TOKYO -- Japanese chat app operator Line unveiled a new service Thursday aimed at spreading mobile payment across Japan, in the most potent challenge yet by a Japanese operator to the dominant Chinese mobile payment platform, Alipay.
The move is an ambitious attempt to break Japanese people's habit of using cash for every transaction. Cashless transactions account for only 18% of personal expenditure in Japan, compared with 45% in the U.S. and 60% in China, according to data from the Japanese Ministry of Economy, Trade and Industry.
"We want to dramatically change the payment service in Japan," said Line Pay chief operating officer Hisahiro Chofuku at an event announcing Line's business strategies.
As with Alipay, users of the new service scan quick response or QR codes with their smartphones in order to make payments.
Line has sought to minimize the hassle for retailers by allowing the retailer to use the service by simply downloading a free app on a smartphone. The retailer then reads the customers' QR codes to check out their purchases.
Retailers can also send messages to individual shoppers later, such as sales promotions.
The service can be used free of charge for the next three years -- a unique feature compared with conventional credit cards, which charge retailers processing fees of a few percentage points of sales.
There are also incentives for customers, offering them loyalty points valued at 3% to 5% of every purchase they make with Line Pay.
Line Pay aims to make the service available at 1 million retail locations throughout Japan. Chofuku said the service will be accepted at retail chains including McDonald's restaurants, Matsuya beef-bowl restaurants, Mini Stop convenience stores, and the bookseller Book-off. Line Pay will also be accepted at many of the retail stores that accept the JCB credit card.
Mobile payment has spread rapidly in China since 2014 and has also started catching on in other Asian countries, where retailers try to attract Chinese tourists by offering Chinese mobile payment services. The most popular QR code-based payment platforms in China are Alipay, run by Ant Financial, an affiliate of Chinese e-commerce giant Alibaba, and WeChat Pay, which is affiliated to Tencent, an operator of instant messenger service and games.
Alipay is already exporting its service to other Asian countries through investment and tie-ups. The most successful examples include Paytm, India's biggest online payment app, in which Ant Financial took a stake in 2015.
Ant is also keen to expand in Japan, and has made the Alipay service available at 40,000 retail locations for Chinese tourists.
But the bigger goal of bringing Japanese consumers into the Alipay user base has not yet been reached.
The Japanese business community has been watching Ant's rapid expansion with unease, fearing that important information on shoppers' spending habits would go into the hands of the Chinese group.
Line Pay is part of chat app operator Line, which is a unit of South Korea's largest internet company Naver.
For Line, the roll-out of the cashless service in Japan represents the introduction of the more advanced practices used in other Asian markets, such as in Thailand and Taiwan, where Line has enjoyed a dominant position.
Line has 75 million monthly active users in Japan and 90 million in Taiwan, Thailand and Indonesia combined.
In Taiwan, for instance, there are over 2.9 million users of Line Pay. "Many market surveys have called us the mobile payment leader in Taiwan," said Roger Chen, general manager of Line Taiwan. The success owes much to the local unit's aggressive promotion campaign, offering users loyalty points equivalent to 2% to 3% of sales.
In Thailand, there are 42 million Line users out of the 45 million internet users. Line is the most popular platform for online video and food delivery services, and is aiming to be the No. 1 mobile payment platform, said Ariya Benomyong, managing director of Line Thailand.