In Japan, Proximity Payments Don't Offer Consumers a Compelling Case - eMarketer
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In Japan, Proximity Payments Don't Offer Consumers a Compelling Case

Just one in five had used a smartphone to make a proximity payment

July 18, 2017 | Retail & Ecommerce

Consumers in Japan have yet to see a clear reason to use their smartphones to make payments. That’s the main takeaway from new research by Japan-based telecommunications firm KDDI Corporation.

The company surveyed smartphone users in Japan in June of this year, and found that just one in five had used a smartphone to make a proximity payment. Even when broken down demographically, KDDI’s data showed only about one-fifth of respondents from any age group used a proximity payment feature on their device.

Proximity Smartphone Payment User Penetration Among Smartphone Users in Japan, by Age, June 2017 (% of respondents in each group)

That figure is roughly in line with eMarketer’s estimate for the US. We project that just 23.0% of smartphone users will make a proximity mobile payment this year, a figure that will rise to only 30.8% by 2021.

The reason that mobile proximity payments—in which consumers use a payment service like Apple Pay on their smartphone to complete a purchase at a point of sale—have not really caught on in developed markets is simple: They don’t offer any significant advantage over credit cards.

In markets like the US and Japan, consumers have long had access to debit and credit cards. That means there’s no good reason for them to go through the trouble of pulling out a smartphone and navigating to a payment app, instead of just swiping a card at a terminal.

In contrast, the absence of widespread access to retail banking services in markets like India and China has meant that mobile payment services have grown with tremendous speed by filling a void.

In China in particular, services like Alipay and WeChat Pay are very common among city dwellers. These platforms rely on QR codes to complete transactions without even the need for payment terminals. This has helped to drive a surge in the number of proximity mobile payment users in China: eMarketer estimates there will be 247.9 million in the country this year, compared with just 48.1 million in the US.

In addition, KDDI found that, at least in Japan, smartphone users who didn’t use proximity payments had concerns about the safety of relying on their devices to complete transactions. In fact, 38.8% said they had security concerns related to mobile proximity payments, while 34.7% worried about losing their smartphone, or other errors that could result in fraudulent or mistaken charges.

Until mobile payment services can provide a compelling reason for these users to switch over from payment cards, it is likely that proximity payments will remain relegated to the sidelines in developed markets like Japan.

Rahul Chadha

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