National / Media | Japan Pulse

Convenience store operator struggles in wake of security fiasco

by Patrick St. Michel

Contributing Writer

The operator of Seven-Eleven’s new smartphone payment service is under fire for appearing clueless at a news conference that was held after customers were allegedly defrauded through unauthorized access.

On July 4, Seven & I Holdings Co. said some 900 convenience store customers using the payment service 7pay may have lost a total of ¥55 million after their accounts were hacked.

The issue was picked up by media outlets, prompting Seven Pay Co. President Tsuyoshi Kobayashi to appear before reporters and issue an apology for the security breach.

During the press conference, a reporter asked Kobayashi why 7pay didn’t include two-factor authentication for its services. Kobayashi repeated the phrase in Japanese, seemingly unsure of exactly what it meant.

The news conference was recorded on film and footage of it soon spread on social media. Netizens digitally rolled their eyes at the sight of a president of a digital payment service seemingly ignorant of terminology associated with their field of expertise, expressing surprise in both Japanese and English.

The incident served as a jumping off point for online media to dig a little deeper into the fiasco, with contributions ranging from Huffington Post Japan and SankeiBiz to a deep dive at IT Media Business Online.

The controversy surrounding 7pay has almost certainly tempered the excitement that erupted in 2018 when mobile payment applications such as PayPay debuted.

Although consumers in Japan have been able to use prepaid e-money cards such as Suica and Pasmo to pay for goods at train station kiosks and convenience stores for some time, they’ve benefited from the introduction of a number of cashless payment systems.

However, the 7pay security breach has dampened enthusiasm significantly.

In the wake of initial reports about the hack, Twitter users shared screenshots of Seven-Eleven’s stock dropping in real time. Others posted the company’s press release as soon as it was made public. Naturally, social media didn’t take long to jump on the bandwagon once Kobayashi made a hash of his news conference.

BuzzFeed Japan’s coverage of the incident was particularly revealing.

On July 3, it published a post that gushed over all the free items consumers could get from the chain on the newly launched service. A day later, BuzzFeed Japan published a fairly comprehensive look at the security breach, pointing out how difficult it was for users to unsubscribe from the service, something that was also criticized by users. The contrast of tones perhaps reflects how quickly the internet can turn on a new idea if it fails to launch without a hitch.

For the most part, scandals that capture the imagination of Japanese netizens have a strong domestic angle and it’s rare for such stories to make waves abroad. In this particular case, however, industry insiders from all over the world expressed an immediate interest in the breach, pointing out the seemingly obvious flaws in the system and marveling at just how quickly it had all unraveled.

Back in Japan, part of the interest in the issue can be linked to the sheer number of related services that have been launched in the past year. Twitter user @umezawa_toy posted an image that showed just how many smartphone-based services have arrived in recent times, with Family Mart also launching its own electronic payment system last week (to a slightly less enthusiastic public). PayPay and Line Pay did well early on, but their future looks less promising than had been hoped.

It’s a reflection on how difficult it can be for an established brand to be successful in fields beyond their area of expertise. Seven-Eleven will always be known for its quality of rice balls, whether it can convince a skeptical public of its security prowess remains to be seen.