A campaign advertising of Rakuten Pay, a QR code mobile payment system operated by Rakuten, is displayed at a coffee shop in Tokyo in this file photo taken May 30, 2019. Photo: REUTERS/Issei Kato
business

Hoping to boost spending, Japan tries to sell shoppers on cashless purchases

18 Comments
By Stanley White

When the baseball season kicked off in Japan this spring, fans of the Tohoku Rakuten Golden Eagles were faced with an inconvenience they'd never encountered before: the food and drinks stalls did not accept cash.

The team's owner, internet commerce firm Rakuten Inc, was trying to promote its QR code mobile payment system. But the marketing ploy quickly turned out to be much more than that.

In April and May, food, beverage and merchandise sales at the Eagles' stadium in the northeastern city of Sendai jumped 20% from the same two-month period of 2018, in part because taking cash out of the equation changed spending habits.

"We consider it to be a success story," said Hayato Morofushi, marketing manager for Rakuten's mobile payments."Using QR codes for payments has only just started in Japan, so we don't expect everyone to jump on the bandwagon. As we get more success stories, this will win more people over."

Experts say that when queues move faster, more people join. Customers don't see cash leaving their wallets and focus on the satisfaction of a purchase, so they spend more.

That psychology could be crucial for Japan's economy, locked for decades in a deflationary mindset, where consumers delay spending in hopes of stable or lower prices. The Bank of Japan has spent more than $3 trillion since 2013 on bonds and other assets to attain a 2% price growth rate, without success.

A scheduled increase in the sales tax to 10% from 8% in October could hurt spending. Aware of that risk, the government is betting big on mobile payments, an industry only just taking root in Japan.

As soon as the tax increase kicks in, the government will offer points redeemable for future discounts to shoppers who use QR codes and other cashless payments for nine months.

The project has a six-month budget of 280 billion yen ($2.6 billion), which will be reassessed in the new fiscal year.

"If we change how we pay, we can change society as a whole," said Masamichi Ito, director of the Japanese Economy Ministry's cashless promotion office, set up in October with the goal of doubling cashless transactions to 120 trillion yen by 2025.

Cash settles 80% of Japan's transactions, with the rest shared among credit cards, mobile and pre-paid swipe cards. That is the highest cash usage rate in the developed world after Germany.

Low crime rates - Japanese are comfortable carrying large amounts of cash - and an ageing population seen as the main obstacles for deeper adoption.

In India and China, two of the world's most voracious spenders, mobile payments are 30-35 percent of transactions, according to Statista.

On average, cashless payments increase per-customer sales by 1.6%, according to the Nomura Research Institute (NRI). Domestic consumption in Japan has grown an average of 0.5% each year in the past six years.

The government says going cashless could alleviate other major economic headaches, such as a labour shortage and the falling profitability of banks, simply by virtue of being more efficient.

Cashiers spend on average more than two hours a day managing cash, while Japanese banks spend around 1 trillion yen a year on their ATM network and physically moving cash, NRI says.

CHINESE SHOPPERS

Tourism spending, especially from China, has been one of the few economic bright spots in Japan, and Chinese tourists use the mobile payment system AliPay, run by Ant Financial Services Group, at over 300,000 Japanese merchants.

Some duty-free counters at big department stores deposit tax refunds directly into AliPay accounts. The app uses targeted advertisements to help users find what they want to buy and recommends related products nearby. When users return to China, they get a recommendation to buy similar Japanese goods online.

South Korean mobile payment firm Kakao Pay is looking to enter Japan, betting on Tokyo's push to go cashless, Ryu Young-joon, chief executive of Kakao Pay, told Reuters in a May interview.

"When I go to Japan, they do not accept credit cards in many stores," Ryu said. "So I thought if I can use Kakao Pay in Japan, it's going to be good."

PayPay, a Japanese QR code system launched in October, is compatible with AliPay, which may smooth the path toward local adoption.

Satoshi Komiya, 39, who runs a Tokyo curry restaurant, got PayPay three months ago - signing a deal that guaranteed he would be charged no fees for three years - and since then, said he had noticed a "slight" increase in sales.

"So far, so good," Komiya said.

But other Japanese payment providers, including Origami, messaging app Line and auction site Mercari, typically charge fees of about 3%.

Because smaller retailers in Japan have average profit margins of around 2%, such fees are a major obstacle for adoption, says Yuki Fukumoto, a researcher at NLI Research Institute.

Japan also has a network of ubiquitous vending machines and meal ticket dispensers that relies on cash and cannot be replaced or upgraded overnight.

"People say shoppers spend more when they use QR codes, but I don't think this will happen in my shop," Tomoko Yokoyama, 50, who runs a Tokyo tennis shop, said as she re-strung a racket.

"I have to pay fees on every purchase, so it is the same as selling goods at a discount," she added. "That would be a disaster."

© (c) Copyright Thomson Reuters 2019.

©2019 GPlusMedia Inc.

18 Comments
Login to comment

Yeah, sure .... use the cashless (QR) system and you'll never know how much you actually spent in a month.

As for me, I prefer to use either cash. This always shows me how many ¥¥¥ I still got in my wallet.

Ok, got to confess that occasionally I'm using my credit card, too,

7 ( +7 / -0 )

Over the next five years will be a major push from the banks for a cashless society reducing the numbers of expensive ATMs.

0 ( +0 / -0 )

Great idea! Just tell it to the large supermarket in my central Tokyo neighbor. They refused my VISA card, saying they only accept paper bills and coins.

The last and only time I used the QR app on my phone, it didn't work cuz the image was stubbornly fuzzy. Two members of the restaurant staff, who told me I had to use QR for some promotional reason, spent a while trying to get a clear image but couldnt and eventually gave up. Have since uninstalled it. No thanks!

2 ( +2 / -0 )

Cashless is the way to go. At least if you use VISA, MasterCard, AMEX, and a select few other companies. The insurances tied into those cards make it far safer than using cash. Also, cash back ultimately means you save money.

@zichi

The atm thing is something I am still skeptical about. So far, most countries have found that atms greatly reduce costs. In the US, adding one atm reduces the need of up to 3 cash tellers in a branch. Also, it increases accessibility.

0 ( +2 / -2 )

Just like when you go to a casino and bet with plastic chips that don't seem very valuable!

2 ( +2 / -0 )

Cashless payments ? by the way, what's a credit card?

3 ( +3 / -0 )

It just benefits business and hurts normal people, making more and more people go into debt which they have no hope of ever paying back and of course 0 savings like the US.

What’s good for businesss and the “economy” is generally bad for the people.

1 ( +4 / -3 )

This is news propaganda. I don't buy it. (pun intended)

3 ( +4 / -1 )

@blahblah222

Actually, credit cards hurt business. How do you think Credit card companies make money? They take a percentage of the transaction. If people use only credit cards, none of their cash, and spend within their limits then they will actually win out using credit cards.

Businesses take a hit from credit card users. However, because they were initially for the wealthy, businesses didn’t want to alienate the people with money so they accepted them even with companies like AMEX taking 2% to 3.5% of each transaction.

3 ( +3 / -0 )

Finally waking up, smelling the coffee. What can i say, better late than never.

0 ( +0 / -0 )

Need just a few more success stories then a major revolution will take place in the spending habits. Amazing. People still us bankbooks.

3 ( +3 / -0 )

I feel anxious one. In a society where cashlessness has progressed, blackouts can easily lead to outages.

4 ( +4 / -0 )

QR codes? Why not NFC (touch)? That's like using fax machines to send documents instead of PDF/JPG attached to emails. (Oh right. That's what they actually do here.)

Also, with so many different brands of QR/cashless payment networks, one needs a stack of apps if they want to use the technology at multiple retailers.

In the US, there are basically two payment brands, Google Pay and Apple Pay. And, they both work via NFC. Yeah. Sure. Starbucks has their own app for payments using a visual barcode. But, they are one of the outliers.

I thought that they were rolling out similar touch systems in Japan at one time. I guess they opted for optical.

3 ( +3 / -0 )

Amazing. People still us bankbooks.

Right??? And how about the wall of different branded ATM's you see in some depato and train stations, instead of ones that work with multiple banks? The konbini ATM's manage that mazing feat. Why can't others?

Nothing like waiting in line for the one ATM from your bank, while the five others next to it are empty, but won't work with your bank.

2 ( +2 / -0 )

After a tsunami, what will that VISA buy you?

After power fails, what will that VISA buy you?

NOTHING.

I'm pro-cash for trivial purchases that don't need warranty protections. Things like meals, trinkets, the thousands of things we buy to use immediately.

Going cashless helps your spending to be tracked by everyone, which is why banks, retailers, sports stadiums, and govts want this. Is that in your interest? Sometimes it is helpful to have your spending tracked, but shouldn't you control who sees that data?

What about people who don't have bank accounts? Do you want to push them farther out of "normal"? How will they buy beer?

0 ( +0 / -0 )

What about people who don't have bank accounts? Do you want to push them farther out of "normal"?

Or the people which do not have a smartphone ?

Fascinating, so the idea is that you will not be able to choose in between having a smartphone with Internet or eating. If you do not have a smartphone with Internet, you are not allowed to eat.

The wish of some for full cashless society creep me out.

1 ( +1 / -0 )

What about people who don't have bank accounts? Do you want to push them farther out of "normal"? How will they buy beer?

Prepay cards do not require a bank account.

However, there will always be a role for cash I think, just a lot less than it has been. Other countries are moving away from it and not experiencing problems so why shouldn't Japan catch up?

Not for the first time it is like Japan is about 30 years behind the rest of the world. Its banking system felt ancient 20 years ago and hasn't changed much since then.

0 ( +0 / -0 )

the food and drinks stalls did not accept cash.

That should be completely illegal. Cash exists for a reason and its so any person can function in society. I can't give a homeless guy electronic credits so he can buy some food. I also don't want to hand my kid my card worth tens of thousands of yen so he can go make a purchase in the hundreds.

1 ( +2 / -1 )

Login to leave a comment

Facebook users

Use your Facebook account to login or register with JapanToday. By doing so, you will also receive an email inviting you to receive our news alerts.

Facebook Connect

Login with your JapanToday account

User registration

Articles, Offers & Useful Resources

A mix of what's trending on our other sites