Why is Line Pay being shut down in Japan?

Written by Kapronasia || July 09 2024

Given the ubiquity of the Line messaging app in Japan, we were initially surprised to learn that the Line Pay app will be shut down in its home market in the end of April 2025. New user registrations will only be possible until Nov. 2024. After that, users will be able to transfer their Line Pay balances to PayPay. In a statement, Line-Yahoo stated the move is part of its governance strategy to “reorganize its businesses and integrate overlapping business areas” to expand group synergy.

The decision appears to be linked to two separate issues. First, Line-Yahoo, the entity formed in 2019 by merging Yahoo Japan and Line, wants to consolidate Line Pay under the SoftBank e-wallet PayPay, a strategic move to streamline digital financial services operations. Second, it is possible that SoftBank wants to reduce Naver’s influence in the Line-Yahoo joint venture.

We would not overemphasize the Naver factor in this decision, as one can argue that Line Pay and PayPay cater to similar market demographics and having the two e-wallets ultimately cannibalizes some of SoftBank’s share of Japan’s already highly fragmented payments market. Discussions about merging the two payment services have been going on since 2021. Although the services have been integrated to some degree, with it possible to use Line Pay at PayPay merchants, we can find no compelling reason for SoftBank to operate two distinctly branded e-wallets with similar functionality in Japan.

PayPay is the larger of the two e-wallets. Despite being a latecomer to the market, it has more than 64 million registered users. By comparison, Line Pay has 44 million registered users in Japan.

Overseas, there will be no changes. Line Pay has been consistently successful in its key overseas markets of Taiwan and Thailand, where PayPay does not have a presence. There would be no reason to terminate its services in either country.

As for the Naver factor, it is a bit complicated. Korea media have been highlighting that the announcement to shut down Line Pay in Japan announcement came a month after the company officially said it has been in talks with Naver over the possibility of changing their capital relationship following a data leak incident in 2023. Earlier this year, Japan's Ministry of Internal Affairs and Communications issued an administrative guidance to Line-Yahoo regarding the incident, urging it to decrease its dependence on Naver.