Softbank bets on credit card tieup PayPal Here system aims to cut use of hard cash in favor of plastic
By KAZUAKI NAGATA Staff writer In an attempt to change the deep-rooted cash culture in Japan, Softbank Corp. is hoping to create a business opportunity here by teaming up with U.S.-based PayPal Inc.
Phone-hacking risk?: A smartphone can work as a credit card reader by attaching a PayPal Here system to it. SOFTBANK CORP.
The country's third-largest cellphone company and the world's leading online settlement service provider plan to soon set up a joint venture, PayPal Japan Inc., and launch a credit card payment service called PayPal Here, which they hope will significantly increase the use of credit cards in Japan.
PayPal Here is a massively discounted credit card reader that can be plugged into a smartphone. The smartphone sends the person's credit card data to PayPal Japan over a 3G cellphone network or Wi-Fi Internet connection, with all the transaction processes settled over the phone, including the signature.
The reader system will be sold for around ¥1,200, a give-away compared to conventional credit card readers, which usually cost around ¥100,000 each, Softbank said.
The low cost of PayPal Here will allow numerous shops to offer credit payment services because many businesses, especially small and midsize shops, have not purchased expensive conventional credit readers, Softbank executives say.
"We will change Japan's settlement system market, and that's the mission of PayPal Japan," said Softbank CEO Masayoshi Son during a press event to announce the partnership with PayPal in May.
According to Softbank, about 3.35 million shops across the country don't accept credit cards and only 950,000 do. This is one reason for the low rate of credit card use in Japan, Softbank said.
In 2010, credit or debit cards accounted only for 12 percent of the ¥290 trillion spent by private-sector consumers, compared with over 50 percent in the United States and South Korea.
While conventional card readers are quite expensive, shops also have to pay commissions of up to 8 percent to the card companies and it takes 15 to 30 days before a shop can receive payment, according to Softbank.
PayPal Here is much cheaper, quicker and easier to use than conventional credit card systems, Softbank said. The system will charge a fixed commission of 5 percent per transaction and PayPal Japan Inc. will transfer the payment to the shop the same day....(continued)