GMO Payment Gateway, Inc.

The Group manages personal information such as credit card numbers, names, and addresses, and there is a risk that unauthorized intrusion, cyberattacks, computer viruses, or other external threats could cause information leakage, resulting in loss of social credibility, claims for damages, and lost business opportunities. As countermeasures, the Group has established an Information Security Committee, implemented a 24-hour system monitoring framework, and obtained ISO27001 and Privacy Mark certifications.

The Group's services rely on public lines, dedicated lines, and the internet, and there is a possibility that services could be suspended due to communication network disruptions or application malfunctions caused by natural disasters, accidents, cyberattacks, etc., or due to system downtime at credit card companies and other payment operators. If a service suspension occurs, there is a risk of claims for damages, lost business opportunities, and loss of service credibility, and the Group addresses this through system redundancy and insurance coverage.

The Group operates under regulations such as the amended Installment Sales Act, the Money Lending Business Act, the Investment Deposit and Interest Rate Act, and the Payment Services Act, and if these laws are amended or new regulations are established that change business regulations, this could affect business performance. In addition, failure to comply with anti-money laundering related laws could result in administrative dispositions such as surcharge orders or business improvement orders. As countermeasures, the Group is strengthening its information-gathering framework through lawyers and external organizations and expanding its legal department.

The Group has entered into comprehensive merchant agreements with each credit card company and bears responsibility for paying sales proceeds to merchants, which creates a chargeback risk that is difficult to recover if fraudulent sales claims or merchant bankruptcy are discovered. Additionally, in the face-to-face payment domain, if a merchant providing prepaid continuous services goes bankrupt, the Group bears the risk of covering amounts equivalent to prepayments made by consumers for services not yet provided. As countermeasures, the Group verifies the merchant's website at the time of contracting, checks Specified Commercial Transactions Act disclosures, conducts ongoing credit screening, and manages delinquent receivables on a monthly basis.

There is a risk that differentiation will become difficult as competitors imitate and follow the Group's services, a risk that new entrants may emerge offering groundbreaking services utilizing entirely new technologies, and a risk that price competition among competitors may intensify. If these risks materialize, business performance could be affected through a decline in the number of active merchants and reduced pricing power. As countermeasures, the Group is pursuing continuous development of products and services that match merchant needs, providing value-added services, and strengthening sales cooperation with credit card companies.

Amid remarkable technological innovation in the internet and information security fields, along with the diversification of payment methods and expanding smartphone usage, if the Group falls behind in responding to new technologies and services, its merchant-facing services could become obsolete and lose competitiveness. As countermeasures, the Group has established a presence in Silicon Valley, USA to obtain the latest technology and service information, and is responding to technological innovation through activities such as investments in startups.

The Group operates a payment agency business and lending services overseas, where risks exist such as unexpected changes in laws and regulations, changes in economic conditions, and war, terrorism, or political instability. These events could affect business performance through the materialization of credit risk and foreign exchange risk in lending services. As countermeasures, the Group seeks to mitigate risk by strengthening monitoring at local sites and diversifying investments and loans.

The parent company, GMO Internet Group, Inc., is the largest shareholder, holding 40.73% of the Company's voting rights, and 8 of the Company's 15 officers concurrently serve as officers or employees of GMO Internet Group (including the Representative Director and President, who also serves as a director of GMO Internet Group). This concurrent holding of positions may affect the Company's independent management decision-making, and there is also a risk of conflicts of interest between the controlling shareholder and minority shareholders. As countermeasures, the Company has established a system for advance notification of important resolution matters and a framework in which a special committee, including independent outside directors, deliberates and reviews transactions involving conflicts of interest.

The Group's non-face-to-face payment agency business is closely related to the scale of the EC market, and if new legal regulations concerning EC are established or consumer spending declines such that EC itself is not accepted by consumers, this could affect business performance through stagnation in EC adoption and market stagnation. There are also concerns about the impact on business performance if consumer behavior changes rapidly due to soaring prices caused by the prolonged situation in Ukraine, yen depreciation, labor shortages, and other factors. As countermeasures, the Group is strengthening information security measures, proactively responding to new legal regulations, and reinforcing a business model that is less susceptible to macroeconomic impacts.

If credit card information is leaked from the Group's merchants, the merchant is, in principle, responsible for compensation; however, if the merchant lacks the capacity to pay such compensation, the Group may bear joint liability for compensation, including credit card reissuance fees. To mitigate this risk, the Group is promoting services in which the Group itself, rather than the merchant, holds credit card information, and is strengthening management of merchants that retain such information.