May 02 (newsonjapan.com) - Tourists visiting Japan often find that paying with a credit card can be a hassle. This is still largely a cash-based economy, despite the fact that the General Credit Card Study of 2016 showed that 84% of the Japanese population owned credit cards. This means that tourists can be taken by surprise when they realize that many small to medium-sized business in the country simply don’t accept payments by card.
It was as recent as the end of 2017 that McDonald’s started rolling out card readers to its Japanese branches, while there are many other businesses that still haven’t adopted this technology yet. However, this seems likely to change soon, with the move towards accepting international credit cards expected to gather pace in the near future.
Why Is This Now So Important?
Perhaps the key driver behind this move is the growing number of Chinese tourists visiting the Land of the Rising Sun. According to numbers from the Japan Tourism Agency, China was the biggest source of foreign tourists in the first half of 2018, with an increase on the previous year of over 23%. The number of visitors crossing the Sea of Japan is expected to keep on climbing, especially with the 2020 Summer Olympics to be held in Tokyo.
Yet, the problem is that these Chinese tourists are used to paying with cashless technology at home. A study by Tencent Holdings showed that 98% of Chinese people who live in urban areas and have smartphones now make mobile payments using their phones. When they visit Japan, these same payment methods are no longer available to them.
This is becoming an ever-bigger problem, as more and more tourists visit Japan and expect to be able to pay without carrying around too much cash with them. Therefore, businesses are being encouraged to accept cashless payments in order to make life easier for tourists to pay in a way that suits them. Together with the move towards more flexible hours in convenience stores, this could be a big turning point in the country’s commercial outlook.
How Will This Work?
It is likely that more businesses in Japan will soon start using QR codes that customers can scan with their mobile devices to make payments, with the technology needed to do this is already being available. Indeed, Business Insider reported in 2016 that, by 2020, there should be 150 million people in the US using this technology, which is widely used in China already but is only starting to take off in Japan.
There are a number of suggestions for how this may work. Companies like AliPay, Amazon Pay, and Yahoo all offer the technology that merchants need to accept card payments in their stores. The most popular mobile payment method in China right now is AliPay, which is a QR code-based service that has over 700 million active users in China and 900 million globally.
One of the options being heavily discussed is called TakeMePay. This is a tourism-based platform that can be used as a multi-payment service to pay using the likes of WeChat, AliPay, Visa, MasterCard, and Apple Pay, among others. Around 30,000 Japanese businesses have joined up to this service, with Japan Railways also planning to use it.
TakeMePay has been in the news since they raised funding of 1.01 billion yen ($9.1 million) in 2018. They work with partners such as Visa to ensure smooth transactions on a global basis. This is a good example of Visa working with partners to make life easier for cardholders, which is an important point in the move towards a world dominated by electronic payment methods.
Visa also works with a wide variety of other partners. These partnerships see them joining IBM, Ingo Money, and Shieldpay on interesting projects to make it easier for people to pay, as well as being one of several payment methods used by online casino platforms such as Betway. In addition, they are listed as partners on the PalmPay electronic wallet launched in Africa to increase financial inclusion.
Digital Currencies on the Rise Too
Japan’s domestic banks are also making an effort to get involved in this march towards a cashless society. Recently, Mizuho Bank announced plans for its own digital currency, known as the J-Coin. Each virtual coin will be worth one yen, and the public will be able to scan QR codes in order to pay using the J-Coin app, which has been developed by the bank together with 60 or so partners.
The bank plans to reach 6.5 million users of the app in the next two years. They also expect to get a minimum of 300,000 stores and restaurants to sign up for it. With over 20,000 merchants in Japan already able to accept Bitcoin thanks to a partnership with the Econtext payment network, it is definitely becoming easier to pay with virtual currencies in this country.
The future for Japan seems certain to involve a huge shift away from the traditional, cash-based approach and towards a cashless society. While this change is currently being driven by tourist demand, it will be interesting to see how quickly and readily Japanese residents accept these new ways of paying.
