TOKYO - The bankruptcy of payment processing company Zento Shin has raised concerns over the impact on restaurants and other small and midsize businesses, while highlighting regulatory gaps in Japan's rapidly expanding cashless payment industry.
Zento Shin filed for bankruptcy in July. According to Tokyo Shoko Research, total liabilities from corporate bankruptcies during the month reached 236.3 billion yen, with Zento Shin accounting for roughly half of the total.
The failure has drawn particular attention because payment processors play an increasingly important role as Japan moves toward a cashless economy.
The government has set a long-term goal of raising the country's cashless payment ratio to 80%, with the figure reaching 58% last year. Credit cards account for more than 80% of cashless payments, with transactions totaling 134 trillion yen.
Payment processors such as Zento Shin have helped support that growth by acting as intermediaries between credit card companies and merchants.
When a customer uses a credit card at a restaurant, supermarket or other business, it can take nearly a month for the card company to transfer the proceeds to the merchant. Payment processors consolidate transactions involving multiple card issuers and handle payments to participating businesses.
Zento Shin distinguished itself by offering merchants settlement in as little as five days.
The company's collapse has therefore created a risk that restaurants and other merchants may be unable to recover sales proceeds that had already been processed.
The case has also highlighted differences in regulatory oversight within the payment industry. Credit card-related businesses operated by banks and trust banks are subject to supervision by financial regulators, while payment processing companies have not been placed under the same level of oversight.
As a result, payment processors have effectively occupied a regulatory gap, leaving merchants exposed to the risk of being unable to recover sales proceeds if an intermediary fails.
The Zento Shin bankruptcy has also brought to light allegations that improper accounting practices had continued for many years, further raising questions about whether existing supervision of the industry has been adequate.
The case is expected to prompt consideration by financial authorities of how payment processors should be supervised in the future.
The government's push toward cashless payments is driven by several factors.
One is the potential to reduce costs across society. Restaurants facing labor shortages can simplify checkout operations, while banks can reduce expenses associated with handling cash and maintaining ATM networks.
Cashless transactions also generate purchasing data that can be used to analyze consumer behavior and broader spending trends.
Another objective is to increase the transparency of transactions. Cash transactions can leave less of a record, potentially facilitating improper transactions or tax evasion, giving the government another reason to encourage electronic payments.
Cashless payments can also make spending more convenient for foreign visitors, who may find credit cards easier to use than cash.
For merchants, particularly restaurants, cashless payments can reduce the burden of administrative work. Small restaurant operators often have to prepare food while simultaneously managing accounting and other back-office duties, creating strong demand for systems that simplify those tasks.
Signing separate agreements with individual credit card issuers can also be cumbersome, making the use of payment processors a common option for restaurants and other merchants.
Handling cash itself carries costs. During business hours, cash transactions can complicate register operations, while outside business hours merchants must deposit sales proceeds into bank accounts and prepare change for the following day's business.
Reducing those administrative burdens has become one of the main attractions of cashless payments for businesses, even as the Zento Shin bankruptcy underscores the financial risks that can arise when merchants depend on intermediaries to receive their sales proceeds.
Source: テレ東BIZ
