Japanese orgs now paying salaries direct into e-wallets

Starting at SoftBank, using its own PayPay service

Ten subsidiaries of Japanese tech conglomerate SoftBank Group have begun paying employees' salaries into SoftBank's own PayPay digital wallet.

PayPay is the largest mobile payment app in Japan and is owned by LY Corporation – a Softbank subsidiary.

"This initiative aims to enhance payment employee benefits by increasing salary options and to promote the expansion of the PayPay economic sphere across the entire group," explained the fintech business back in August, when it announced it would eventually issue digital salary payments.

That announcement arrived the same day that Japan's Ministry of Health, Labor and Welfare gave the multifaceted firm approval to operate as a fund transfer business that handles "digital wage" payments.

The initiative is the first of its type in Japan, and perhaps the world. While Asian gig economy and freelance workers are often paid through e-wallets or QR code payment – particularly in countries like India where many workers remain unbanked – paying wages to a bank account remains the norm. Individuals then move money to their preferred digital wallet.

At the time of granting PayPay approval, the Ministry revealed that three other companies are being considered for the same authorization.

It has set out some rules for paying wages into wallets – among them a requirement that wages be refunded if an e-wallet service goes bankrupt.

But rules on what happens during e-wallet outages or maintenance windows are vague. The impact of cyber attacks is also not addressed – an item of concern as PayPay was a victim of such an attack in late 2020 when configuration flaws led to unauthorized access.

The Ministry also prohibited payment of wages in points or cryptocurrencies that cannot be converted into cash. Furthermore, digital salaries must be optional for the employee. If employees want to use a bank account instead, they must be able to do so. Fractional payments are also required: employees can choose how much of their salary goes to a wallet.

PayPay must also provide a wage receipt under the Enforcement Regulations of the Labor Standards Act.

At this time, the service – known as PayPay Paycheck – is only available for deposit amounts of up to ¥200,000 ($1,381). That's equivalent to around two thirds of the average monthly wage of a full-time worker in Japan.

Once the money is in the digital wallet, however, it could cost the owner a fee of ¥100 ($0.69) per transaction to move it to a traditional financial institution.

SoftBank employs around 65,000 people in Japan, so getting them paid via PayPay Paycheck is a pretty good way to grow the service quickly. It will likely expand to non-Softbank businesses at a later date.

PayPay accounted for four percent of SoftBank FY 2023 revenue – ¥216 billion ($1.49 billion). It did, however, operate at a loss of ¥5 billion ($34.55 million) that same financial year.

Softbank has declareds its business strategy includes expansion "by further growing PayPay through Group synergies and driving the growth of other financial services by leveraging the strengths of PayPay as a leading payment platform." ®