Many visitors face a problem: Japan’s restaurants and operators of activities and attractions typically don’t accept the preferred digital payment methods of foreign tourists.
The problem speaks to a broader reality. “Many small and medium sized businesses in Japan don’t have in-store credit card and mobile payment processing terminals,” said Silvio Tavares, CEO of CardLinx, an association focused on online-to-offline commerce. Fewer than one in five consumer and business transactions are by credit card.
But Chinese tourists expect to make cashless payments. So Japan is increasingly adopting tech that appeals to them.
In recent months, AliPay, Amazon Pay, Line, Yahoo Japan, and domestic banks have begun wooing merchants with tech that holds the promise of helping attract high-spending Chinese visitors.
In Japan, QR codes — or square-shaped black-and-white barcodes are quickly overtaking other options, such as credit cards embedded with computer chips or phones with near-field transmitters, as methods for cashless payments.
China’s tourists to Japan outnumber all other foreign visitors in numbers and spending. Close to 7.35 million Chinese tourists visited Japan in 2017, the most recent year with full data. In the past four years QR codes have become popular in China, where the most popular mobile payment method is Alipay, a QR-code-based platform operated by Ant Financial Services Group, followed by the similar WeChat/Weixin.
Japan is following suit. In September 2018, Yahoo Japan, a popular internet portal, partnered with Alipay to bring that company’s QR-code-based tech to its users. In October, Yahoo Japan made available Paytm, India’s largest payment service, which also happens to be backed by Ant Financial, to offer a similar service.
Japan’s most popular social network, Line, has introduced a QR code reader for small and medium businesses to allow consumers to pay with its digital wallet Line Pay. In November 2018, Line cut a deal with China’s WeChat Pay to enable foreign travelers to buy things at shops in Japan that accept Line Pay. Line took a stake last year in Venture Republic, which runs booking site Travel.jp, and it will make Line Pay available through its Line Travel brand.
Domestic banks are taking notice. This month, Mizuho Bank debuted a digital currency platform J–Coin Pay using QR codes in cooperation with about 60 other financial institutions.
TakeMePay Makes a Bet
The rise of conflicting payment services may give an entry point for a multi-gateway player.
This month, TakeMePay, a multi-payment app service, lets restaurants, retailers, railways, attractions, and tour operators accept multiple payment networks with the same process, including Alipay, WeChat Pay, Visa, MasterCard, Apple Pay, Line Pay, Rakuten, and so forth. About 30,000 merchants in Japan have already signed on to the service. Japan Railways has hopped on board, too. The startup, led by CEO Lu Dong, raised $9.1 million (1.01 billion yen) in Series A funding last year led by Norinchukin Bank, the Japanese state-run cooperative bank.
While TakeMyPay is only one small company, it’s worth examining as a way to grasp the broader trend of why Japan is adopting QR codes and how it will affect visitors from countries that aren’t familiar with the codes.
Say you’re a foreign visitor at a restaurant in Japan that doesn’t have an electronic cash register, or point-of-sale device. A waiter hands you a bill. If you’re Chinese, you may want to use AliPay.
The waiter can then show you the QR code for the restaurant provided by either a company like TakeMePay, AliPay, Rakuten, or a similar company. You scan the code with your phone, which you’ve already set up to work with the AliPay app. You enter the bill amount and offer secondary verification of your identification either by typing in a code or having the phone recognize your face or fingerprint.
If you’re a Western visitor, the process may seem unfamiliar, but it’s still manageable. If you have a relatively new iPhone or Android phone, for example, you can point the camera at the QR code, and it will recognize it as a scannable payment method. You can set up your phone to link your preferred payment method. In the case of an iPhone, the phone will open a browser link with an option to choose payment methods like ApplePay or your favorite credit card.
For the merchant, the appeal of QR codes is their cheap simplicity. Anyone can print out a QR code on paper and display it, and anyone can get a smartphone or tablet device to receive payments.
TakeMePay gives participating merchants access to a browser-based administration tool so that, when a customer pays, a message pops up on the screen of the tool or a text message is sent to the merchant’s phone.
The simplicity of QR code cashless payments is spurring countries in Asia and Africa to gravitating toward it. The code spares small merchants from having to invest in a point-of-sale device that may be costly or fail to accept a wide variety of payment networks.
While Western markets have entrenched credit- and debit-card-based systems, the appeal of the new methods may mean that the future of restaurant payments will be tied to your phone, as our sister brand Skift Table recently argued.
A more sophisticated merchant that has a modern cash register or tablet point-of-sale device can install code from TakeMePay to add the ability to scan a user’s phone screen. A restaurant customer displays a QR code on their phone that represents their AliPay or similar account.
Clearly, an opportunity exists in Japan — and increasingly South Korea, Thailand and other Asian countries — for adopting new forms of cashless payments in ways that will prompt learning curves for North American and European travelers.