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This story appears in the May 2009 issue of Cards&Payments.
With the Japanese economy spiraling downward, who could blame Japan's homegrown card brand, JCB Co. Ltd., for seeking a little help from Mickey Mouse and his friends at Tokyo Disneyland?
JCB late last year announced it was taking applications for Japan's first cobranded credit card featuring Disney characters, giving cardholders special offers and discounts on merchandise and visits to the theme park.
But despite the backing of Mickey Mouse, all signs point to a tough 2009 for JCB. While JCB is making some progress expanding overseas, its fortunes are bound up with those of its home base. And as the Japan Research Institute Ltd. self-styled think tank put it in a recent monthly economic progress report, Japan's economy is "deteriorating rapidly."
That is especially the case for exports, which caused the economy to contract by an annualized 12.1% during the fourth quarter. Experts expect another double-digit decline in annualized gross domestic product in the first quarter of 2009.
All this is spooking shoppers, who reportedly cut purchases by 5.8% during February compared with the same period a year earlier, the sixth consecutive month consumer spending declined. Spending fell by 2.4% in January.
Consumers are using their credit cards less often, as would be expected, with card spending down by 1.6% during January to just more than 2.97 trillion yen (US$32.4 billion) from just more than 2.93 trillion yen (US$26.8 billion) a year earlier, according to the Ministry of Economy, Trade and Industry.
JCB has only released transaction figures for its 2007 fiscal year ended in March 2008, which showed a 9.7% increase from the previous year (
That does not take in the economic meltdown, although a JCB executive tells Cards&Payments the smaller drop in credit card spending relative to overall spending declines suggests the card sector is not being hit as badly as others.
But JCB and other Japanese card companies likely will find it even more difficult to wean consumers off of cash, which still accounts for 90% or more of payment transactions.
Through September 2008, JCB card issuance climbed just 2.6%. Besides such new programs as the Disney cobranded card, JCB says it has had some success encouraging consumers to use cards to pay more utility bills, although it could not provide figures.
And the card brand also will try to sell some extra processing capacity to other card issuers to bring in new revenue. At the same time, JCB is trying to supplement domestic consumption by encouraging spending with JCB-branded cards from visitors to Japan, especially from China.
Six Chinese banks have together issued more than 2 million JCB cards, which cardholders can use while in Japan or other JCB acceptance points outside of China. In November, JCB signed up the giant Industrial and Commercial Bank of China to issue cards, starting by March 2010.
Still, while it has had ambitions to become a major international card brand and has 7.5 million acceptance points abroad, JCB remains only a niche player compared with American rivals Visa Inc. and MasterCard Worldwide. And it faces new competition from Chinese card brand China UnionPay, which also has international ambitions. But unlike JCB in Japan, UnionPay enjoys a monopoly on domestic Interbank transactions in its home market.
So while JCB's Disney cobranded card may prove a hit with Japanese consumers, it will need more than Disney pixie dust to return to healthy growth. CP
