Payment Cards in Japan

Introduction

Payment Cards in Japan is an invaluable guide to one of the world's most complex card markets. The report provides statistics on market size, competitor market shares and forecasts. It also provides an overview of regulation, competitor activities, issuer strategy and product innovation including developments in contactless, mobile payments, online and prepaid cards.

Scope

*Data and analysis provided on debit cards, credit cards and deferred debit and charge cards.

*Historic market data and competitor market shares are presented for 2004-2008, H1 2009, with forecasts presented to 2014.

*New for 2010 includes data covering transactions by merchant category, premium card branding, benefits per card, card primacy and repayment behaviour.

*Includes a detailed analysis of developments in the areas of e-money, contactless, mobile, online and prepaid cards.

Highlights

The Japanese payment market remains dominated by cash, with consumers using that payment form even for high value transactions. Despite this, credit cards are continuing to show positive levels of growth with a CAGR of 2.5% between 2004 and 2008. Pay now cards however remain almost exclusively used at ATMs, with use at the POS in active decline.

The competitive situation in Japan is in a state of flux as a result of new regulations restricting APRs and issuer margins. Acquisitions and mergers are currently running high as the industry restructures itself. Despite this, the market remains dominated by JCB, who hold a 34% share of the market, a full 20% more than its nearest competitor.

Contactless, mobile, and prepaid payments are at an advanced state of development in Japan in the form of e-payments, typically on a contactless card or on a mobile phone handset. A large proportion of the market also holds transport ticketing functionality. E-money has gone truly mainstream with over 100 million cards in issue.

Reasons to Purchase

*Learn how payment cards in Japan work, and how they have developed over the past five years.

*Understand recent developments in Japanese payments in terms of consolidation, new entrants and product/technology innovations.

*Plan your future strategy effectively with Datamonitor's five year forecasts across all product categories.


Report Highlights

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Overview 1
Catalyst 1
Summary 1
Executive Summary 2
Sizing and Forecasting the Payment Card Market in Japan 2
Competitor and product developments in Japan 3
Contactless Mobile Online and Prepaid Payments 3
Table of Contents 5
Table of Figures 5
Table of Tables 6
Sizing and Forecasting the Payment Card Market in Japan 7
Overview 7
Structure of the Japanese payment cards market 9
Demand for debit is weak, partly due to the structure of credit repayments 11
Key macroeconomic and consumer data 13
Macro-economic trends and performance 13
GDP 14
Unemployment 15
Real GDP growth 16
Inflation 17
Demographic and consumer trends 18
Regulatory environment 19
The payments market is regulated by the Japanese Financial Services Authority 19
Credit card issuers have always faced heavy restrictions on lending and borrowing rates 19
The revised Money Lending Business Law became fully enacted in June 2010 19
The consumer credit market is experiencing dramatic shifts as a result of the new law 20
Prepaid cards are also affected by tight regulations 20
Sizing the payment card market in Japan 21
Size and performance of the payment card market 21
Penetration of payment cards 21
Number of payment cards in issue by type 25
Number of payment card transactions 26
Value of payment card transactions 33
Trends in payment card use compared to other countries 39
Credit card balances outstanding, revolve rates, usage and repayment behavior 44
ATM and POS terminal numbers 48
Competitor and Product Developments in Japan 50
Overview 50
Profiles of key Japanese players 50
JCB 51
Sumitomo Mitsui Financial Group 51
Mitsubishi UFJ Financial Group 51
Credit Saison 52
Aeon Credit Service 52
Rakuten 52
Western players 53
Card issuer market shares and performance 54
Credit card market shares 54
Number of credit cards in issue by brand 54
Number of transactions by brand 55
Value of transactions by brand 56
Balances outstanding and card repayment rates by brand 56
Charge and deferred-debit card market shares 59
Product design and issuer strategy in Japan 60
Credit card product strategy 60
Card product features by brand 60
Usage trends by brand 64
Leading revolving credit products and price points 65
Leading loyalty programmes 66
Card scheme market shares and developments 66
Major card scheme developments 66
Pay now card scheme shares 67
Number of cards in issue 67
Value of transactions 68
Revolving credit card scheme shares 69
Number of cards in issue 69
Value of transactions 70
Charge and deferred-debit card scheme shares 71
Number of cards in issue 71
Value of transactions 72
Forecasting the payment card market in Japan 73
Forecasting the pay now card market 73
Forecasting the revolving credit card market 74
Forecasting the charge and deferred-debit card market 76
Contactless, Mobile, Online and Prepaid Payments 77
Overview 77
Alternative payments are now mainstream 78
Japan has the most advanced e-money market in the world 78
e-money can be used on cards or phones 78
The majority of consumers now use e-money 79
There were 105 million e-money cards in issue by March 2009 81
Transaction values and volumes are also rising as consumers spend more using e-money 82
The majority of e-money transactions are for less than JPY1,000 83
Most e-money re-loads are for a value between JPY1,000 to JPY5,000 84
Although characterized by a variety of players, e-money is dominated by a select few firms 86
Branding remains a critical feature of the e-money market 87
Transport related cards hold a regional presence 88
Suica leads the market for e-money, with a 30.3% share of the market in H1 2009 89
Convenience is the primary driver of e-money use in Japan 91
Mobile payments remain niche in Japan 94
NTT DoCoMo's success in mobile has been driven by its effective domestic monopoly 94
Mobile players are focusing on incentivising use 97
FeliCa's dominant position may be a drawback 97
Online spending remains relatively low in relation to Japan's online presence 98
30.2% of all online shopping in Japan is for airline tickets and hotels 98
Credit and debit use online in Japan are at the extremes when compared to other markets 100
Japan holds several lessons for other regions 103
A sense of convenience is critical 103
Technology is not enough 104
Partnerships are essential to gaining mass acceptance 104
Appendix 105
Supplementary data 105
Definitions 113
AAGR 113
Affinity card 113
CAGR 113
Co-branded card 113
Credit card 113
Deferred-debit and charge card 113
EMV 113
EPC 113
ePurse 114
Merchant service charge 114
Pay now cards 114
POS terminal 114
Private-label cards 114
Methodology 114
Cards and payments database 114
Financial Services Consumer Insight is new to our offering, providing new and valuable insight 115
Forecasting methodology 115
Further reading 116
Ask the analyst 117
Datamonitor consulting 117
Disclaimer 117
List of Tables
Table 1: Japan - macro-economic indicators 13
Table 2: Japan - demographics and consumer trends 18
Table 3: A selection of key credit card fees, APR's and product features 66
Table 4: Datamonitor's forecast for the pay now card market, 2008-14f 74
Table 5: Datamonitor's forecast for the credit card market, 2008-14f 75
Table 6: Datamonitor's forecast for the deferred-debit and charge card market, 2008-14f 76
Table 7: GDP for 2008 by country 105
Table 8: Unemployment and unemployment rates in Asia-pacific 105
Table 9: Japan: GDP growth 2005-09 105
Table 10: Card penetration in Asia-pacific 106
Table 11: Japan: inflation (% change) 106
Table 12: Transaction split by merchant category in Japan 107
Table 13: Average transaction value and frequency of use for pay now cards in Asia-pacific 107
Table 14: Average transaction value and frequency of use for pay later cards in Asia-pacific 108
Table 15: Number of ATMs: Asia-pacific 108
Table 16: Population per ATM in Asia-pacific countries 108
Table 17: Number of POS terminals: Asia-pacific 109
Table 18: Population per POS terminal in Asia-pacific countries 109
Table 19: Balances outstanding and revolve rates, 2008 109
Table 20: Number of e-money cards, mobiles and terminals 110
Table 21: Volume and value of e-money transactions 111
Table 22: E-money amount outstanding 111
Table 23: E-money market shares, H1 2009 112
Table 24: Current relevant publications 116
Table 25: Future relevant publications 117
List of Figures
Figure 1: The value of banknotes and coins in Japan accounted for 17% of GDP in 2008 10
Figure 2: Cheques account for 1.5% of non-cash transactions by volume 11
Figure 3: The Japan Debit Card Promotion Council has an active online marketing presence 12
Figure 4: Japan had the highest GDP in Asia-pacific in 2009 14
Figure 5: The unemployment rate stood at 5.1% in Japan in 2009 15
Figure 6: Japan's economy shrank by 5.2% in 2009 16
Figure 7: Japan's economy hit by deflation in 2009 17
Figure 8: Japan had the highest card penetration among Asia-pacific countries, 2008 21
Figure 9: Penetration of pay now cards is higher than pay later cards in Japan, 2008 22
Figure 10: Japan had the highest penetration of pay now cards in Asia-pacific in 2008 23
Figure 11: Japan had the second highest penetration of pay later cards in Asia-pacific, 2008 24
Figure 12: Credit cards grew the fastest in Japan over 2004-08 25
Figure 13: Credit cards accounted for the largest share of cards transactions, 2004-09e* 26
Figure 14: Payments cards were used more at the POS than at ATMs in Japan 27
Figure 15: Pay later cards are majorly used to buy food & drink in Japan 28
Figure 16: Pay now cards usage constantly declined in Japan during 2004-08 30
Figure 17: Transactions made at ATM showed a downward trend from 2005 to 2009e 32
Figure 18: The transaction value of pay now cards is constantly declining in Japan, 2004-09e* 34
Figure 19: The value of ATM transactions has declined substantially in Japan over the last five years 35
Figure 20: Flight and hotels account for the greatest transaction value in Japan 36
Figure 21: Average transaction values were highest for pay now cards, 2004-09e* 37
Figure 22: Average transaction value at ATMs was higher than at the POS in Japan, 2004-09e 38
Figure 23: Asia-pacific countries vary significantly in terms of frequency of use and transaction value of pay now cards, 2008 39
Figure 24: ATM transactions accounted for the greatest turnover per pay now card in Japan, 2008 40
Figure 25: The average value and frequency of use of pay later at the POS is in line with the asia-pac average 41
Figure 26: Turnover per pay later card was highest at the ATMs in APAC region, 2008 42
Figure 27: In most Asia-pacific countries, the transaction value of pay later cards is highest for booking flights & hotels 43
Figure 28: 51% of Japanese credit cards are seen as primary by consumers 44
Figure 29: Japan stood out in terms of cards usage in Asia-pacific region 45
Figure 30: The revolve rates per outstanding balance range between 3%-13% across APAC countries 46
Figure 31: 83.5% of consumers in Japan pay off their balance in full each month 47
Figure 32: The ATM terminals grew at a CAGR of just 0.5% in Japan during 2004-2008 48
Figure 33: The POS terminals grew at a CAGR of just 8.2% in Japan during 2004-2008 49
Figure 34: JCB was the leading credit card issuer in Japan 54
Figure 35: JCB has the highest volume of transactions, but a low level of use per card 55
Figure 36: JCB held the highest value of transactions with €94.3 billion 56
Figure 37: Revolve rates ranged between 0% - 7% in Japan, H1 2009 57
Figure 38: Most of the consumers pay off their credit cards in full in Japan 58
Figure 39: JCB was the largest charge and deferred-debit card issuer in Japan 59
Figure 40: Rewards/loyalty points was the most prevalent card feature in Asia-pacific 60
Figure 41: Reward/ loyalty points was the most dominant card feature in Japanese market 61
Figure 42: Japan had the highest number of standard-branded cards among APAC countries 62
Figure 43: Half of the Citibank' and MUFG card' were banded as gold cards in Japan 63
Figure 44: Card primacy levels vary strongly by brand 64
Figure 45: J Debit was the only pay now scheme in Japan 67
Figure 46: The value of transaction for pay now cards declined by a negative CAGR of 7.9% over 2004-2008 68
Figure 47: Visa was the dominant credit card scheme in Japan 69
Figure 48: JCB accounted for the maximum value of transactions in Japan 70
Figure 49: Visa was the most dominant scheme in the Japanese deferred-debit and charge card market 71
Figure 50: Visa was the dominant scheme in terms of value of transaction in Japan 72
Figure 51: Pay now cards in issue are expected to increase by 0.3% during 2009-2014 73
Figure 52: The credit card market in Japan is expected to grow by a CAGR of 2.3% during 2009-2014 74
Figure 53: Charge and deferred-debit will continue to grow through to 2014 76
Figure 54: e-money can be used on a variety of terminals and devices 79
Figure 55: 57% of Japanese consumers now use electronic cash 80
Figure 56: 55% of e-money users have been using it for more than two years 81
Figure 57: There were over 103 million e-money contactless cards in issue as of March 2009 82
Figure 58: There were 1.18 billion e-money transactions between April 2008 and March 2009 83
Figure 59: 53% of consumers spend an average of JPY1,000 or less per e-money transaction 84
Figure 60: 60.3% of consumers load an average of JPY1,001-5,000 on their e-money wallets 85
Figure 61: Outstanding e-money totaled JPY92.2 billion in March 2009 86
Figure 62: e-money cards often have a strong brand identity 87
Figure 63: Transport orientated cards are often partnered with other cards, including for e-money acceptance 89
Figure 64: The market is dominated by Suica and Edy, both of which have around 31 million cards in issue 90
Figure 65: Convenience remains the key draw for Japanese consumers in using e-money 92
Figure 66: 19.2% of e-money users feel it does not need any improvements 93
Figure 67: 60.5% of non-users of e-money claim they simply do not need it 94
Figure 68: DoCoMo has leveraged its market power to develop a multi-functional mobile payment service 95
Figure 69: Two-thirds of consumers do not make use of the contactless functions on their phones 97
Figure 70: Consumers spent €54.9 billion on airline tickets and hotels in 2009 99
Figure 71: The value of spending per online shopper is higher than the global average 100
Figure 72: 66.1% of online purchases are made with credit cards 101
Figure 73: Debit cards account for only 2.8% of online spending in Japan 102
Figure 74: Bank transfers and cash on delivery accounted for 22.8% of online spending 103

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