Japan's Largest Corporate Bankruptcy of the Year Hits Credit-Card Processor and Its 200,000 Merchants

Zentoshin, an Osaka-based credit card payment processor, filed for bankruptcy with the Osaka District Court on Monday, according to Teikoku Databank. The company listed total liabilities of approximately ¥115.2 billion ($710 million), making the case Japan's largest corporate bankruptcy of the year.

The collapse followed two years of difficulty securing new financing after allegations of employee misconduct.

Zentoshin had turned to crowdfunding to keep operating, yet many of its lending banks had continued to classify the loans as performing assets. Five listed regional banks and banking groups, including Towa Bank and The San ju San Financial Group, said they will take writedowns.

Towa Bank will write off the entire ¥5.9 billion portion of its ¥8 billion exposure not covered by collateral or reserves in the fiscal year ending March 2027.

The bank, which had forecast ¥5.5 billion in net income for that period, said it is reviewing its earnings outlook. Zentoshin served about 200,000 shops, many of them small restaurants and retailers that rely on early remittance of sales proceeds. Merchants using its terminals can no longer accept cashless payments until they install replacement systems.

Osamu Naito, a manager at Teikoku Databank's Osaka branch, said the failure raises the risk of secondary bankruptcies among restaurants and retailers. Tokyo Shoko Research reported that Zentoshin may have falsified accounts for 20 years or more. Shares in regional banks fell after the filing.

The Financial Services Agency has mapped the extent of lending to Zentoshin. An agency spokesperson said the FSA does not currently see serious concerns about the soundness of the affected institutions but is monitoring the situation closely.