Innovation in the Japanese Financial Services Industry: Retail Payments

by Eiichiro Yanagawa, March 3, 2015
Industry Trends
Asia-Pacific

Abstract

This report examines efforts in the financial services industry to spur innovation, with a focus on the retail payments market. In particular, the report addresses the following points:

  • Japan is a market where cash payments long have been king.
  • Credit cards are offered by many firms apart from banks and are the most common noncash method of payment.
  • Debit cards have languished, but brand-specific debit cards are creating expectations of new growth.
  • Japan’s many e-money schemes make the market unique. Many telecommunications firms and card companies are working to come up with mobile wallet solutions.
  • The advent of the Payment Services Act in 2010 expanded regulations on server-based prepaid services, opening the door to a new market for payment and money transfer services.
  • Japan’s electronic marketplace has been growing rapidly as business increasingly shifts to the mobile channel.
  • Omnichannel initiatives are gaining momentum. The lines between channels are beginning to blur as bank, mobile, ATM, and branch channels are transformed, fused, and run in two directions.
  • In the retail and the communications industries, there are many innovative initiatives afoot. For instance, the financial industry is implementing new approaches, including using a diverse variety of store formats in an organically coordinated way; observers expect to see the leveraging of online services to heighten value-added at brick-and-mortar stores, such as by unifying customer information and offering premium services.

Against the backdrop of the Japan Revitalization Strategy, a crucial component of recently reelected Prime Minister Shinzo Abe’s raft of economic policies called Abenomics, this report examines efforts in the financial services industry to spur innovation, with a focus on the retail payments market. The report is based on a 2014 survey tailored to accommodate the factors peculiar to the Japanese market.

“Innovative disruption is akin to the search for undiscovered continents: monumental discoveries that can provide new value to win over non-consuming consumers.” says Eiichiro Yanagawa, a senior analyst with Celent’s Asian Financial Services practice and author of the report. “Celent believes that technology, the market, regulations, and government are putting in place an environment to encourage innovation.”

The report contains 27 figures and 4 tables.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

 

Key Research Questions

1

Abenomics and Innovation

3

 

Japan Back on the World’s Radar

3

 

Abenomics: Fourth Arrow of Innovation and Globalization

3

Retail Payments Market

6

 

The Spread of Online-to-Offline Commerce

6

 

Primary Payment Methods in Japan

6

Traditional Payment Methods

8

 

Cash Circulation and the Cash Payment Ratio

8

 

Major Japanese Credit Card Companies

9

 

J-Mups: Multipayment Processing System

10

 

M-POS Initiatives

11

Second-Generation Payment Methods

13

 

Contactless Payments

13

 

Payment Services Act and Related Services

17

 

Leading E-Commerce Payment Methods

20

Digital Banking and Omnichannel Initiatives

22

 

The Backdrop of Digital Banking

22

 

Digital Banking Trends at Banks and Financial Institutions

24

 

Leading Omnichannel Initiatives at Major Retailers

27

 

Omnichannel Initiatives Involving Interindustry Partnerships

29

Final Thoughts

30

 

Key Market Trends

30

 

The Future of Innovation

30

Appendix: Celent’s Forum on Innovation and Digital Strategies in Tokyo

32

Leveraging Celent’s Expertise

34

 

Support for Financial Institutions

34

 

Support for Vendors

34

Related Celent Research

35

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