Electronic Contract Service Market in Japan: Key Research Findings 2020
Yano Research Institute (the President, Takashi Mizukoshi) carried out a survey on the domestic electronic contract service market, and found out the market status, the trend of market players, the trend of user acceptance, and the future perspectives.
The electronic contract service market size in 2019 was estimated as 6,800 million yen, a rise by 74.4% from the previous year, based on the sales at the vendors. The market has been steadfastly growing, due to improved awareness of the services themselves as well as of the credibility of such services having no problem, and also due to information on employment conditions digitized.
Company-Wide Introduction of Electronic Contract Services in Progress
In April 2020 when the COVID-19 infections expanded, GMO Internet Group announced the abolishment of personal seals for clients to do some procedures and of the use of only electronic contracts for business connections, which caused significant impact to the industry of electronic contract services. Many companies seem to have followed suit, which sharply increased those companies introducing electronic contract services as well as those vendors that widened the service coverage by the first half of 2020.
When observing the companies that adopted the services by size, they are mainly major companies. However, some mid-to-small size companies have also introduced the services or are under consideration. Contrary to digital transformation not smoothly performed at mid-to-small size companies as planned, electronic contract services have a tendency of being adopted at many companies by top-down approaches triggered by the COVID-19 pandemic.
Because implementing of an electronic contract service affects not only the legal section, the companies that tried to introduce the service in the past used to start from in-house documents in the hope of the services to gradually spread to company-wide. However, as the COVID-19 pandemic does not allow such a carefree manner, increasing number of companies has introduced the service company-wide from the beginning. Also, even if use of the service may start from in-house documents, many companies have the company-wide perspectives for introduction. Furthermore, the services used to take a year or more to be fully implemented at major companies, but they now need three to six months. For small to mid-size companies, many cases require two to three months or even less for implementation. It shows that the period between collecting information and implementation of electronic contract services at companies is shrinking.
In 2020, although working at home has rapidly increased due to the COVID-19 infections, some employees had to go to office only to press the seals on the documents to process them. This caused the companies to focus on electronic contract services from the viewpoint of BCP (business continuity planning.)
In addition to Ministry of Justice having made public to the economic world in May 2020 about the effectiveness of electronic signature using cloud technology for the approval of board of directors and auditors required in the minutes of the Board of Directors meetings and its availability from the viewpoint of corporation law, the Cabinet Office, Ministry of Justice, and METI showing their perspectives on unnecessity of affixing seals in June the same year brought about electronic contract services to be in advantageous situation for gaining wide acceptance. As a result, companies considering introduction or implementing the services have been on the rise, letting the market size forecast of the services for 2020 to reach 10,800 million yen, up by 58.8% of the previous year.
That said, however, introduction of electronic contract services require various processes including cross-sectional procedures across multiple teams and sections, reviewing of words written in office routine regulations and contract documents, and explanations or negotiations to all parties concerned. Therefore, many companies consider 2020 as the period to collect information and to prepare for introduction, and full implementation to take place in 2021. As a result, the market is expected to grow further in 2021 to reach 17,500 million yen, up by 62.0% from the preceding year. Boosted by the demand for digitization to diverse whitespaces in the market together with shift of introduction to section-wide to company-wide, CAGR of the electronic contract service market from 2017 to 2024 is expected to be 37.8%, with the market size reaching 26,400 million yen by 2024.
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