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Japanese credit card industry is never a winner of cashless conversion

Toyo Keizai ONLINE
A bit odd, the government’s cashless induction policy
Spreading card company’s confusion to 10% consumption tax

I think the content of this article is generally accurate. Even though this article was written by a reporter familiar with the Japanese credit card industry, the description of the level of franchise commission fees is ambiguous. He wrote that “the member store fee is about 2% on a weighted average.” Meanwhile, he wrote that “there are many cases in which the member store fee is about 2 to 4%, but in the case of small and medium-sized enterprises where there are many restaurants and the like, it may be even higher.” The figures are not disclosed, and we cannot understand the details of cost structure well.

Japanese credit card companies must pay some amount of rebates to cardholders. They burden insurance premiums prepared for illegal card transactions. Also, they must add an extra cost of the credit risk to the fee. As the franchise commission fee is consist of these various costs, there is a limit to lowering it.

Besides, Japanese credit card companies use CAFIS, a highly reliable network infrastructure with high system maintenance costs. If you look only at the cost competitiveness of the system, they will not be competitive with Internet-based payment business companies with almost zero system-cost such as PayPal, Alipay, and LINE pay. The current credit card industry is never a winner of cashless conversion.

So, I think the conclusion of the article is also correct recognition. “The credit card industry is likely to be pressed to respond, including correcting the high-cost structure and revising the business model.” In that sense, the heading ‘a bit odd’ does not reflect the contents of the article correctly. Government’s cashless induction policy is not carried out to protect the credit card industry but to raise the productivity of the service industry in the shortage of human resources economy. Whether it works or not depends on the response of the citizens, but this process also requires card companies to change.

Of course, policy discussions heard from the government at the present stage is “a bit odd” as individual policies, but if it focuses to credit card companies to improve their efficiency, I do not think it is “a bit odd.” Perhaps, this title was decided by the editing side, not the author, I guess.