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Technology

Alibaba to cash in on Japan's nascent e-payment market

China's top player in the field hunting for growth abroad

A customer pays with a smartphone using the Alipay service at a McDonald's restaurant in Beijing.

TOKYO -- China's e-commerce leader Alibaba Group Holding will bring a version of its hit smartphone-based payment platform to Japan as early as next spring, hoping the simple technology will convince many cash-reliant shoppers here to go digital.

The Japanese unit of Ant Financial Services Group, the internet giant's financial arm, will offer a version of the Alipay digital payment system tailored for the Japanese market under a new brand. Shoppers will be able to load money into or link a bank account with a dedicated app on their smartphone, and scan QR codes issued by merchants to make a payment. Merchants can also scan codes displayed on a user's phone to the same effect.

This type of smartphone-based payment is more widespread in China than in any other country. Two services -- Alipay and Tencent Holdings' WeChat Pay -- dominate the market. With chances for further growth declining at home, expanding to Japan, where cash payments still predominate, is a natural next step.

Local flavor

Using Alipay itself requires a Chinese bank account. But the Japanese variant will be compatible with accounts at Japanese banks. The company aims to attract 10 million users within three years. Japanese users will also be able to make payments in China soon after the launch -- a feature sure to appeal to the roughly 2.5 million businesspeople and tourists who travel from Japan to China each year.

The new service will be usable mostly at Japanese businesses such as electronics sellers, department stores and Lawson convenience stores that already accept Alipay. Alibaba has built up this network in recent years amid a surge in Chinese tourism to Japan, and hopes to expand it from the current 30,000 or so stores to around 50,000 locations by the end of 2017.

A host of upcoming lifestyle features will make the service more valuable as time goes on. Partnerships with cinemas, for example, will let users reserve and pay for movie tickets. Retailers, meanwhile, will be able to offer promotions such as discounts through the platform, according to the company.

Prime opportunity

While smartphone-based payment technology originated in the U.S., Chinese players have taken the lead in making the platforms easy to use and in lowering the costs of adopting the technology, making it accessible to the world's largest population.

As a result, China's mobile payment market will be worth some 15 trillion yuan ($2.24 trillion) this year, a Chinese survey company estimates. Japan's market for digital payments such as e-money cards, by contrast, is expected to be worth a mere 5.6 trillion yen ($50.6 billion) in 2017, according to the Nomura Research Institute, signifying ample room for growth.

Of course, Alibaba will likely face similar hurdles to other Chinese companies expanding abroad -- namely, concern over the security of personal information. Consumers in China are already concerned that sensitive data such as transaction records could fall into the hands of government authorities as Beijing steps up surveillance of residents. But as compatriots in the manufacturing sector such as Huawei Technologies have already discovered, the rewards of foreign forays are well worth the challenges.

(Nikkei)

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