Once a pioneer in technologies for cashless transactions, Japan is now lagging the world’s biggest economies in the embrace of electronic payments because most of the population still prefers physical money.
Four out of five purchases are still made with cash in Japan, despite its reputation as a futuristic and innovative nation. In South Korea, some 90 percent of transactions are now digital, while Sweden aims to be a cashless society as early as 2023.
But in a place where crime is relatively low, people feel more comfortable carrying cash, muting the public response to mobile payments.
At Katsuyuki Hasegawa’s bike repair shop, customers are invited to settle their bills via PayPay — a mobile payment system set up by SoftBank Group Corp. and Yahoo Japan Corp. that uses Quick Response codes and smartphones.
But only “two or three” people a week use the service, Hasegawa said.
“In a place like this, everything is very slow. We get lots of old people who like to chat while getting out their money. They don’t need quick transactions,” the 40-year-old shopkeeper said.
“Personally, I prefer cash. With PayPay, you don’t keep track of your money,” he added.
In the first “superaged” society with more than 28 percent of people 65 or over, it is harder to persuade Japan’s consumers why they should adopt the new technology, according to Yuki Fukumoto, an analyst at NLI Research Institute.
“The challenge from now on is how to motivate people” to change their habits, Fukumoto said.
This is a serious challenge in a country with more than 200,000 ATMs and where most small shops will only take cash to avoid the high transaction costs charged by credit card companies and other payment services.
Many were also put off when retail giant Seven & I Holdings Co. was hacked immediately after launching its QR code-based payment system, forcing it to scrap it.
It was way back in the 1990s that Japanese firm Denso Wave developed the first QR code, an inventory device that was later adapted for use in cashless payments. That was followed by a Sony microchip designed for commuters to use on public transport and for small payments in the 2000s.
Later, the commuter cards were expanded in Tokyo and other cities so people could conveniently make minor purchases at vending machines and convenience stores. Cash, however, remains the currency of choice for other transactions.
The government is hoping to seize on the 2020 Olympics tourism boom to double the amount of electronic payments to 40 percent by 2025. It also plans to roll out a point system based on cashless payments as an electronic way to mitigate the scheduled hike in the consumption tax to 10 percent from 8 percent in October.
Perhaps Tokyo has an eye on the costs of maintaining the nation’s cash-dependence, which a Boston Consulting Group survey estimated at ¥2 trillion ($18 billion), based on the cost of maintaining ATMs and ensuring cash can be transported securely.
Companies, too, are doing their best to promote a cashless society. Earlier this year, online mall operator Rakuten Inc. started “100 percent cashless” stadiums for its baseball and football teams.
Akiko Yamanaka, who runs a restaurant called Koguma, said a 10 percent discount introduced by PayPay for diners who settle bills using the system had attracted several people.
“The more campaigns there are like this, the more people will convert to cashless,” said the 54-year-old.
And Rakuten boss Hiroshi Mikitani is convinced that the future is cashless, even in Japan.
“One day soon, money as we know it — notes and coins that we carry with us — will be as outdated and collectable as vinyl discs are now,” he said in a recent blog.
Nevertheless, he admitted that “security has to be improved” for this to happen, especially in the wake of the QR hack at Seven & I.