Japan's credit cards set for double-figure growth over coming years

Revealing data and analysis in new study of cards and payments in world's third-largest economy

Transactions on Japan's credit cards are set for at least 12 percent growth per annum for the next three years, according to a brand-new study on the country's cards and payments market from the Research unit of Argus Advisory, a TransUnion company.

Both at the point of sale and online, credit cards remain the most popular non-cash payment tool, with Visa leading JCB for credit cards in circulation and Mastercard investing in market visibility.

Together the three networks enjoy a combined market share of all but two percent of cards in circulation. Total billed volume grew by 59 percent between 2016 and 2022.

Given Japan's historical status as a high-tech innovator that has given the world the QR code among other inventions, there is a notably high proportion of cash transactions: some 38 percent of the value of consumer transactions last year were undertaken using notes and coins.

"Cash usage remains unusually high for such an advanced market, leaving a lot of transactions to be migrated", noted Patrick Houlihan, senior research analyst at Argus Advisory Research (AAR). "However, credit cardholders are savvy in their usage, with the credit card being the primary in-person payment method used in the market and also dominating e-commerce payments."

Tokyo's push for cashless

Convenience is valued in Japan, with issuers and fintechs producing a host of solutions, but delays to interbank access for non-establishment players mean that digital solutions have yet to do the kind of heavy lifting becoming common in other markets throughout the region.

Healthy growth can be expected too when it comes to mobile payments with only a quarter of adults using this means of payment during 2022: the new QR standard should play a key role in this regard as will, in time, the interbank-transfer reforms underway, with fees reduced for the first time in four decades.

Fintechs are proliferating in Japan, especially in partnerships, but are not yet in a position to challenge entrenched incumbents. The government, recognising that the country lags behind its neighbours in payments, is pushing for cashless payments, a strategic goal that has benefitted from pandemic-driven changes to consumer behaviour and the banking industry's focus on digitalisation. Fintechs, albeit slowly, are being brought into the payments clearing system.

More information on Argus Advisory Research's new report on Japan can be found here. It offers a comprehensive overview of the cards, payments and consumer banking market in the country, with clearsighted commentary backed by relevant data.

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