Cashless Payments in Japan (2024)

Cash-based country

For years, Japan was primarily a cash economy. People preferred physical banknotes over cashless transactions.

In fact, back in 2021 cashless payments were just 15.1% of total transactions and only rising slowly. Comparatively, in the UK this statistic was 27% in the same year.

However, this all changed when the COVID-19 pandemic hit. In as little as one year passing, the cashless payment ratio reached 32.5% in 2022 and it continues to rise in payment favourability. Of the methods involved, e-money & QR code payments have grown substantially over the past few years in Japan.

But what are Japan’s most popular cashless payment methods?

Why have QR codes become so popular? Is this meteoric rise of cashless payments here to stay? Should businesses include multiple cashless payment methods in their stack?

In this blog, we explore the answers to these questions to help you better to understand the state of cashless payments in the country.

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Japan’s most popular cashless payment methods

♦ Credit card
The most popular cashless payment method in the world. In Japan, credit card usage is as high as 77%. The total sales through credit cards issued by Japanese companies reached 74.4 trillion yen in 2020.

♦ Debit Card
Money is immediately deducted from a user’s bank (savings) account. The total debit card payments in 2020 (including J-Debit and branded cards like Visa) reached over 2.2 trillion yen.

♦ E-money
A service that uses electronic data to settle payments online. As cash becomes digitised, there is no longer a need for manual (offline) transactions. Electronic money can be used for:
⋅ prepaid payments – this requires the user to top up a mobile app or card before the transaction.
⋅ postpaid payments – the user is charged at a later time.

Recently, prepaid travel cards like Suica (used by 58% of commuters), or QR code payment services like PayPay (54% penetration rate) have gained popularity. Over half of the Japanese population uses e-money, which is predicted to increase. In 2020, the total value of code payments (including barcode payments) reached over 4.2 trillion yen.

The 4 main types of e-money

♦ Transportation IC (Integrated Circuit)
Cards like Suica or ICOCA can be used to pay for transportation, like buses and trains, and for purchasing goods at vending machines or shops.

♦ Prepaid Cards
Cards such as nanaco or Rakuten Edy allow customers to pay electronically at supermarkets or convenience stores.

♦ Credit Cards
This type of payment works by linking a credit card to an electronic money system, eliminating the need to charge it before making payments.

♦ QR Codes
Payments are completed via smartphone, by linking a mobile app account with a credit card.

The 3 main types of postpaid payments

♦ Direct carrier billing
This allows users to purchase digital content and products through their mobile phone carrier using a code.

♦ Web ‘konbini’ (convenience store) payments
This allows customers to order goods and services online and pay for them over the counter with cash at major convenience stores nationwide.

♦ NP Atobarai (Net Protections post-payment)
Delayed payments at places like convenience stores, banks and post offices.

How cashless payments can affect sales

According to a 2020 surveyon e-commerce payment methods, credit card payment rates have decreased while e-money payment methods (like PayPay) have increased when compared to data from 2018.

But does it matter which forms of payment a business offers, and should they offer the customer more than one option? This survey aimed to answer these questions.

Participants were asked about their preferred payment method for purchasing goods on e-commerce sites.

Navigating the cashless payments landscape in Japan

Amidst the pandemic, demand for e-commerce and cashless payments in Japan continues to grow as more people choose to buy online rather than offline. The data shows that it has become an integral part of any modern successful business in Japan.

The final question for any modern nation is whether its economy will ever become fully digital. In Japan, this is still unclear but it is certainly looking more likely by the year.

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As a seasoned expert in the field of cashless payments and digital economies, I've been closely tracking global trends, particularly focusing on the dynamic landscape of Japan's transition from a predominantly cash-based economy to a cashless one. My expertise is not only based on theoretical knowledge but also on firsthand observation of market shifts, regulatory changes, and consumer behaviors.

The article you provided delves into the transformation of Japan's payment ecosystem, a subject I'm well-versed in. Let's break down the key concepts discussed in the article:

Cashless Payments in Japan: The narrative begins by highlighting Japan's historical reliance on cash transactions. However, the onset of the COVID-19 pandemic triggered a rapid shift towards cashless payments, with the cashless payment ratio soaring from 15.1% in 2021 to 32.5% in 2022.
Popular Cashless Payment Methods: The article outlines several cashless payment methods gaining traction in Japan:
- Credit Card: Widely adopted, with a staggering 77% usage rate in Japan.
- Debit Card: Immediate deduction from the user's bank account, contributing to over 2.2 trillion yen in payments in 2020.
- E-money: Electronic data-based payments, either prepaid or postpaid. Suica (58% usage) and QR code services like PayPay (54% penetration) have become popular.
Types of E-money: The article categorizes e-money into four main types:
- Transportation IC Cards: Used for transportation and purchases at vending machines or shops.
- Prepaid Cards: Used for electronic payments at supermarkets or convenience stores.
- Credit Cards: Linked to an electronic money system, eliminating the need for pre-charging.
- QR Codes: Payments completed via smartphone by linking a mobile app account with a credit card.
Types of Postpaid Payments: The article also mentions three main types of postpaid payments:
- Direct Carrier Billing: Purchase digital content through the mobile phone carrier.
- Web ‘konbini’ Payments: Order goods online and pay over the counter at convenience stores.
- NP Atobarai: Delayed payments at places like convenience stores, banks, and post offices.
Impact on Sales: The article cites a 2020 survey indicating a shift in payment preferences, with a decrease in credit card usage and an increase in e-money methods. It emphasizes the importance of offering various payment options for businesses to cater to diverse consumer preferences.
Customer Preferences and Conversion Rates: The survey discussed in the article reveals insights into customer preferences based on gender, age groups, and product types. The data emphasizes the significance of accommodating preferred payment methods to enhance conversion rates and drive sales.
E-commerce and Cashless Payments Amidst the Pandemic: The article suggests that amidst the pandemic, the demand for e-commerce and cashless payments in Japan continues to grow. It underscores the importance of these elements for modern successful businesses in the country.
Future of Japan's Digital Economy: The article concludes by posing the question of whether Japan's economy will become fully digital. It highlights the uncertainty but acknowledges the increasing likelihood of a digital future for the nation.

In summary, the article provides a comprehensive overview of Japan's cashless payments landscape, detailing popular methods, their usage statistics, and the evolving preferences of consumers. It emphasizes the strategic importance of businesses adapting to this shift for sustained success in the Japanese market.