The news: Payment processor and paytech Worldline will expand its business in Japan through a partnership with local payment service provider Vesca in early 2022, per a press release.

Vesca will act as the acquirer, and Worldline will process payments for in-person transactions. The partnership will eventually expand to cover ecommerce.

Why it’s worth watching: Japan’s dynamic payments landscape makes it an attractive market for Worldline to pursue.

• Rapidly declining cash use. The share of cash point-of-sale payments in Japan dropped 15% year over year (YoY) in 2021, per FIS, compared with a 7.8% YoY drop the year before. Consumers may have opted for digital payments to avoid touching cash during the pandemic.
• Increasing ecommerce. The share of ecommerce sales relative to total retail has steadily increased in recent years—highlighting greater digital payments volume. Japan’s ecommerce sales are expected to hit $168.7 billion in 2022 and account for 11.9% of the country’s total retail sales, per eMarketer forecasts from Insider Intelligence.
• Government cashless goal. By 2025, the Japanese government wants cashless payments to account for at least 40% of all transactions, up from about 20% last year. It hopes encouraging digital payments use will help support tourism and drive innovation within the country’s financial sector.

Worldline’s opportunity: Moving into Japan as the market becomes more cashless can position Worldline for strong growth in the coming years.

Japan is still in the early stages of cashlessness compared with neighboring countries like China, where proximity mobile payment users accounted for more than half (62.7%) of its population in 2021, per Insider Intelligence forecasts. Moving in before Japan’s cashless sector matures can give Worldline an early mover advantage. And partnering with Vesca can help it develop a rapport with businesses in the market and potentially open it up to new opportunities in the future.

The bigger picture: Other payment providers have also recently bolstered their presence in Japan, which reinforces the market’s promising cashless development.

• Netherlands-based Adyen expanded its acquiring business into Japan in May 2021.
• A few months later, PayPal acquired local buy now, pay later (BNPL) firm Paidy for an estimated $2.7 billion to gain a stronger foothold in the market.
• And Google paid $187.3 million for Japan-based cashless payments startup pring in September, which we called out as an opportunity to expand Google Pay acceptance.

Related content: Interested in learning more about payment processors like Worldline? Check out the “Participants in the Payments Purchasing Chain” report.