Japan airline ANA aims to build digital payments business

ANA, Japan’s largest carrier, is aiming to launch a digital payments business as it seeks a cushion against the volatility in the airline industry’s profits.

The plan is part of a broader digital push by ANA, which hopes to build on data collected from the 31m users of its airline miles to provide a range of services including real estate, insurance and health to consumers across Japan. 

"We are aiming for ANA's version of Alibaba’s Alipay,” Shinya Katanozaka, ANA’s chief executive, said in an interview, referring to the payment service operated by Ant Financial, an affiliate of Chinese ecommerce giant Alibaba. 

“We need to actively build new businesses to prepare for the changes in the new (digital) era. The non-core business can also provide a back-up when our mainstay airline business, which tends to be volatile, is facing a downturn,” Mr Katanozaka added. 

Although Japan was early in introducing mobile phones with payment functions — originally using Sony’s patented Felica technology — companies were slow to capitalise on the technology and cash still accounts for 70 per cent of all transactions by value. As a result, Japan’s online payment market is still tiny compared with China, where mobile payments hit a record $12.7tn last year. 

Japan’s digital payment market — including credit cards, smartphones and other platforms — is expected to grow from ¥73.2tn ($682bn) last year to ¥114tn in 2023, according to Nomura Research Institute.

Last year, Japanese banks, led by Mizuho Financial Group and Japan Post Bank, won support from the country's financial regulators to launch a digital currency in time for the 2020 Tokyo Olympics. The move came in response to the threat posed by Alibaba, which recently launched its mobile-phone payments service in Japan. 

ANA aims to generate about 20 per cent of its total revenue, which is projected to reach ¥2.45tn by the fiscal year 2022, from the non-airline business. It has not worked out details of how it will launch its mobile payments system and its business will probably be too small to counter Alipay. But Mr Katanozaka said the move was a natural extension of its existing financial services including mileage-linked credit cards and a system to convert miles to electronic money called ANA Sky Coin.

Under Mr Katanozaka, the company is trying to position itself as a leader in digital travel. 

It recently announced a $10m project with the XPrize Foundation — the best known of the private organisations that offer financial rewards for bold innovation — to invent, by 2021, an avatar. It hopes the artificial proxy for a human can be used in the future for virtual travel, medical assistance and disaster relief although analysts have expressed doubts about whether the project can be turned into actual business.

Other carriers have also made a digital push to stem the volatility risk in their airline business, which is vulnerable to a slowdown in travel demand caused by economic downturn, global pandemics and terrorist attacks. 

In February, AirAsia, the region's biggest low cost carrier, also launched BigPay, its mobile digital payments platform in partnership with MasterCard.