TOKYO -- Chat app operator Line and online secondhand marketplace Mercari have joined forces, the two companies said Wednesday, in the latest twist in the battle for dominance in Japan's cashless payment service.
Users of the two companies' apps will be able to make payments using Quick Response or QR codes at either company's affiliated stores, starting this summer. The companies hope their initiative will catalyze the consolidation of various types of QR code-based payment systems that have proliferated in recent months.
Line and Mercari operate their own cashless payment systems, called Line Pay and Merpay. Other companies, such as Yahoo Japan and Rakuten, provide similar services under their own brands, resulting in a bewildering array of payment systems, which retailers and shoppers are struggling to adapt to.
The two companies will work together to increase the number of retail outlets that accept their cashless payment service. In the future, they will explore the possibility of collaborating in their online services as well, said Merpay CEO Naoki Aoyagi. The two companies will ask other operators, including Rakuten and Yahoo Japan, to join their group as they aim to make the shopping experience a seamless one.
Mercari is the Japanese version of eBay or Craigslist, but focuses on smartphone users.
These companies all bet that Japan, one of the most heavily cash-dependent economies in the world, will transform into a cashless society under a strong push by the government of Prime Minister Shinzo Abe. Last year, the government set a goal of doubling the cashless payment rate to 40% by 2025 -- and ultimately to 80%. Cashless payments include those made by QR code as well as by credit and prepaid cards.
The Line-Mercari partnership is likely to mark a shift in strategies of financial technology companies and e-retailers that have been trying to carve out their own niche in the fledgling market, toward achieving scale and competitiveness in the global market.
In China, for instance, mobile payment service is dominated by two platforms -- Alipay by Ant Financial and WeChatPay by Tencent. In Southeast Asia, GrabPay and Go-Jek are among the platforms rapidly spreading across borders.
Tokyo-based Line, a subsidiary of Korean internet portal Naver, is the first in Japan to roll out mobile payment services on a large scale to become Japan's answer to China's Alipay, the most dominant platform in the region.
Line has taken advantage of its strong presence among smartphone users in Japan, Taiwan, Indonesia and Thailand. It has 79 million users in Japan, 44 million in Thailand and 21 million in Taiwan. Line has built on its presence as an instant messaging app to expand into other areas, such as investment, insurance and lending. Brick-and-mortar banks have also sought partnership with Line to reach younger users.
A mobile payment platform could potentially be in a position to gain real-time insight into consumer shopping behavior, especially among the young, and many companies are trying to seek that position to gain an edge in the e-commerce business.
Line's main rival is Yahoo Japan's PayPay platform.
PayPay is a latecomer to the market, but backed by the financial muscle of Yahoo Japan and its parent, SoftBank Group. It is trying to make rapid inroads into the QR-code payment service. The group's strategy has been focused on offering generous incentive programs as well as collaboration with SoftBank's other assets, such as Alibaba Group Holding's Alipaya.
Line has been trying to fend off competition by rapidly announcing partnerships, such as with Tencent Holdings and Naver. The company is also making its mobile payment service more attractive by joining up with a larger number of retail outlets and also by teaming up with the government to enable tax and utility bill payments through its app.