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Business deals

Tencent partners with Line on mobile payments in Japan

Tie-up targets Chinese tourists, but faces competition from Yahoo-Alibaba service

The WeChat Pay system uses QR codes generated by a terminal located in a store.    © LightRocket/Getty Images

TOKYO -- Tencent Holdings will team with Tokyo-based chat app operator Line to offer mobile payment services for small Japanese retailers looking to capitalize on the recent influx of Chinese tourists.

The partnership will vie for business with a rival service operated by Yahoo Japan and SoftBank Group, which recently announced a tie-up with Alibaba Group Holding. Both teams seek to leverage the massive user bases of their Chinese partners to expand their own coverage networks.

Line will lease terminals compatible with Tencent's WeChat Pay beginning around mid-December to small and midsize restaurants and stores that have yet to adopt Line's own Line Pay offering. The service with Tencent is scheduled to start next year.

The service would have a shopkeeper enter the amount due for a transaction into the terminal that generates a QR code. The customer then scans the code with a smartphone to pay via the service of either company. Processing fees will be waived through July 2021 for stores that introduce these terminals in an effort to promote broader use.

Line says it aims to improve efficiency as well as help small stores that have struggled to tap into the Chinese tourism boom. About 7.35 million Chinese people visited Japan last year, triple the number from three years earlier, Japanese government data shows. Mobile payment services can attract Chinese tourists, who often are accustomed to paying with their phones.

The cashless payment business is growing crowded as players from various industries move in, including online retailers Amazon.com and Rakuten as well as wireless carrier NTT Docomo. Financial institutions, for which payments are a bread-and-butter business, are expected to join the fray as well. With competition escalating, improving usability quickly will be essential for processing services to attract merchants.

Line's strategy of working with a Chinese partner resembles that of Yahoo and SoftBank, which launched the PayPay mobile service this fall. The companies entered a tie-up with Alibaba under which customers can pay with Alipay at some PayPay member stores.

The Chinese players in both of these alliances each boast 700 million to 800 million users.

Cashless payment options can encourage customers to spend more -- something Line plans to use as a selling point. A souvenir store found that Chinese customers using Alipay spent 2.6 times as much per visit as the average Chinese shopper, including those paying with cash, according to a Tokyo-based online payment processor.

Line Pay was available at roughly 1 million locations as of Nov. 21, thanks to a partnership with Japanese credit card company JCB and its QuicPay contactless payment system.

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