Increasing adoption of a cashless society

With more offline retailers and consumer brand companies launching e-commerce portals, we believe GMO Payment is well positioned to capture the opportunity, due to its extensive experience and track record in the payments industry.

GMO Payment Gateway is an example of a 'hidden gem' with ability to grow despite Japan’s weak macro environment.

We have been shareholders of GMO Payment Gateway, the largest online payment processing company in Japan, in our Japan portfolios since 2019. The e-commerce penetration rate in Japan is only 7% of retail sales.

The emergence of cashless payment transactions is a further potential growth driver for GMO Payment. Japan’s cashless payment penetration (18%) is still relatively low compared to countries such as South Korea (95%), the UK (67%) and the US (44%).

Recent policies, such as merchant subsidies and consumer rewards programs (which have been primary catalysts in other nations), are expected to accelerate the pace of transition. This could open doors to larger addressable markets, such as the offline cashless payment (JPY300 trillion) and the public tax/utilities market (JPY100 trillion).

Card Usage Rate to Private Final Consumption Expenditure

Source: GMO Payment Gateway, FSSA Investment Managers, as at May 2020.

Disclaimer: Reference to specific securities (if any) is included for the purpose of illustration only and should not be construed as a recommendation to buy or sell the same. All securities mentioned herein may or may not form part of the holdings of FSSA Investment Managers' portfolios at a certain point in time, and the holdings may change over time.