• Bloomberg


Across most of Asia, people pay for taxi rides, restaurant meals and merchandise with smartphone-readable barcodes — except in Japan, where cash is still king.

Now, as the country’s biggest web companies race to capture the payments market, one Tokyo-based startup says it has a fighting chance to win with its QR app.

Origami Inc. had a head start when it introduced a QR-code payment service in late 2015, and has since signed up fast-food chain KFC, Tokyo’s largest cab company Nihon Kotsu Co. and convenience store operator Lawson Inc. The company raised $66 million in September to expand nationwide and plans to more than double its staff of about 100 employees, founder Yoshiki Yasui said in an interview.

It’s up against formidable competition. 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. Line Corp.’s app is used by about half of Japan’s population to send instant messages every day. Yahoo Japan Inc. has teamed up with SoftBank Group Corp. and Indian startup Paytm. Mercari Inc., whose marketplace app has 10 million users in the country, has also announced plans to join the fray.

“It makes sense for Line, Yahoo Japan and Rakuten to build mobile payments as part of their greater ecosystem of services and point reward schemes,” said Kazunori Ito, an analyst at Morningstar Investment Services in Tokyo. “It’s hard to imagine payments as a stand-alone business being very profitable.”

That need to encircle users puts rivals at odds with merchants who seek to build a direct relationship with customers, Yasui said.

Origami is betting that stores, which until now relied on direct mail and email newsletters, will pay for the ability to reach customers on their smartphones. For example, a hair salon using Origami’s payment app would be able to send a message to past customers with a coupon for their next haircut.

“People talk like there is a mobile-payments war going, but the real enemy is cash,” Yasui said. “If the market itself grows, everyone wins.”

Quick Response codes, the dotted squares that can be read by smartphone cameras, were invented in the 1990s by a unit of Toyota Motor Corp. to track automotive parts. But when the Japanese pioneered digital payments almost two decades ago with contactless cards for train fares, they chose the so-called near-field communications technology. The high cost of rolling out NFC payments, convenient ATMs and a culture where lost wallets are often returned have all been cited as reasons why cash remains king in the archipelago. In China, however, QR codes dominate.

Cashless payments, including via credit cards, accounted for just 20 percent of total consumer spending in Japan during 2016, compared with 60 percent in China and 89 percent in South Korea, according to a report by the Bank of Japan.

For merchants installing an NFC payment terminal can be costly, but QR codes can work with a tablet or even a paper printout. And customers only need to have a smartphone with a camera. Origami is targeting 100,000 retail locations by March as it opens sales offices in Osaka, Fukuoka, Nagoya and Sendai. That compares with 200,000 for Line Pay. Rakuten doesn’t break out the number of merchants using its QR code service.

When it comes to attracting consumers, Origami is teaming up with credit card companies as a potential source of users. The startup recently released a software development kit that lets other companies add a mobile-payment function to their apps. Toyota Finance Corp., whose TS Cubic credit card has 13 million users, plans to do so next fiscal year.

“Every single company that has a card business wants to enter mobile payments because they want more data,” Yasui said. “We can become that infrastructure.”

Toyota’s financial arm was among investors in Origami’s latest financing round because it wanted the startup to prioritize development for its app, said Tsuyoshi Takeshita, a group manager at Toyota Finance. The list of shareholders also includes financial firms JCB, Saison Card, Sumitomo Mitsui Card and Union Pay.

“For something to be widely adopted, it really has to add value for the user,” said Vey-Sern Ling, a Bloomberg Intelligence analyst. “For a country as developed as Japan, it’s probably a lot harder for mobile payments to take off like they did in China.”

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