Show me the Yens! PayPal's Strategic Alliance in Japan

PayPal announced (Japanese) to forge a strategic alliance with Mitsui Sumitomo, a Japanese bank. Will they be able to get the Japanese to use their services? I am sceptical.

According to research (Japanese) by the Ministry of Economy Trade and Industry in Japan, some 32.6% of e-consumers in the US have ever used a third party payment method like PayPal to pay for their transaction.

In Japan however, users prefer to pay with creditcard (66.8%); only 4.7% of the Japanese users have ever paid through a third party like PayPal. Some 36.9% of respondents have paid through their local bank, ATM or even convenience store. (This was the only relevant article in English I could find about paying through convenience stores. Very convenient indeed!)

Paypal has been a leader in its market, but has recently been threatened by other companies including Google and Apple. It has even sued Google for abuse of trade secrets.

So it is no surprise that PayPal has chosen to find sources of revenue outside of the US now that the market is getting more crowded. Good move?

Mitsui Sumitomo is a large player in the Japanese creditcard market. According to this source it is second to JCB. Surely this alliance will give them access to a large customer base. It is said that they plan to start offering PayPal services to customers starting October and that they will look into mobile payment methods.

But what is the value proposition of PayPal again?

• Ease
• Security
• Payment other than creditcard

Ease of payment. It is questionable whether the Japanese value this as much as, say, people from the US. Note that many Japanese would rather go to their local bank, ATM or convenience store to make a payment. Why? Because that's more secure.

PayPal might be secure, and you wouldn't need a creditcard to make payments. But as users don't mind going outside to pay securely, why would they stay inside if it means they have to trust a foreign company with their payments?

So, again, I don't see it happening. This means that e-commerce retailers targeting Japan need not change their focus on the current popular payment methods: creditcard, local (bank, ATM, convenience store) and payment on delivery.