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Payments Regulation in Asia
APM Case Study: Digital Wallets In recent years, Japan has witnessed a significant shift in its payment landscape, moving from a traditionally cash-based society towards more modern, cashless payment solutions. Despite its reputation for technological innovation, Japan’s adoption of digital wallets has lagged behind some of its APAC counterparts, notably China. However, the landscape is rapidly changing, with digital wallets gaining popularity among Japanese consumers and merchants alike. In 2022, digital wallets made notable progress in the Japanese market, particularly in the e-commerce sector, where their share of transaction value jumped from 12% in 2021 to 18%. At the point of sale (POS), digital wallet usage saw a more modest increase from 9% to 10% over the same period. This growth reflects a broader trend towards cashless payments, driven by consumer demand for convenience and efficiency in transactions. Market Growth and Consumer Behavior: The Fortumo & Boku 2021 Mobile Wallets Report highlights that mobile wallet transactions in Japan are expected to more than double from 7.2 billion transactions per year in 2020 to 14.6 billion by 2025, with the transaction value forecasted to increase from $189 billion in 2020 to $337 billion in 2025. 162 This indicates a rapidly growing acceptance and usage of mobile wallets among Japanese consumers. Additionally, Japanese consumers, on average, use 2.2 wallets, showcasing a high level of engagement with mobile wallets for purchases, particularly among the 35–44-year-old demographic. 163 Historically, Japan has been a predominantly cash-based society, with many small shops and restaurants only accepting cash payments. Recognizing the need to modernize its payment infrastructure ahead of the 2020 Olympics, the Japanese government announced a plan in late 2018 to incentivize cashless payments. Consumers paying with cashless services were offered a cashback of up to 5 percent, accelerating the adoption of cashless payment technologies. 164 The push to cashless payments has led to a proliferation of mobile payment services in Japan. Consumers now find themselves with an array of options, with over 15 different apps available for use in convenience stores alone. These include LINE Pay, PayPay, Rakuten Pay, and many others, collectively nicknamed “nantoka-pay” (whatever-pay) by users. 165
162 https://wp-boku-2020.s3.eu-west-2.amazonaws.com/media/2021/09/18175330/2021-Mobile-Wal- lets-Report.pdf?utm_campaign=Mobile+Wallets+Report+2021+Download&utm_medium=email&utm_ source=autopilot 163 Ibid 164 https://ctmfile.com/story/real-time-payments-pioneer-japan-shaking-off-cash-by-embracing-digi - tal-payments#:~:text=Under%20the%20programme%2C%20citizens%20who,cashless%20payments%20in%20 the%20country. 165 https://medium.com/swlh/japans-mobile-payment-arms-race-575544d67522
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