Line Yahoo to close payment service developed by Naver

Line Yahoo is complying with Tokyo's urging to reduce capital ties with Naver with the closure of Line Pay.

Line Plus headquarters in Pangyo, Gyeonggi. [YONHAP[

Line Yahoo (LY), the operator behind Japan’s top messaging app Line, is phasing out its services linked with Naver in accordance with the Japanese government's urging for the Tokyo-based unit to reduce capital ties with the Korean portal.

LY announced in an electronic disclosure on Thursday that its mobile payment service Line Pay will close in Japan by April 30, 2025. After the termination of Line Pay, users will be able to transfer their balances to PayPay, another mobile payment service developed by SoftBank and Yahoo Japan in 2018.

Line Pay, which has 44 million registered users in Japan, was developed by Naver in 2014 and is currently available through Line in countries such as Japan, Thailand and Taiwan.

New user registration on Line Pay will be accepted until November of this year in Japan. The service will continue to be available in other countries such as Thailand and Taiwan.

Although a latecomer to the market, PayPay is one of the largest cashless payment services in Japan, with more than 64 million registered users.

LY stated the move is part of its governance strategy to “reorganize its businesses and integrate overlapping business areas” to expand group synergy.

Discussions on merging the two payment services have been ongoing since 2021, but Line Pay’s exit from the Japanese market is being evaluated as an abrupt move to dissolve Naver’s influence in the company.

LY is 64.5 percent owned by A Holdings, a 50:50 joint venture between Naver and SoftBank.

Japan’s Ministry of Internal Affairs and Communications has been pressuring LY to cut cybersecurity and capital ties with Naver, issuing an administrative guidance in March and April after a data breach incident in October resulted in the leaking of 510,000 items of personal information through LY’s subcontractor Naver Cloud.

LY has until July 1 to come up with specific measures in response to the guidance.

Shin Jung-ho, LY's chief product officer and the sole Korean member of its board of directors, was confirmed to be resigning as an internal director in May.

Naver's AI model Clova X has been excluded from Yahoo Japan's Q&A platform, Yahoo Answers, in favor of incorporating AI models from global tech companies to enhance its AI-powered answering feature. Models such as Anthropic's Claude 3 and OpenAI's GPT-4 were among those to be included.

The Korean internet giant announced earlier this month through an electronic disclosure that it decided to dissolve Line Biz Plus, in charge of overseas fintech services from Korea, of which Line Pay owned shares. Related businesses will be transferred to Line Pay Plus, headquartered in Taiwan.

The Korean government stated last month that matters regarding equity sales will not be included in the July 1 report, but discussions related to stake divestment are expected to continue.

Line Yahoo and SoftBank are scheduled to hold a general shareholder meeting on Tuesday and Friday, with matters related to Naver and an equity sale to be outlined then.

Meanwhile, LY’s market value has been falling since its announcement about cutting ties with Naver on March 5, with shares dipping 6.58 percent since then to close at 364.6 yen ($2.31) on Monday — equal to a loss of some 1.7 trillion won ($1.23 billion) in its market cap.

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]