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Payments Regulation in Asia
JAPAN: • Payments Mix: Cash is still one of the most dominant payment methods in Japan. In fact, Japan is reported to be only one of three countries where cash remained the dominant payment method in 2022. The role of cash, however, has been slowly changing. Driven by the government’s “Cashless Vision” 46 and the COVID-19 pandemic, cash’s share of POS spending fell from nearly 70% in 2018 to slightly over 51% in 2022. In parallel, credit card spending and digital wallets have been on the rise. Interestingly, Japan’s reported debit card spending has consistently remained below 10% of total spending, indicating lower value transactions are typically paid with cash or credit cards. • Public Resources for Cost Analysis: Japan’s Fair Trade Commission (JFTC) has published two surveys on the cost of card acceptance, one held in 2019 and the other 2020-2021. Both surveys found that none of the five international card brands surveyed published standard interchange fee rates for Japan. • Price Trends: Based on the 2019 and 2020-2021 JFTC surveys, the average merchant MDR fell from 3.2% in 2019 to 2.70% in 2021. The reduction could be due to the provisioning of grants by the Ministry of Trade and Industry (METI) to cover the cost of purchasing or leasing POS terminals. The report also found that merchants that negotiate or compare network rates are more likely to see lower costs, with non-negotiated rates sitting at 2.89% and negotiated rates sitting at 2.51%. The benefits of network negotiation pervade all merchant sizes, with 10 to 50 basis point differentials when comparing negotiated vs. non- negotiated rates across all merchant sizes. SINGAPORE: • Payments Mix: Singapore has seen significant changes in its payments mix between 2017 and 2022, largely in response to the Monetary Authority of Singapore’s (MAS) Payment Services Bill of 2018. Since the bill’s introduction there’s been significant churn in the payments mix of Singapore, with digital wallet’s share of ecommerce spending tripling from 10% in 2017 to over 30% in 2022. In parallel, the volume of cash spending dropped, as cash’s share of POS spending fell from 40% in 2019 to below 20% in 2022. The growth of wallets and decline in cash also coincides with the rapid adoption and use of FAST, Singapore’s interbank settlement system, which had more than doubled in volume between August 2020 and September 2021. • Public Resources for Cost Analysis: Only one bank in Singapore, Development Bank of Singapore (DBS), has published MDRs for Visa, Mastercard, JCB, and Union Pay transactions for retail and service-based merchants. From a cost specific standpoint, DBS, a nationally-owned bank, reported MDRs for Visa, Mastercard, JCB, and Union Pay transactions for retail merchants and service-based merchants at 2.5% and 3.0% respectively. The ecommerce rate for both retail and service-based merchants was 3.0%. 47
46 Facilitated subsidies to small retailers for accepting cashless payments. Subsidies were meant to compensate for the cost of reward card points. A cap of 3.25% on processing fees was also implemented. (link) 47 https://www.dbs.com.sg/iwov-resources/forms/sgsme/en/day-to-day/accounts/business-account/merchant-ser- vices-pricing.pdf
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