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Japan's megabanks aim to introduce unified smartphone payment system

A tablet terminal, left, and a smartphone, right, used to make payments in a verification test, are seen on March 15, 2018. (Mainichi)

Japanese banking giants Mitsubishi UFJ Financial Group Inc. (MUFG), Sumitomo Mitsui Financial Group Inc. (SMFG), and Mizuho Financial Group Inc. (MHFG) are collaborating on smartphone payment and remittance services that make use of two-dimensional barcodes, it has emerged.

On March 15, MHFG announced that it will soon embark on a verification test of smartphone payments with Toho Bank, headquartered in Fukushima Prefecture, using the barcodes.

It is thought that the results of the test will be used to create uniform standards for the two-dimensional barcodes that are currently being mulled by the three banking groups -- in what can be interpreted as an attempt by the banking sector to challenge the IT industry's grip on smartphone-based payments.

In the test, people who hold either a Mizuho or Toho bank account will take part sequentially from April. The participants will transfer money from their bank accounts to a special app downloaded on their smartphones, and then make payments by using their smartphones to scan two-dimensional barcodes on tablet terminals placed in stores.

The test area will first cover convenience stores and cafeterias inside Tokyo Electronic Power Co. (TEPCO)'s Fukushima No. 1 Nuclear Power Plant, and then spread to other locations in the Hamadori region in eastern Fukushima Prefecture such as the town of Tomioka. The two-dimensional barcodes that are set to be used in the test are not the uniform standards, but the outcome of the test will be reflected on the uniform standards that three banking groups will create in the future.

Speaking at a press conference at Fukushima Prefectural Government headquarters on March 15, MHFG President Yasuhiro Sato said, "(According to a private survey) The economic effect of moving to a cashless society is 10 trillion yen, making it an urgent issue" -- referring to the huge costs of a cash society such as those relating to the installation of ATMs.

In addition, Seishi Kitamura, president of Toho Bank, expressed his hopes for the new system, saying, "This will lead to a huge reduction in the burden on people, on stores and increase convenience."

From left, Fukushima Gov. Masao Uchibori, MHFG President Yasuhiro Sato and Toho Bank President Seishi Kitamura are seen on March 15, 2018. (Mainichi)

Regarding the two-dimensional barcodes, the three banking groups are considering the joint establishment of a company ahead of the development and operation of the uniform standards.

At a regular news conference on March 15, Nobuyuki Hirano, chairman of the Japanese Bankers Association, said, "Having so many standards is burdensome for retailers, and inconvenient for customers. It is desirable to have consistency across the banking sector."

In recent years, the number of people using the the Chinese Alibaba group's "Alipay" service, which makes use of two-dimensional barcodes to make payments, has increased drastically.

The use of such barcodes has also been introduced in Japan, via the smartphone LINE app, with NTT Docomo Inc. planning to do the same in April.

However, as MHFG President Sato says, with Alipay's entrance into the Japanese market in mind, "By creating a uniform code, it is important to stop the leak of valuable customer data."

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