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Business trends

Japanese banks unite on QR code payment service

Megabanks and cooperatives join hands to regain ground lost to nonbank rivals

Japanese banks are planning a unified smartphone system to compete against Line Pay and other newcomers to the payments field.

TOKYO -- Banks and regional financial institutions across Japan expect to come out with a unified smartphone payment service, perhaps in April 2020, Nikkei has learned.

The envisioned service will allow savings account holders to pay merchants by showing QR codes that will appear on their smartphones. Payment amounts will then be debited from the buyer's bank account.

The institutions are discussing other details, such as collecting service fees of more than 1% from merchants, who usually have to pay credit card issuers fees of 1% to 5%.

The banks are trying to maintain their traditional turf as they face increasing challenges from outside the financial industry.

The new service will be an extension of existing debit card services, with an app replacing the physical cards. By making use of the existing system, the industry will be able to reduce fresh capital spending and cut other costs that go along with introducing a service. The banks also believe this approach will allow many institutions to join.

A trial will start next October, with a full rollout planned for April 2020 among a wide scope of large retailers. The banks then expect their system to take off among small retailers and mom-and-pop operations.

The banks also want to allow savings account holders to use the service when shopping online or paying utility bills and taxes. In Japan, many consumers allow utilities to directly debit their bank or credit card accounts every month, and local taxes can be paid at the post office.

The new service will be based on a system that is currently used at as many as 1,300 institutions, including top-tier megabanks, regional banks, Japan Post Bank, credit associations and credit cooperatives. If all of these institutions participate, their smartphone service would be available to 100 million depositors.

The banks will be joining a crowded smartphone payment industry. On Thursday, Yahoo Japan joined the fray by announcing a campaign in which users will be refunded 20% of the payments they make through the company's service.

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