By NAOKO MURAI/ Staff Writer
December 10, 2019 at 14:25 JST
Line Corp. on Dec. 9 started allowing customers to make bank transfers through its Line Pay smartphone payment system, a service that cuts into a business area heavily dominated by banks.
Line Pay’s bank transfer fee is considerably lower than what commercial banks charge for the same service.
Smartphone users who have the same app can now send money between their mobile phones, but Line Pay’s new service will cut across different smartphone payment apps.
A maximum of 100,000 yen ($920) a day can be transferred to the account of the other party. The fee for a single bank transfer is 176 yen, tax inclusive.
The service can be used even if the bank account number of the recipient is unknown. The person making the bank transfer only needs to enter the name and phone number or e-mail address of the recipient to the Line Pay service.
To ensure security, Line Pay will send an e-mail or short message to the recipient with a password to confirm the individual’s identity. The recipient then enters his or her bank account information to receive the transfer.
Line Pay uses an account of Japan Net Bank Ltd., which belongs to the group headed by Z Holdings Corp. under the SoftBank Corp. umbrella, to make the bank transfers.
Z Holdings, whose group companies also include Yahoo Japan Corp., recently reached an agreement to merge with Line.
Japan Net Bank already provides bank transfer services on behalf of companies. The new service will use the bank transfer network of Japan Net Bank to send the money to the specific bank of the recipient.
Account holders at MUFG Bank Ltd., Japan’s largest bank, must pay a tax-inclusive fee of 880 yen if they go to a teller and ask for a money transfer of 30,000 yen or more to an account at another bank.
If the same transaction is made over the Internet, the MUFG Bank account holder would still have to pay 330 yen, close to double what Line Pay charges.
However, bank officials said they believe that Line Pay will be unable to make a profit with such a low fee.
What bank officials are worried about is the next step the smartphone payment service has in mind, especially if it attracts many users to the money transfer system.
Line Pay was one of the first services that moved into areas other than simply using smartphones to pay for items purchased at retail outlets. It already offers an option of paying public utilities by using a smartphone to read the bar code information on the utility bill.
The additional options are intended to turn the smartphone into a virtual wallet. Line’s ultimate goal is to have the monthly salaries of users directly deposited into the Line Pay account rather than to their bank accounts.
Under the Labor Standards Law, transfer of monthly salaries is restricted to accounts at banks and other financial institutions. But there has been discussions within government circles about easing those provisions.
If monthly salaries can be directly deposited into smartphone payment services, it would be another service that moves into another important area once dominated by banks.
Many information technology companies in the United States have advanced into payment settlement services, leading to a decrease in fees for bank transfers.
A similar trend in Japan could pose a problem for banks, especially since their operations are already suffering from a long period of low interest rates.
“If banks can no longer receive fees for payments and money transfers, the only option left to them might be to charge fees to their customers to maintain their accounts,” Hiroshi Oka, a senior fellow at the Economic Research Center under the Fujitsu Research Institute, said.
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