Application of the Payment Services Act in Mobile Games and Practical Responses

Legal Obligations and Specific Procedures for Businesses

When in-game currency or items are considered prepaid payment instruments under the Japanese Payment Services Act, businesses incur significant legal obligations.
If the unused balance of issued prepaid payment instruments exceeds the threshold amount (currently 10 million yen), businesses must submit a notification of issuance and accompanying documents in the prescribed format to the Director of the competent Local Finance Bureau within two months from the reference date when this fact is identified (March 31 and September 30 each year) (Article 5, Paragraphs 1 and 2 of the Japanese Payment Services Act).
This notification obligation serves as a report to the supervisory authorities when the scale of the business reaches a certain level.

Furthermore, if the unused balance exceeds the threshold amount on the reference date, businesses are required to secure at least half of the unused balance by depositing it with the Legal Affairs Bureau that has jurisdiction over the main office or business office, or by other means (Article 14, Paragraph 1 of the Japanese Payment Services Act, and Article 6 of the Enforcement Order of the same Act).
This deposit obligation is established as a system to preserve the value of the unused portion from the perspective of user protection.

Prepaid Payment Instruments in the Gaming Industry

The importance of such legal regulations stems from the unique business model specific to the mobile gaming industry.
In recent years, the prevalent model in the industry offers the game itself for free and adopts an in-game purchase system as the primary source of revenue.
In this model, players purchase in-game exclusive currencies, such as crystals, gems, or orbs, with real money. They can then use these currencies to acquire personalitys or items through a gacha system or purchase various items usable within the game.

When implementing such in-game purchase systems, it is crucial to carefully consider whether the in-game exclusive currencies provided and the items purchasable with them fall under the category of “prepaid payment instruments” as defined by the Japanese Payment Services Act (資金決済法, Shikin Kessai-hō) (2009).
If they do fall under this category, it becomes necessary to establish appropriate procedures and management systems in compliance with the law.

The Importance of Determining the Applicability of Prepaid Payment Instruments

In the Japanese Payment Services Act, prepaid payment instruments are defined by specific criteria.
First, it is required that the amount or quantity of goods and services be indicated or recorded.
This requirement demonstrates the preservation of value.
Second, it is necessary that these instruments are issued in exchange for consideration corresponding to the recorded amount or quantity.
This constitutes the requirement of consideration.
Third, it is required that the recorded value can be used for payments or utilization of services.
This is the requirement of exercisability of rights.

Typically, in-game currency meets all the requirements of prepaid payment instruments because its quantity is electronically recorded, it is issued in exchange for money corresponding to the quantity, and it can be used to purchase various services and items within the game.
Therefore, many in-game currencies are considered to fall under prepaid payment instruments.

On the other hand, in cases where in-game items are directly sold for money, unless the items themselves possess the nature to meet the above three requirements, they are generally not considered prepaid payment instruments.
Additionally, as an important exception under Japanese law, if the period of use is limited to within six months, even if the above requirements are met, it is stipulated that they are excluded from prepaid payment instruments (Article 4, Item 1 of the Payment Services Act, and Article 4, Paragraph 2 of the Enforcement Order of the same Act).
This exclusion provision is established to reduce the regulatory burden on prepaid payment instruments intended for short-term use.

Thus, in designing in-game payment systems, it is crucial to thoroughly examine in advance whether the functions and mechanisms provided fall under the regulations of the Japanese Payment Services Act, and if applicable, to appropriately fulfill the necessary legal procedures.
By doing so, it is possible to achieve both stable service provision and user protection, enabling the construction of a sustainable business model.