Founding Merpay and entering mobile payments: building the “Mercari economy” (2017)

The “next” beyond the flea market, on the different logic of payments

The heart of this decision was to turn the “sales proceeds” that pile up in the flea market — an idle, retained asset — into money usable outside the app as well, and to place the settlement and credit generated at every transaction as a new revenue source. Its emphasis differed slightly from the “economy sphere” that Rakuten and PayPay pursued by fencing consumption inside their own services: Mercari’s concept centred on “credit,” converting flea-market usage data into creditworthiness. That it sought to build a second pillar after the flea market not as an extension of the existing business but on the different business logic of finance and payments is where the character of this decision shows.

Yet payments and credit are also a business demanding capital intensity and a discipline unlike the flea market’s high margins. The huge up-front investment of the launch phase deepened the group’s losses, and the expansion of deferred payment turned receivables and bad debt into a permanent management issue. Even so, the significance is not small that, through Merpay and Mercard, the flea market’s one-off transactions were re-tied into a continuing relationship by way of payments and credit. This choice to bet the flea market’s “next” on payments appears to have left Mercari the ongoing question of how to reconcile the expansion of scale with the management of credit risk.