(Bloomberg) -- Line Corp. and Mercari Inc. are joining forces on mobile payments as Japan’s internet companies race to dominate cashless transactions in the world’s No. 3 economy.
The operator of Japan’s most popular messaging platform and the used-goods online marketplace app will let users shop and pay for purchases at stores that accept each other’s systems starting early this summer, they told reporters in Tokyo Wednesday. They also launched an alliance to welcome other mobile payment providers.
After years of inactivity, mobile payments competition is heating up in Japan. Line and Mercari are teaming up to face powerful rivals: e-commerce giant Rakuten Inc. runs its own bank, has a credit card with more than 15 million customers and is building a mobile-phone network. PayPay, backed by SoftBank Group Corp., Yahoo Japan Corp. and India’s Paytm, sparked a shopping frenzy in December by giving users 10 billion yen ($90 million) in rebates on purchases.
“The teaming up of Mercari and Line makes perfect sense and should help reduce infrastructure and promotion costs,” Amir Anvarzadeh, a market strategist at Asymmetric Advisors Pte, said in a note to clients. “Those who dominate e-commerce and messaging platforms have a good shot at carving the mobile payment market. With Rakuten also heavily involved in financial services and soon to get into mobile segment with an aggressive pricing plan, its chances are good to be among the top two in Japan, which will include Line/Mercari.”
While Rakuten and Line had an early start in payments, Mercari is a latecomer and none of their rivals have managed to secure an insurmountable lead. Two of the country’s biggest convenience store chains -- Lawson and Family Mart -- already accept most competing payment methods, on top of an assortment of e-money and transit cards. The same is true for fast-food operator Matsuya Foods, electronics store Bic Camera and pharmacy chain Tomod’s.
Internet companies have also turned to discounts and giveaways to lure users. PayPay is running its second rebate campaign, while Rakuten customers can earn 40-times the points awarded on purchases. All three leading players offer users a chance to get back as much 20 percent from purchase amounts.
“The way we have been pursuing cashless payments has put a strain on the merchants and confused consumers,” Line Pay Chief Operating Officer Hisahiro Chofuku said at the briefing. “We want to simplify things.”
Line has bet that partnerships with financial institutions will help it get ahead of the competition. The company plans to introduce Line Securities equities trading with the country’s biggest brokerage, Nomura Holdings Inc., this year, provided it receives the necessary permits. And a banking offering in partnership with Mizuho Financial Group Inc. could become available as early as fall 2020. In November, the internet company announced an alliance with China’s Tencent Holdings Ltd. and its WeChat Pay, targeting Chinese visitors to Japan.
Line and Mercari’s payments operations will remain separate, and they will continue with their own marketing, customer service and fee collection from stores. Mercari’s Merpay is accepted at 1.35 million locations around the country, including 900,000 stores using NTT Docomo Inc.’s iD contactless payments service, while Line Pay is available at 1.33 million outlets. The companies didn’t discuss the extent of their overlap.
“When pursuing new merchants, we would like to avoid doubling up,” said Naoki Aoyagi, the head of Merpay operations.
(Updates with analyst’s and company comments from the fourth paragraph.)
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