth influencers, and significant industry vendors, providing support for market estimates and growth rates in Japan throughout the forecast period. The study looks at COVID-19's overall influence on the Japanese payment ecosystem.

By Mode of Payment
Point of Sale
Card Payments (includes Debit Cards, Credit Cards, Bank Financing Prepaid Cards)
Digital Wallet (includes Mobile Wallets)
Cash
Others
Online Sale
Card Payments (includes Debit Cards, Credit Cards, Bank Financing Prepaid Cards)
Digital Wallet (includes Mobile Wallets)
Others (includes Cash on Delivery, Bank Transfer, and Buy Now, Pay Later)
By End-user Industry
Retail
Entertainment
Healthcare
Hospitality
Other End-user Industries

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Key Market Trends

Adoption of Online Mode of Payments

  • E-commerce is growing at twice the rate of POS in Japan's mature economy. Japanese customers prefer credit and charge cards, followed by digital wallets. Bank transfers and COD are expected to lose market share to digital wallets and BNPL by 2025.
  • The Japan Payment Clearing Network (Zengin) saw relatively little growth in real-time payment volume and value processing despite expanding the operations window to encompass weekday nights, weekends, and holidays. For consumers, merchants, enterprises, and government agencies, Zengin supports all non-card-based electronic payments, including credit, payroll, remittance, collection, government fines and fees, bonuses, stock dividends, and perks.
  • The Amended Payment Services Act of May 2021 in Japan gives non-bank organizations more regulatory flexibility to operate in banking and payment services. This new three-tiered structure for money transmitters encourages non-bank actors to compete and recognizes a new global financial ecosystem with a varied range of economic agents.
Japan Payments Market

Government Initiatives are aiding the growth of the market

  • Japan has long been known for its significant reliance on cash, which presents a challenge for banks attempting to move more mundane, low-profit jobs to digital channels. By 2025, the government wants cashless payments to account for around 40% of all transactions, up from around 20% presently.
  • The central bank and the country's financial regulator have endorsed a move by Japan's three largest banks to look into the possibility of creating a uniform settlement infrastructure for digital payments. The Japanese are the country's most cash-loving people, with most transactions taking place in notes and coins. Authorities, on the other hand, have been eager to promote cashless transactions in order to boost productivity and, more recently, to decrease human interaction in the wake of the coronavirus outbreak.
  • As part of the Digital Currency Forum, a partnership of 74 organizations, Japan's top banks, including MUFG, SMBC, Mizuho, and Japan Post, are collaborating on a digital currency payment system. The endeavor is led by DeCurret, a firm that received USD 62 million in funding in March from SMBC, MUFG, and SBI. The Proof of Concept (PoC) stage of the project has been completed, and it is expected to be commercialized by March 2023.
Japan Payments Market

Competitive Landscape

The level of rivalry in Japan's payments market is high due to the presence of a large number of market players. Apart from PayPal, some banks, like Japan Post Bank, already enjoy a considerable presence in the payments market, further intensifying the overall rivalry between players. Some of the key players in the Japanese payments market are Mitsubishi UFJ Financial Group, Resona Holdings, and Sumitomo Mitsui Financial Group.

  • December 2021 - PayPal is charting a new growth strategy focused on more significant investments, tie-ups, and acquisitions to tap surging demand for cashless payment services. The U.S.-based platform acquired Japanese "buy now, pay later" startup Paidy for roughly USD 2.7 billion.
  • October 2021 - Apple Pay was launched by Japanese prepaid cards WAON and nanaco to incorporate e-Money systems into the fold. These prepaid cards were previously only available to Google Pay users. Still, thanks to this collaboration, Aeon's WAON and Seven & I Holdings' nanaco are now available to iPhone and Apple Watch users as well.

Recent Developments

  • March 2022 - Mizuho Financial Group and Google Cloud formed a strategic partnership to help the Japanese bank speed its digital transformation and retail innovation efforts. Four areas will be the focus of the collaboration. To begin, Mizuho will use Google's cloud-based, AI-powered analytics tool to assess client preferences. Second, the bank will launch an advanced financial platform based on BaaS technology. Next, the bank will use Google Cloud's security engineering knowledge and development processes to upgrade its security systems. Finally, by adopting a Google Cloud product development and problem-solving approach, the collaboration hopes to transform Mizuho's corporate culture.
  • February 2022 - Rakuten launched its NFT platform to sell and trade virtual assets in a bid to cash in on the crypto sector. The platform also features an ability for IP holders to build their websites supporting the issuance and sale of NFTs.

Table of Contents

  1. 1. INTRODUCTION

    1. 1.1 Study Assumptions and Market Definitions

    2. 1.2 Scope of the Study

  2. 2. RESEARCH METHODOLOGY

  3. 3. EXECUTIVE SUMMARY

  4. 4. MARKET INSIGHTS

    1. 4.1 Market Overview

    2. 4.2 Industry Stakeholder Analysis

    3. 4.3 Industry Attractiveness-Porter's Five Forces Analysis

      1. 4.3.1 Bargaining Power of Suppliers

      2. 4.3.2 Bargaining Power of Buyers

      3. 4.3.3 Threat of New Entrants

      4. 4.3.4 Threat of Substitute Products

      5. 4.3.5 Intensity of Competitive Rivalry

    4. 4.4 Evolution of the payments landscape in the country

    5. 4.5 Key market trends pertaining to the growth of cashless transaction in the country

    6. 4.6 Impact of COVID-19 on the payments market in the country

  5. 5. MARKET DYNAMICS

    1. 5.1 Market Drivers

      1. 5.1.1 Adoption of online mode of Payments

      2. 5.1.2 Initiatives by the Government

    2. 5.2 Market Challenges

      1. 5.2.1 Data Privacy of the Consumers

    3. 5.3 Market Opportunities

      1. 5.3.1 Move towards Cashless Society

      2. 5.3.2 New Entrants to Drive Innovation Leading to Higher Adoption

    4. 5.4 Key Regulations and Standards in the Digital Payments Industry

    5. 5.5 Analysis of major case studies and use-cases

    6. 5.6 Analysis of key demographic trends and patterns related to payments industry in Japan (Coverage to include Population, Internet Penetration, Banking Penetration/Unbanking Population, Age & Income etc.)

    7. 5.7 Analysis of the increasing emphasis on customer satisfaction and convergence of global trends in Japan

    8. 5.8 Analysis of cash displacement and rise of contactless payment modes in Japan

  6. 6. MARKET SEGMENTATION

    1. 6.1 By Mode of Payment

      1. 6.1.1 Point of Sale

        1. 6.1.1.1 Card Payments (includes Debit Cards, Credit Cards, Bank Financing Prepaid Cards)

        2. 6.1.1.2 Digital Wallet (includes Mobile Wallets)

        3. 6.1.1.3 Cash

        4. 6.1.1.4 Others

      2. 6.1.2 Online Sale

        1. 6.1.2.1 Card Payments (includes Debit Cards, Credit Cards, Bank Financing Prepaid Cards)

        2. 6.1.2.2 Digital Wallet (includes Mobile Wallets)

        3. 6.1.2.3 Others (includes Cash on Delivery, Bank Transfer, and Buy Now, Pay Later)

    2. 6.2 By End-user Industry

      1. 6.2.1 Retail

      2. 6.2.2 Entertainment

      3. 6.2.3 Healthcare

      4. 6.2.4 Hospitality

      5. 6.2.5 Other End-user Industries

  7. 7. COMPETITIVE LANDSCAPE

    1. 7.1 Company Profiles

      1. 7.1.1 Mer Pay Co. Ltd (MerPay)

      2. 7.1.2 Mitsubishi UFJ Financial Group

      3. 7.1.3 Resona Holdings

      4. 7.1.4 KDDI Corporation (AuPay)

      5. 7.1.5 Japan Post Bank Co. Ltd

      6. 7.1.6 Rakuten Group Inc.

      7. 7.1.7 NTT Docomo (D-Barai)

      8. 7.1.8 PayPay Corporation

      9. 7.1.9 Resona Holdings

      10. 7.1.10 LINE Pay Corporation

      11. 7.1.11 Sumitomo Mitsui Financial Group

      12. 7.1.12 Mizuho Group

    2. *List Not Exhaustive
  8. 8. INVESTMENT ANALYSIS

  9. 9. FUTURE OUTLOOK OF THE MARKET

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Frequently Asked Questions

The Japan Payments Market market is studied from 2020 - 2027.

The Japan Payments Market is growing at a CAGR of 6.4% over the next 5 years.

Mitsubishi UFJ Financial Group, Japan Post Bank, Resona Holdings, Sumitomo Mitsui Financial Group, Mizuho Group are the major companies operating in Japan Payments Market.

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