JCB International, a Japanese owned payment card company, is rolling out an aggressive strategy to win in a global market dominated by a few companies from the west. The strategy includes expanding its global issuer base and merchant network, but these are the obvious and general things to do. However, there are two reasons why JCB’s approach is unique. First is its Asia focus: global wealth is shifting to the east from the west and the region is home to the largest emerging middle-income population. Second, curiously, JCB International has strategically partnered with national payment systems in emerging markets where the company will not earn anything significant. For instance, JCB International recently partnered with LankaClear to launch a national payment card scheme in Sri Lanka in collaboration with local banks under the patronage of the Central Bank.
WE DON’T CHARGE ANYTHING FOR DOMESTIC PAYMENTS, ONLY FOR INTERNATIONAL PAYMENTS AND THAT TOO AT ABOUT HALF THE RATE COMPARED TO OUR COMPETITORS
“There is beauty in our strategy,” says Kimihisa Imada, President and COO, JCB International. “It’s a collaborative approach with clear, mutually beneficial outcomes for partner agencies like LankaClear, the banks that issue our cards, merchants who accept them and, importantly, consumers who use them”. Imada outlines the company’s growth strategy, what set’s JCB payment cards apart from the competition and the new challenges facing the industry. Excerpts of the interview are as follows:
JCB International has partnered with LankaClear who develops a national payment card scheme in Sri Lanka, how does this fit into the company’s global strategy?
Imada: JCB International began as a domestic payments card system in Japan in 1961. When Japan’s economy was in expansion mode in the 80’s and 90’s, we decided it was time to expand overseas. But, this was a big challenge because the global market was dominated by payment card companies from the west. However, we’ve aggressively narrowed the gap between us and them. While acquiring new banking partners to issue JCB cards and expanding the merchant network across the globe, we realized the fastest way to achieve growth was to focus aggressively on Asian markets. Global wealth is shifting to the East and Asia is emerging as the center of the global economy.
The region comprises developed countries and importantly, emerging economies with amazing growth potential like Sri Lanka. Asians are not only becoming wealthier, but also there’s a growing middle class in the region that’s driving growth in consumption and tourism. The conditions are ripe for us to position JCB to be an aspiring brand in the region and the payment card of choice that would cater to the needs of an emerging middle class and wealthy. We understand Asian consumers better, because the region is our home. We also have a wealth of cutting-edge technological capabilities not only for faster, more secure payments but also to create enhanced experiences for our customers.
It was not enough selling a brand or product, or wildly competing for a share of the payment card market. We saw an opportunity to make a difference, to be an impact in the societies we serve. This would give us sustained growth in the mid-to-long term. We made it our goal to facilitate the expansion of the region’s domestic economies. We partner government agencies to build the infrastructure for national card-based electronic payments systems and transfer our expertise and technology knowhow in this area.
We recently entered Sri Lanka by partnering with LankaClear, Before entering Sri Lanka with LankaClear, we had amazing experiences in other parts of the region. For example, in Myanmar financial inclusion is improving and we’ve reached 1.5 million JCB debit cards there. We’re the largest international payment card issuer there. In India, we have partnership with eight large banks through the Indian national payment card scheme operator, NPCI (National Payments Corporations of India).. The large 12 banks in Vietnam issue JCB credit and/or debit cards. In China, we have 18 million customers. What’s exciting to see is that Japan and China are emerging as popular tourism destinations for each other, so there’s huge potential to grow our market in the region.
The only time we earn fees or royalties is when a locally issued JCB card in these markets is used overseas. Usually, payment card schemes charge a nominal percentage of transaction value as fees and commissions for local and international payments to the card issuers such as commercial banks. We don’t charge anything for domestic payments, only for international payments and that too at about half the rate compared to our competitors.
One may ask what’s in it for JCB? Well, it’s the opportunity to latch onto a growing population who’s global consumption has increased: ordering goods from ecommerce channels or travelling the region as tourists; we see business-to-business relationships also increasing within the region as well. This global market within Asia is our focus and catalyst for growth. Our global drive to expand our merchant network continues with the same intensity, but coupled with this Asia push, JCB is steadily increasing its presence in the international cards market where the global giants that have long dominated. We’re investing heavily and allocating considerable resources to this strategy.
Japanese corporates are venturing into emerging markets in Asia, and they are followed by Japan’s banks. The region, including South Asia, is growing in importance to corporate Japan. Sri Lanka, India, Bangladesh and Myanmar are important cogs in Asia’s growth story and that’s why JCB is committed to these markets. There is beauty in our strategy because it is collaborative with clear mutually beneficial outcomes for partner agencies like LankaClear, the banks that issue our cards, merchants who accept them and consumers.
WE UNDERSTAND ASIAN CONSUMERS BETTER, BECAUSE THE REGION IS OUR HOME. WE ALSO HAVE A WEALTH OF CUTTING-EDGE TECHNOLOGICAL CAPABILITIES NOT ONLY FOR FASTER, MORE SECURE PAYMENTS BUT ALSO TO CREATE ENHANCED EXPERIENCES FOR OUR CUSTOMERS
What makes JCB unique compared to other global payment card schemes in Sri Lanka?
Imada: As I said, unlike other payment card schemes, we don’t make money when JCB cards are used locally in Sri Lanka. This will generate considerable foreign exchange savings for our partners in emerging markets where more than 98% of all transactions are domestic. Therefore, Sri Lankan banks will not have to repatriate fees and loyalties at considerable value to a payment card schemes based in another country for local transactions. Under the National Card Scheme, the tariff will be substantially low to both banks and merchants as domestic transactions will be routed via LankaPay Network, locally. We believe our partnership with LankaClear will further develop Sri Lanka’s payments infrastructure and harness financial inclusivity, which is essential for sustainable economic development. We also have technological capabilities for faster and secure ecommerce payments, which will benefit companies in Sri Lanka.
JCB offers other cost benefits to banks through LankaPay collaboration. Banks here are already linked to Sri Lanka’s national ATM network via LankaClear, so countrywide acceptance will not be a problem. Also, LankaPay merchant network will soon be expanded by LankaClear and merchant acquiring banks. JCB international cards will also be accepted through the infrastructure without specific investment for JCB transactions. We estimate that banks and merchants incur more than double the cost to maintain relationships with other international payment card companies compared to the LankaPay-JCB collaborated scheme. These are significant benefits.
We have around 30 million merchants linked to the global JCB network. While the cost benefits to banks and merchants can indirectly benefit consumers, we offer unique services, such as JCB Plaza and JCB Plaza Lounge, which are in-city travel concierge service and general lounge service in more than 40 major cities. Also, we’re constantly introducing special discounts and promotions that will delight our card users locally and when they travel overseas. For instance, we offer JCB exclusive discounts at major T&E area merchants, such as transportation, visitor attractions, dining, and accommodation. Also, JCB premium card holders can enjoy airport lounges at international airports where such premium customer often travel to. We keep creating new benefits and privileges for our clients. We have 130 million JCB payment card users worldwide. While JCB credit cards remains the focus, we also offer debit cards, e-wallets and prepaid cards.
While you’re in aggressive expansion mode, how are your competitors responding to your growth strategy?
Imada: We’re not always competing with peer companies. JCB is a founding member of the Payment Card Industry Security Standards Council that defines the standards such as PCI-DSS for the global card industry. Also JCB is a shareholder of EMV Co., and we are proud of having played many important responsibilities in the organization. We’re working together to standardize technology’s evolution, which is important for consumer convenience and ensuring measures are adopted industrywide to protect data and privacy. There are new challenges from FinTech companies, however, the large investments we’ve made in cutting edge technology and data security give us an advantage over these emerging startups.