The Japanese card payments market is expected to register a robust growth of 8.5% in 2022 supported by strong economic recovery and rising consumer spending, says GlobalData, a leading data and analytics company.
Like most markets globally, Japan was also affected by the COVID-19 pandemic. Reduced consumer spending and travel restrictions affected card payments, which registered a subdued growth of 1.9% in 2020.
GlobalData’s Payment Cards Analytics reveals that the gradual recovery in economy, partly supported by sporting events such as Tokyo Olympics, helped the market to rebound with 9.0% in 2021.
With the economy now returning to normalcy, card payments are anticipated to increase at a CAGR of 7% between 2021 and 2025 to reach JPY109.8 trillion ($953.6bn) in 2025.
Sowmya Kulkarni, Payments Senior Analyst at GlobalData, comments: “Japan has been traditionally a cash-based country, with cash accounting for over two-thirds of tht total payment transactions by volume. However, payment cards’ usage has grown during the past few years, supported by government initiatives, rising consumer awareness of electronic payments and increase in merchant acceptance.”
Credit card is the most preferred payment card type amongst Japanese consumers. This is mainly due to the associated reward programs, which are more beneficial than debit cards. Credit cards have wider acceptance among merchants while debit cards are not that popular due to their longer settlement period.
GlobalData’s Payment Cards Analytics reveals that credit cards accounted for 96.5% of the total card payment by value in 2021 while debit cards accounted for just 3.5% share.
Japan has also been taking various initiatives to push digital payments in the country with the intention to take cashless payments to 40% of the overall payment transactions by 2025. As part of the strategy, the government released Credit Card Security Guideline (Version 3.0) in March 2022 to prevent credit card fraud and boost cardholders’ confidence.
Apart from offering secured payment, there has been constant focus on providing convenient and faster payments experience to cardholders. This has led to the growing adoption and usage of contactless payments, which is slowly displacing cash especially for lower value transactions.
Kulkarni concludes: “Although the COVID-19 pandemic led to a decline in consumer spending, it also brought a significant shift in consumer preferences towards cards and other non-cash payment methods. As COVID-19 restrictions gradually ease, the use of card payments is expected to grow at a fast pace, supported by rise in consumer spending, increase in contactless payments and government initiatives.”