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Cashless payments changing Japan

‘Time has come’ to promote and standardize cashless payments

Payments Japan Association Chairperson Hiroo Unoura delivers his opening remarks at the organization’s founding conference.

People from companies engaging in cashless payments gathered at a Tokyo hotel on Oct. 15 to celebrate the founding of the Payments Japan Association.

“Finally, the time has come,” noted association Chairperson Hiroo Unoura, who serves as executive advisor to NTT Corp., in his opening remarks. Through efforts to boost convenience of, as well as increase confidence in, cashless payments, Unoura said, “We’d like to launch an environment in which consumers can use the system with ease.”

This conference served as an update on the progress of various projects the association has conducted since its launch in July and outlined future business plans.

An industry-government-academia entity with participating companies and organizations numbering more than 250 as of October, the association is expected to play two major roles. One is to prepare an environment to further spread alternative means to cash, which include credit cards, electronic money and payments by smartphone. The other is to gather information, which is essential to draw up future policies.

A conference to celebrate the founding of the Payments Japan Association was held in Tokyo in October.
A conference to celebrate the founding of the Payments Japan Association was held in Tokyo in October.

Above all, what the association urgently needs to address is the standardization of technical and operational specifications for smartphone payments through QR codes, including bar codes. These services have been rapidly expanding with a wave of newcomers to the field.

Competition and cooperation

Currently, QR code payments are divided into the following three types — customers show a QR code on their smartphones to be read by the devices at outlets; outlets show a QR code to customers, who then scan them with their smartphone cameras; and customers scan codes printed at outlets. As payment options increase, retailers need to address each standard, adding another burden to employees operating cash registers.

If QR codes, which have been set by each company, were standardized and payments using them were processed with a simple operation of a corresponding device, it could advance cashless payments in Japan a step further.

Payments Japan Association Vice Chairperson Koji Fujiwara, who serves as president and CEO of Mizuho Bank Ltd., called for association member companies to cooperate on QR code standardization, saying, “Each company should work together in the payment infrastructure area, while competition among them is welcome in the service field.”

Guideline draft by April

In a guideline draft the association aims to create by the end of the 2018 fiscal year, it has been nearly agreed upon to introduce a system for a type of QR code, dubbed the Consumer Presented Model (CPM). This CPM will use the initial eight digits of codes to identify settlement companies.

This would enable shoppers to likely avoid situations where they are forced to address system changes as new settlement companies using QR codes enter the market. On the other hand, companies already accepting QR code payments need to work on how to incorporate the new eight-digit identification figures into their own systems.

Another important task is how cashless payments should be handled in case of emergency. Some pointed out the vulnerability of such systems citing a failure in proper information processing of credit card and electronic money transactions during power outages caused by the powerful earthquake in Hokkaido in September.

Although a legitimate concern, it is possible that cash settlements might also not work properly following disasters. For example, there could be change shortages and people may not be able to withdraw cash at all.

In light of such scenarios, the association plans to consider how society can have a strong cashless system in time of disasters. For example, it will study the possibilities of cashless payments during power outages through the communication lines of mobile phones and others.

Consumer benefit promotion

The METI Journal asked Payments Japan Association Secretary-General Yoshio Fukuda for his perspective. The following is an excerpt of his comments.

Payments Japan Association Secretary-General Yoshio Fukuda
Payments Japan Association Secretary-General Yoshio Fukuda

Though a technical system is almost fixed for the code to identify the operators in QR code payments, there are also other points that need to be addressed for standardization. One of these is how to review business operations for shoppers on introducing QR code payments.

For instance, there is discussion over which Japanese description should be adopted in referring to “the remaining balance”; “zangaku” or “zandaka.” Another example is what to do with the display format when downloading usage details.

We know these details matter to conventional commercial practices of each company, but we think it’s essential to proceed under a philosophy of “harmonized fields” that seeks streamlining through keeping pace in cross-corporate efforts, rather than competing with each other’s different ways.

Although QR code payments have garnered attention, there are still fundamental issues in spreading cashless payment efforts in the first place. We have heard of an instance that a customer requested using Edy (Rakuten Inc.’s prepaid e-money service) for payment, but the retailer misheard it as “iD” (NTT DoCoMo Inc.’s e-money payment system). Amid increasing numbers of inbound tourists, as well as a rapid increase of foreign workers, we have many issues to address from the customer viewpoint, including unification of address terms and easy-to-understand displays of payment menus.

We also plan to work on promoting paperless efforts on cashless payments, as well as popularizing such payments in vending machines and automated service devices such as parking lot payment machines.

People might wonder what Japan’s cashless society would look like after all of these efforts. In my personal opinion, I expect Japanese people to use different payment methods meticulously according to need and their lifestyles. Namely, they would use credit cards to purchase something expensive; they would use non-contact electronic money for quick payments; and they would use smartphone payments for such things as bill splitting, transactions among individuals and use of services and perks.

What’s important is to offer customers options so they can freely choose modes of payments, as well as an abundance of locations where such services are available.

We’d like to reflect the opinions of consumers more in our association’s activities. We hope for further, active participation of not only financial institutions and internet-related companies, but also supermarkets, restaurants and accommodation services. We expect them to convey what kind of opinions of those on their front lines.


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