How JCB's fintech collaborations battle Japan's cash habit

Tokyo-based credit card brand JCB faces a domestic battle to automate Japanese B2B payments that remain mired in old-school cash and paper, while it also tries to grow an international e-commerce network. It's a diverse set of challenges that have led the company to bring on a pair of technology partners.

Scotts Valley, Calif.-based fintech Paystand and JCB Co. Ltd., Japan’s largest payment card issuers and acquirer, have signed a memorandum of understanding to develop an end-to-end digital blockchain-powered payment platform for Japanese businesses and JCB customers.

At almost the same time, JCB has signed a separate deal with Worldpay through FIS to extend its digital payments reach to merchants and consumers far beyond Tokyo.

JCB hopes the Paystand-powered solution will provide an alternative to credit cards and cash—which retains high usage in Japan—by connecting payers and suppliers through a cloud-based platform leveraging blockchain technology for real-time payments.

Bloomberg News

Paystand envisions developing a platform for a potential payments market of $10 trillion, serving thousands of small- to midsize businesses in Japan plus a subset of corporate customers within JCB’s customer base of 130 million cardholders.

While corporations around the world are working to replace manual and paper-based B2B payments with streamlined, digital payments—including virtual cards—Japan has particularly slow to make changes. While checkout-free deployments have sprung up in Japan's transit systems, the country retains a largely cash-based economy.

That impacts not only consumer retail payments, but also supply chains. Only 1% of commercial payments in Japan are made via credit card and an even smaller fraction of B2B payments travel on bank-to-bank rails, with most Japanese businesses using cash and checks to exchange funds, Paystand said in the release.

Globally, B2B payments are starting to automate, but still trail consumer payments in adopting automation.

Paystand, launched in 2013, markets a B2B payments solution that uses blockchain and other technologies to digitize receivables, automate B2B processing to handle payables and receivables across organizations, said Paystand’s CEO Jeremy Almond, writing in PaymentsSource.

“Our relationship with JCB is yet another indication that enterprises in all markets are demanding easy, secure, frictionless business payments that leverage digital technology,” Almond said in the JCB release.

JCB separately has announced a partnership with Worldpay from FIS to enable local and international retailers to scale e-commerce volume. Worldpay will enable businesses operating in Japan to accept payment via JCB cards, and the deal will particularly benefit online merchants, the release said. Japan’s $163 billion e-commerce market is expected to grow 28% by 2022.

Merchants selling online through Worldpay’s network will now be able to accept card payments through a single integration rather than set up separate third-party contracts, the release said.

For FIS, which faces heightened competition from both processing rivals and younger software-focused merchant acquirers, it's a chance to put its acquired technology from Worldpay to work in building a broader international payment network.

“By driving broader payments acceptance among e-commerce merchants, JCB stands to become the preferred method of payment as consumers shift to buying goods and services online,” said Yutaka Nakazawa, JCB’s executive vice president and head of acquiring sales and marketing and partner relations, in the release.

JCB, founded in 1961, issues cards in Japan that are accepted in 190 countries worldwide, driving more than $60 billion in card volume annually. JCB for several years has had a reciprocal card acceptance agreement with Discover Financial Services. Discover Network merchants accept JCB cards in the U.S. and Discover cards are accepted at JCB payment terminals throughout Japan.