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Japan slowly buying into cashless future despite widespread misgivings
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Despite its reputation as one of the homes of forward-thinking technology, Japan remains generally reluctant to move in a cashless direction -- tradition, demographics and a wariness of change meaning people still prefer to reach for notes and coins when checking out. (Shutterstock/soi7studio)
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very few meters along a shopping street near the iconic Tokyo Skytree tower, signs with the words "PayPay used here" can be seen promoting the availability of an electronic payment option, something that remains a relative rarity in Japan.
Despite its reputation as one of the homes of forward-thinking technology, Japan remains generally reluctant to move in a cashless direction -- tradition, demographics and a wariness of change meaning people still prefer to reach for notes and coins when checking out.
But in a bid to attract more foreigners from countries familiar with paying via credit cards or apps that support cashless transactions, Sumida Ward, the area that hosts Tokyo's most imposing tower and one of the city's most popular tourist destinations, has begun working with PayPay Corp.
PayPay, which entered the cashless market in October 2018, started a trial of its mobile payment service at 300 shops in December, a joint venture between portal site operator Yahoo Japan Corp. and cellphone carrier Softbank Corp.
Although the Japanese government hopes consumers will eventually embrace the future, or even the present, and become comfortable with credit cards, debit cards or electronic transactions, it is proving a hard sell, especially among the older people that make up an increasingly large percentage of the country's population.
In Japan, cash remains king, with contactless transactions, including payments by credit cards and smartphones, accounting for just under 20 percent of personal spending.
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In comparison, about 90 percent of such transactions were cashless in South Korea, 60 percent in China and 45 percent in the United States, according to 2015 data from the Ministry of Economy, Trade and Industry.
At shops along Oshinari Shotengai, one of the shopping districts participating in the "Sumida Cashless Demonstration Test Project," the red "P" PayPay logo is now ubiquitous.
"The number of customers who use PayPay has increased significantly, with one-fifth of our sales now coming from PayPay," said Matsuhiro Ito, 41, a staff member at a soba buckwheat noodle restaurant on the street. "Payments using PayPay are easily done...and there are no mistakes made when giving change."
Using the PayPay App, customers can scan QR codes displayed at stores with their smartphones to complete payment or they can let sales staff scan a barcode displayed on their screen.
PayPay's tie-up with Alipay, an online payment service provided by Chinese e-commerce giant Alibaba Group Holding Ltd., has led some Oshinari Shotengai storekeepers to hope that the ease of payment will lead to an influx of foreign tourists.
"I think (PayPay) will lead to sales growth as more foreign visitors, especially from mainland China and Taiwan, use Alipay," Ito said.
But not everyone is positive about cashless payments becoming the new normal.
Some store operators and workers, especially those of advancing age, said the new technology has left them confused or worried that transactions are not being completed correctly.
"I have been doing business only through cash for more than 50 years," said Sachiko Takahashi, a 71-year-old woman who works at a "senbei" baked rice cracker shop in the Oshinari shopping district.
"Although (money paid via PayPay) finally flows into the bank account, I am somewhat worried," she said, explaining that she is concerned about how to handle such transactions if an error occurs.
Takahashi said her shop will continue with the PayPay service after the end of the trial period at the end of March because her customers are now used to it.
A worker at a nearby bakery said adopting the PayPay service was an easy choice since there was no setup charge during the trial period. But she added the priority must be on making sure local customers and the elderly, most of whom are accustomed to using cash, are comfortable.
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More and more companies from various industries, such as online retailer Rakuten Inc. and mobile carrier NTT Docomo Inc., have joined the domestic cashless payment market and are expanding their services.
Fast-food restaurant chain Yoshinoya Co. in December introduced Origami Pay, one of the pioneer mobile payment service providers, in almost all of its 1,200 shops, allowing customers to pay by smartphone.
The Kanagawa prefectural government said in November that it will promote cashless payments under the "Cashless City Kanagawa" campaign. Payments for property taxes and various other taxes can be made by Line Pay, a smartphone payment method offered by Line Corp., a service that began in January in the prefecture.
Among megabanks, Mizuho launched a smartphone app that can both work as a debit card and as a Suica prepaid e-money card and East Japan Railway Co. transport pass.
In a bid to grab market share amid intensifying competition, PayPay launched a campaign in February to give users reward points worth a total of 10 billion yen ($91 million) until May 31, following a similar campaign in December.
However, it remains an uphill battle to get people to buy in.
A Bank of Japan survey, conducted in March last year, said Japanese consumers use cash mainly because they are convenient, with cash used at many places and payments completed on the spot with no commission fees. Consumers are also concerned about security, including worries about their credit information being hacked.
Hsu Tien-in, 50, a Taiwanese man on a weeklong trip to Japan with two friends, said he uses cash all the time in Japan and sees no need for anything else, unlike in China where even the most basic purchase requires him to use mobile payments even at small local grocery stores.
Industry officials and analysts said 2018 marked the "first year" for the spread of cashless payments. The trade ministry unveiled its "Cashless Vision" in April 2018, aiming to raise the ratio of cashless payments in Japan from 20 to 40 percent by 2025.
The Japanese government is also putting its money where its mouth is as it hopes to boost consumption ahead of the Tokyo Olympic Games in 2020 and the World Expo in 2025.
Consumption bolstering steps by the government, implemented to mitigate the impact of the impending increase in sales tax from 8 to 10 percent in October, will serve as a major driving force for the spread of cashless payments, officials hope.
The government plans to give award points of up to 5 percent of purchase amounts for a period of nine months to consumers who make cashless payments at small- and medium-sized retailers.
During the period, cashless payment service operators will be required to cap their fees for such stores at 3.25 percent, lower than ordinary fees, in order to receive subsidies for the rewards program.
Yuuki Fukumoto, a chief researcher at the NLI Research Institute, said one of the key factors in the spread of cashless payments is whether there will be a mechanism to ensure small- and medium-sized retailers continue to move away from cash even after the government's nine-month program concludes.
Fukumoto said the importance of having more smartphone charging stations and free Wi-Fi to make it easier for customers to go cashless. But he also said older people need to embrace a post-cash world for it to stick.
"In a long history, it is natural to think digitalization is better since it's a hassle to carry paper money. I think our society will go cashless sometime, in the long run," Fukumoto said.
