Japan Post Bank is scrapping its cashless payment card service after confirming major security flaws have resulted in at least 230 cases of fraudulent money transfers. This latest data breach is likely to further dent Japanese consumer confident in digital payment services, following on from similar hacks of 7-Eleven’s cashless offering.
A shutdown of the Visa prepaid debit card service—called Mijica—was announced on 8 January, with a note on JP Bank’s website apologising for ‘not being able to provide services that meet customer expectations’ and laying out their intention to launch a new service in spring 2022.
The bank has had to compensate customers for losses of almost ¥53 million ($508,000/€418,000) arising from flaws in the system that were regularly exploited by criminals to fraudulently withdraw money from people’s cards.
In an apologetic speech, JP Bank President Norito Ikeda admitted the first instance of fraud occurred in the summer of 2017, however the bank did not address the security issues or even offer customers compensation for over two years. In taking responsibility for the debacle, Ikeda and four other executives will be returning a percentage of their pay for three months.
This latest cashless payment scandal follows the ill-fated launch of 7-Eleven’s mobile payment service 7pay, which was hacked within two days, with around 900 users affected and losses marginally exceeding the more recent JP Bank disaster.
It was noted at the time by a payment insider speaking to Nikkei Asia that the attack would likely hurt consumer confidence in digital payments, saying: ‘This has thrown cold water on the market just as it was heating up.’ Consumer finance writer Akio Iwata added: ‘I think there will be rising unease among consumers.’
In a country where cash is relied upon by customers and businesses alike, Japan’s cashless payment market is noted for its aggressive marketing and generous reward programs as it tries to carve out a niche in the payments landscape. These, however, may not be enough when weighed against the risks of fraud inherent in digital payment offerings. Given cash is unhackable, untrackable and not reliant on electricity or an internet connection, it is clear to see why many prefer its dependability to other options.