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Payment Options at the Point of Sale

Arriving in Japan I was shocked to see people reserving tables in coffee shops by leaving their bag, mobile phone, or other valuable things. Now I do the same, because finding a table is a bigger concern than having stuff stolen: it’s that safe (and crowded). With this safety I feel comfortable carrying and using cash for all purchases large or small.

That is common for Japan, where cash in circulation is equivalent to 20% of GDP, the highest percentage of all countries indexed by the BIS and more than twice the average. Safety is one factor. Also bank transfers, although relatively common, have fees and limits on the amount that can be transferred. Credit cards are not accepted everywhere and credit is relatively difficult to obtain, especially for foreigners. Overall, cash is a convenient option.

However, there are other forms of payment widely used in Japan, including prepaid travel smart cards (Suica and Pasmo), which are accepted at many points of sale. In addition, mobile payments from smartphones are slowly gaining ground.

The latter could have a huge impact for retailers once the technology and consumer adoption are in place.

Widespread use of mobile payment is not yet at the doorstep. According to the latest studies, such as the Mastercard Mobile Payment Readiness Index consumer readiness for mobile payments is by far the weakest component of overall readiness in Japan. This creates a competitive opportunity for retailers who successfully grow mobile payments at physical stores.

Mobile payments offer retailers a few advantages:

Globally, mobile payment options are growing, with heavyweights Apple Pay, Android Pay and Samsung Pay extending their coverage to more countries. In July, Apple Pay launched in France and Hong Kong and other Asian countries could be coming close behind.

Even in countries like Japan where those big three mobile payment options are not yet available, retailers can enable other types of mobile payment at the point of sale. For example, the payment features of Japanese shopping app Origami or Chinese social network WeChat. The battle for consumer wallets is just beginning…

What is your favorite payment method? Tell us about it in the comments!

Update September 8, 2016: Apply Pay is coming to Japan in October and will work with Suica.