Fintech is an emerging industry that uses technology to improve the delivery of financial services for both consumers and users. New payment methods are invented every day. In a country like Japan where start-ups and venture companies thrive, so does the fintech and payments industry. On the 7th of September 2021, one of the world’s leading e-payment service provider Paypal had announced its new payment service – Buy Now Pay Later (BNPL). As a leading electronic payment service provider with a huge global presence, it had made headlines in Japan when it acquired Paidy for approximately 300 billion yen, a Japanese unicorn and service provider of BNPL.
Before we look at the future and prospects of BNPL, we will cover what is BNPL and what are some of the leading BNPL companies in Japan.
What is BNPL? How is it different to credit cards?
BNPL is a deferred payment system similar to an instalments plan.
BNPL services don’t really require any form of credit check or pre-screening unlike credit cards where an applicant must go through a credit check based on various prerequisites such as income or place of work. Credit card applications also typically take two to four weeks before you receive the physical credit card.
This is also one of the main reasons why the majority of BNPL users belong to a younger demographic consisting of millennials and Gen Z who take advantage of the ease of completion for BNPL on their smartphones.
One other reason for the demand of BNPL services is that no additional costs are incurred by the consumer when paying in instalments, as opposed to credit card instalments where the consumer is charged a fee and interest depending on the number of instalments and the method of payment.
BNPL companies in Japan
According to a study by the Yano Research Institute, the domestic market for BNPL has been growing steadily since 2016 and is forecasted to reach ¥1 trillion by 2021 and ¥1.8 trillion by 2024.
Although the percentage of people who own a credit card in Japan is high, the number of people who use them are low as many are concerned about the fees and interest associated with instalment payments. In this aspect, BNPL offers a clear payment amount and a simpler UX (user experience) that many people prefer.
Companies in Japan that offer BNPL services:
- Paidy: AttoPay Paidy had expanded its services rapidly, from one million users in 2017 to over six million users in 2021. And in collaboration with Visa, consumers are now able to use Paidy at any Visa merchant online
- ZOZO: "Tsuke-Pay" is often used on the largest fashion e-commerce platform in Japan. It allows you to delay payment of goods for up to two months.
- Rakuten Group: Provides post-paid payment services within Rakuten Pay, a smartphone payment service.
- Mercari: Offers Merpay Smart Payment but charges interest for instalments.
PayPay, which has been making great strides within the smartphone payment market, is expected to enter the BNPL market soon. With the growth in usage of both smartphone payments and the e-commerce industry as a whole, competition between companies will only intensify.
BNPL companies in other parts of the world
The growing demand for online payments due to declining income combined with the pandemic has predicted to lead to a significant growth within the Fintech sector from 2020 onwards. In 2021, however, we saw bigger players within payments that have entered the BNPL industry, taking advantage of the growing market and increasing competition.
In the US, credit card applications are more difficult to complete as compared to Japan. It can be very difficult to get a credit card if you do not have a certain credit score. A credit score is calculated based on income and past payment history. For those who are not able to apply for a credit card, BNPL becomes a very attractive alternative payment service. According to a survey by investment guidance website The Ascent, 55.8% of US consumers had used a BNPL service as of July 2020, a significant increase from 37.65% in 2019.
In European countries and Australia, we are seeing a shift in the needs of credit card holders towards BNPL. This is due to high annual fees and interest charges associated with credit card instalments. As such, consumers are increasingly turning to BNPL to avoid these additional payments.
Leading companies in the world that offer BNPL services:
- Affirm: Based in San Francisco and founded by Max Levchin, co-founder of PayPal.
- Afterpay: An Australian start-up with a wide range of BNPL services provided in the US, UK, Canada and other English-speaking countries. They were acquired by Square in August 2021 for approximately $200 million.
- Klarna: A Swedish start-up and one of the largest unlisted companies in Europe who is also funded by SoftBank.
- ZIP: Australian start-up founded in 2017 that acquired Quadpay in 2020, another BNPL service provider and is now operating under a single brand, ZIP pay.
Challenges in BNPL
When ZOZO TOWN launched its "bill pay" service in 2016, it caused major controversy due to the high number of late payments. As these services were mainly targeted at minors with low financial literacy, there has been a growing debate about whether there should be some degree of regulation on the companies’ part in providing the services, rather than placing all responsibilities on the consumer.
It is also likely that consumers will start to lose the sense that they are spending money and start making purchases beyond their ability to repay. In the UK, the Financial Conduct Authority (FCA) has started to regulate the use of BNPL services. It is possible that Japan may also adopt some form of measures or regulations in the future, which can potentially impact the growth of the payments industry.
Jobs in fintech companies offering BNPL services
BNPL is relatively new to the fintech sector and is attracting a lot of attention now, especially with many of the world's leading payment companies and start-ups entering Japan. As the regulations by the government and the Financial Services Authority (FSA) are still in its infancy, the market is likely to go through various phases of growth before developing into a mature market.
BNPL can be a very attractive industry to consider a career in. There is potential for job seekers to gain a range of experiences that are only available to new products or services, such as breaking into the Japanese market or coordinating with government authorities. It's also a sector that's growing rapidly, and therefore have multiple job openings and job options for you.
The following jobs are expected to be in high demand:
- Full stack engineers: For relatively small companies such as start-ups, people who can develop a wide range of products are highly valued. In the case of the fintech industry, experience in developing financial machines tends to result in a much higher salary. This could also be a good turning point for full stack engineers who are looking to grow their career.
- iOS/Andriod engineers: As BNPL services are mainly designed to be used on smartphones, the ease of use in the app is a key factor in attracting and retaining consumers.
- UI/UX designers: As more companies enter the BNPL market, UI/UX becomes increasingly important for companies to differentiated themselves from other services.
- Public Affairs: As this is an area that is yet to be regulated, there will be a lot of interaction and coordination with government bodies and financial institutions.
- Digital Marketing: As the current target audience belong to a younger demographic, there is potential for advertising campaigns using social networking sites to reach a larger number of intended audiences. However, a range of activities through channels other than social networking to reach the over 40s who are currently under-represented in the market will also be required.
We have a range of job opportunities and good track record in helping businesses within Fintech
Computer Futures has one of the largest teams of IT and technology recruitment consultants in Japan, where each consultant specialises in a niche area of expertise. Particularly within Fintech, we have two teams that can help you achieve your career or business goals. They focus on technical positions such as engineering as well as sales and marketing jobs respectively.
As BNPL may be new to the market, there are many opportunities that do not require prior industry experience, making it a great time to build a career in this growing market. This is a great opportunity for job seekers who wish to enter the fintech industry.
Alternatively, you may click on the button below to view our latest jobs in Japan or contact us via the form below if you wish for a specialist consultant to get in touch.