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Japan, historically known for its cash-reliant culture, is undergoing a remarkable shift toward cashless payments. Government initiatives and innovations in QR code payments and mobile wallets fuel this transition. According to the Ministry of Economy, Trade, and Industry, Japan’s cashless payment ratio reached 39.3% in 2023, up from 36.0% in 2022. Initially targeting 40% by 2027, the goal was propelled to 2025 in preparation for the Osaka-Kansai Expo.
Understanding this new shift is essential for eCommerce owners in Japan and those considering entering the market, as it impacts consumer payment behavior and business operations such as mobile payment integration. That said, this article will explore the ongoing cashless transition and what e-commerce owners should know to stay ahead.
The Evolution of Japan’s Payment Landscape
Cash has long been the preferred payment method in Japan, especially in rural areas and small businesses, despite the rise of digital payments worldwide. Japan’s reliance on cash is supported by its low crime rate and strong trust in the security of physical money, which is often seen as more tangible and reliable. Although mobile payments and cards have gained popularity in recent years, cash continues to play a significant role in the Japanese economy.
Cash Dependency in Japan
Japan’s strong cultural reliance on cash is rooted in both tradition and practicality. For many—particularly older generations, rural residents, and small business owners—cash is seen as more secure, tangible, and easier to manage than digital payments. These groups value the simplicity and immediacy of cash transactions, which provide a greater sense of control.
Many stores in Japan, including local ramen shops, are cash-only. Many also have older automated cash machines and in the spirit of “if it ain’t broke, don’t fix it,” there’s little urgency to update them, even when it comes to accommodating new banknotes released in 2024. The cost of upgrading these machines simply isn’t seen as necessary, nor can many can’t afford it.
Despite Japan’s reputation as a high-tech, savvy country, this doesn’t always translate to consumer behavior, especially among older individuals. Many seniors are reluctant to adopt digital alternatives, finding cashless options like mobile payments and digital wallets confusing. E-commerce is already a challenge for many seniors, with the National Consumer Affairs Center reporting 25,800 consultations related to online shopping from people aged 60 and older in fiscal 2019—15 times more than in fiscal 2010.
Japan’s ultra-low interest rates have also made cash a more attractive option for saving compared to cashless methods. For instance, as of November 2024, Japan’s deposit interest rate was only 0.12%. Negative interest rates, intended to encourage banks to lend more money, have also been a common policy. The Bank of Japan only raised interest rates from -0.1% to 0-0.1% in March 2024, marking the first rate hike in nearly a decade.
Thus, despite the rapid shift toward cashless societies seen in other SEA countries like China and South Korea, Japan remains one of the most cash-centric developed nations, with cash in circulation far outpacing digital transactions.
Government Initiatives and the 2020 Olympics Catalyst
Japan’s government is actively pushing for a cashless society. Key efforts include offering subsidies to help retailers adopt digital payment systems and the My Number Card system, which links digital IDs to financial services. The “Cashless Vision” launched in 2018 set a goal of 40% cashless transactions by 2025 and 80% in the long run. Progress has been quick, with cashless payments reaching 39.3% in 2023, a big jump from just 13% in 2010.
Events like the 2020 Tokyo Olympics, the COVID-19 pandemic, and the upcoming 2025 Osaka Expo have sped up this transition. The Olympics promoted cashless payments for international visitors, while COVID-19 pushed people to use digital and contactless payments to avoid handling cash. The Osaka Expo will be entirely cashless, using a blockchain-enabled digital wallet for payments. With 28 million visitors expected, this event will further drive the adoption of digital payments in Japan.
This shift opens up exciting opportunities for e-commerce businesses. For instance, the number of coins in circulation dropped by 5.5% between 2021 and mid-2023, showing less reliance on cash. QR code payments have also increased. In June 2024, QR code and barcode payments in Japan totaled approximately 1.54 trillion yen. By aligning with shifting consumer preferences, e-commerce businesses can tap into Japan’s rapidly growing cashless market.
Advantages of Cashless Adoption in Japan
As Japan continues towards its cashless goals, the benefits for both consumers and businesses are increasingly evident. Stores that introduce cashless payment systems improve convenience, simplify payments, and offer greater security.
Convenience for Consumers
Mobile wallets like PayPay and Line Pay make online transactions faster and simpler. Customers can skip entering lengthy credit card details or dealing with cash-on-delivery logistics. Using a smartphone, they can complete purchases quickly and securely.
Features like one-click payments and automatic form-filling reduce the steps needed at checkout. For example, PayPay and Line Pay store billing and shipping information allow customers to skip manual entries. This reduces cart abandonment caused by time-consuming or complicated processes. The speed of these systems is particularly useful during limited-time sales or peak shopping periods, helping customers complete purchases before items go out of stock.
Cashless payments also offer benefits like loyalty points and cashback rewards, encouraging customers to shop more often. Businesses that integrate these payment systems can attract more customers and improve retention by providing practical incentives.
Reduced Operational Costs for Businesses
Cashless payment systems make operations easier and reduce costs by simplifying payment processing. Since all transactions are digital, businesses don’t need to handle cash or check that the bank deposits match the sales, saving time on administrative tasks.
These systems often integrate with inventory management tools, providing real-time tracking of sales and stock levels. For example, eCommerce platforms with such features help businesses optimize inventory, ensuring they avoid overstocking or running out of products.
Even just offering cashless payment options can attract more customers. A survey by the Japan Credit Card Association found that 32% of general consumers and 54% of households using finance apps avoid stores that don’t accept cashless payments. This means businesses that adopt digital payment systems can avoid losing sales and improve customer retention.
Transparency and Security
Digital payment systems offer transparency for online transactions through detailed, traceable records of every sale. This allows businesses to monitor revenues, detect discrepancies, and simplify bookkeeping.
Since cash isn’t involved, there’s little to no risk of theft or loss, which is especially important for businesses handling high transaction volumes. Digital payment systems provide encryption and other security measures to protect funds during transactions.
Customers also benefit from these protections, as their payment information is encrypted and shielded from unauthorized access during online purchases. However, users should remain proactive by keeping their passwords updated and staying vigilant against phishing scams. Trust in secure payment methods helps encourage repeat customers and maintain a positive reputation for businesses.
Key Drivers of the Cashless Shift
A combination of evolving technologies, consumer behaviors, and industry shifts is shaping Japan’s transition to a cashless society. Several factors contribute to the growing prominence of cashless payments, with mobile wallets, QR codes, and the e-commerce boom being central to the transformation.
Mobile Wallet Adoption
Mobile wallets have gained significant popularity in Japan, driven by the country’s high smartphone and smartwatch penetration. With a simple tap, users can pay for transportation, groceries, or even a vending machine drink, reflecting a broader trend toward digital payments.
The rise of mobile wallets is evident in the success of services like PayPay, Rakuten Pay, and LINE Pay. Launched in 2018, PayPay quickly became a dominant force in the market, offering promotions and seamless QR code integration with both large retailers and small businesses.
Rakuten Pay, part of the Rakuten ecosystem, grew in popularity thanks to its convenience for users of Rakuten’s shopping, banking, and loyalty services. Similarly, LINE Pay capitalized on its massive user base from the LINE messaging app, making mobile payments accessible to millions.
Despite the rapid growth of non-card-linked wallets, card-linked wallets are expected to catch up by 2028. Still, according to a 2024 hybrid research study, digital wallet adoption in Japan lags behind other Asia-Pacific countries, with credit cards remaining the dominant eCommerce payment method.
QR Code Payments Revolution
In June 2024, Japan saw around 943.6 million QR code and barcode payments, although mostly made in-store. These payments let consumers easily buy goods and services by scanning a QR code with their smartphones without needing special devices like payment terminals. QR code services can be linked to bank accounts or credit cards or used with prepaid options, making them convenient for both consumers and small businesses.
Government cash-back programs and the increase in digital payments during the COVID-19 pandemic fueled the rise of these payments. By 2022, QR code payments had surpassed electronic money as the second-most used cashless payment method in Japan, with transactions reaching nearly 15 trillion yen.
In 2019, Japan introduced a standardized QR code system, JPQR, to streamline payments across providers. By 2023, the number of active QR code payment users surged from 3.55 million in 2018 to 75.8 million, with PayPay leading the way with 56.6 million users, followed by Rakuten Pay and d Barai. Merchants offering services like Alipay and WeChat Pay to attract both local customers and tourists have also boosted the rise of QR payments.
Role of eCommerce in Driving Change
As more consumers shop online, digital payments are essential for a fast and easy way to checkout. In 2024, the majority of Japanese consumers shopped online at least once a month, with 28% using e-commerce platforms two to three times a month. The convenience of cashless payments has fueled a growing preference for online shopping.
The shift to cashless payments is helping Japan address its economic challenges. With a labor shortage expected to reach 6.44 million people by 2030, businesses are focusing on boosting productivity. Cashless systems reduce the time spent on operational tasks. These systems also lower costs by eliminating the need for expensive cash infrastructure, such as ATMs and cash handling, which costs Japan over 1.6 trillion yen annually. Thus, businesses can reduce expenses and grow in Japan’s thriving eCommerce market.
Cashless payments are also boosting consumption, especially from inbound tourists. Before the pandemic, about 70% of foreign visitors said they would have spent more with cashless options. While tourism has slowed, demand for cashless payments is rising, particularly for remote and contactless options. As Japan moves toward a cashless economy, these changes are driving e-commerce growth, making it easier for both local and international shoppers to buy online.
Challenges in Japan’s Cashless Transition
While Japan’s shift toward cashless payments is progressing, several challenges need to be addressed to achieve broader adoption, especially in rural areas and among older demographics.
Resistance Among Older Generations
Japan has an aging population, and many older citizens are not accustomed to using digital payment systems. This demographic is more comfortable with cash, which they trust and understand. Despite efforts to promote cashless options, this resistance from older generations remains a significant hurdle in achieving widespread adoption.
Infrastructure Gaps
While urban areas like Tokyo and Osaka are increasingly cashless, many smaller businesses and rural regions still lack the infrastructure to support digital payments. In particular, smaller merchants may not have the financial resources or technology to implement cashless systems, which limits the convenience and reach of digital payment methods for consumers outside major cities. Even local ramen shops struggle to go digital.
Concerns Over Privacy and Security
Japanese consumers remain cautious about the security of digital payments, fearing potential data breaches, unauthorized access to personal information, and vulnerabilities in digital wallets. Cash, as a tangible and certain form of payment, offers a sense of security that some people lack in digital transactions.
These concerns, particularly around financial and privacy risks, continue to deter some from fully embracing cashless systems. A 2017 study found that 51% of Japanese people opposed a cashless society, with security and data breaches being top concerns. Trust in the security of digital payments is essential for overcoming these barriers.
Strategies for Businesses to Adapt
Below are simple methods businesses can integrate into their eCommerce store.
Offer a Variety of Payment Methods
Offering a variety of payment options can help eCommerce stores in Japan meet the needs of different customers. While many people still prefer cash, digital methods like mobile wallets and QR codes can attract younger or tech-savvy shoppers. Providing options like Konbini (convenience store) payments or prepaid cards lets businesses reach those who are more comfortable with cash. KOMOJU is an excellent solution, as it supports multiple payment methods, making it easy for both digital and cash-preferring customers to complete their purchases.
Educate and Engage Customers
To promote digital payments and strengthen customer relationships, highlight the security and convenience of digital transactions with clear signage and email marketing. For example, if your store offers Rakuten Pay, show customers how they can earn points, get discounts, or enjoy cashback rewards with each purchase. By explaining how easy and secure Rakuten Pay is, you can help customers feel confident and encourage them to use it. Since Rakuten is widely trusted in Japan, linking your store to this ecosystem not only simplifies payments but also boosts customer loyalty.
Adopt User-Friendly Payment Systems
In Japan, where smartphone ownership is widespread, and user expectations for speed and convenience are high, intuitive interfaces and seamless experiences are essential. Payment options should prioritize simplicity and efficiency to ensure smooth transactions.
The success of Belluna, a popular Japanese retailer, illustrates the impact of streamlined user experiences. According to Think With Google, after improving its mobile shopping platform, Belluna achieved a 28% increase in mobile orders. The introduction of a Progressive Web App (PWA) boosted order rates by 60% compared to email-based channels, while Accelerated Mobile Pages reduced page loading times to 0.62 seconds, an 8-fold improvement.
Similarly, insights from The Payper’s Digital Payments Performance Report show that 40% of customers abandon transactions due to excessive checkout friction. Offering diverse payment options, enabling one-click payments, and simplifying the checkout experience can reduce churn and encourage users to complete their purchases.
Summary
In 2023, Japan’s cashless payment ratio reached 39.3%, with a target of 40% by 2025. Although cash remains popular, the shift toward digital payments is still going strong. Government support through initiatives like subsidies has helped make significant strides since 2018.
For eCommerce owners, this cashless transition opens opportunities to meet growing consumer demand for quicker and more secure payment methods. Popular services like PayPay and Rakuten Pay offer benefits such as loyalty rewards and faster checkouts. These systems also simplify operations and reduce administrative tasks.
For businesses entering Japan’s evolving payment landscape, KOMOJU offers a solution for accepting various digital payments, including credit cards, bank transfers, and popular mobile wallets, helping businesses stay ahead in the cashless transition.
FAQs
Credit cards and QR code apps are the most popular cashless payment methods in Japan. As of 2024, around 70% of people use credit cards, while mobile payment apps like PayPay are becoming more common, with 51% of consumers using them.
Cashless payment systems can attract more customers by offering convenient and popular payment methods like QR codes and mobile wallets. Moreover, cashless options eliminate cash handling costs, reduce theft risks, and facilitate operations, saving businesses time and providing more accurate accounting.
Cashless payments may have transaction fees. Going cashless may also exclude customers who prefer cash for budgeting or those without access to digital payment methods, such as minors or those living in remote areas. Technical issues like system outages or internet failures can halt transactions, causing operational disruptions. Furthermore, there is a risk of cyberattacks, such as hacking and phishing, which could compromise sensitive payment data.
We help businesses accept payments online.
