Japan Cashless 2020 Retrospect

As we look back on 2020 there are 2 big divides: COVID and cashless. We suddenly found ourselves in a world where all human contact is conducted behind face masks and sheets of clear plastic. Not touching anything not ours is the rule of daily life.

The year started with the Japanese Cashless tax rebate in full swing but the real value of the program, helping smaller merchants to add cashless payments, became clear when the Diamond Princess brought the COVID crisis to Japan big time and real cash suddenly become suspect fomite material. More than anything, COVID fears attached to handling cash drove cashless use in 2020 but are we there yet? Back in July, I said we are. It will be months before official 2020 cashless trend numbers are in, but you don’t need anything more than to ask yourself one simple question:

How much has changed since the October 25, 2016 Apple Pay Japan launch?

Junya Suzuki correctly predicted Apple Pay would be the ‘Black Ships‘ inflection point catalyst for cashless payments in Japan that would change everything. And everything has changed. Cashless is now the first choice that most people want, that most stores want you to use. Cash is the fallback. If grandma want to use it at the supermarket checkout she can take all the time she wants feeding bills and coins into a checkout payment machine. Just one more choice in the every growing payment option menu.

There were other cashless developments in 2020, such as the Yucho Bank security scandal that hit the Docomo Account first, then other online payment services. The end result was that QR Code players (PayPay, Line Pay, etc.) took a hit and for the time being cannot recharge from a bank account. It knocked the wind out of QR Code payment mania that I don’t see returning.

On the transit front the biggest news was the Mobile PASMO Android and Apple Pay PASMO launch. Geographically these only cover the Kanto region but Suica and PASMO combined represent 80% of the Japanese transit IC card market. As Mobile PASMO turned out to be recycled Mobile Suica under the hood, I see it as part of the overall JR East next generation Super Suica that is formally launching in March 2021.

2021 should be an interesting year for contactless payments with Super Suica and VISA Japan finally signing on with Apple Pay. We will see more transit IC card service announcements similar to the Mobile ICOCA one, and if Apple Pay QR Code Payments launch we could see developments in that segment, but 2020 will always be known as the year that Japan finally went cashless.

Japan Cashless X-Day

Anybody care to chart the Japanese cashless transformation?

Now that the CASHLESS Rebate program is over with transaction rates reportedly going back to ‘normal’ (an estimated 1% rise over rebate program rates), JP media outlets report that some smaller merchants might go back to cash to keep profit margins intact. Real transaction rates are always hush-hush but QR payment rates recently revealed in connection with the Japan QR (JPQR) unified code scheme give us an idea what goes on behind the curtain:

NTT Data already lowered basic CAFIS transaction rates in response to the stera payment co-venture from SMBC-Visa Japan-GMO. As the JPQR transaction rate chart makes clear, banks and payment players have plenty of transaction rate wiggle room. The Japanese government is pushing cashless. If necessary the push will become shove for lower rates and yet another cashless program but where do things stand right now?

July 2020 is the proverbial “X-Day” crossover point: Japan is cashless now, even though the transformation is uneven, ongoing and very messy. On the customer side cashless is the mindset and survival behavior for many Japanese, even for older folks who under normal circumstances would prefer using cash until they day they die.

Faced with the reality of handing money that carries the risk of infection, people are going cashless instead especially with contactless smartphone payments. Junya Suzuki was right all along: Apple Pay turned out to be “the black ship of payments” catalyst that finally nudged Japan from cash to cashless. That and COVID.

Market analysts will undoubtably demand chart data that clearly explains and quantifies the transformation before declaring a ‘winner’ but they have a long wait. That’s because the cashless transformation is sloppy with huge regional variations, all happening right before us. But all of this is an afterthought and our priorities are different now, getting accurate market survey information of any kind in the current environment is extremely difficult.

The Tokyo Olympics was supposed to be the event heralding the cashless era but the COVID crisis has forced much more change very quickly. Evidence is best found in the countless little rituals of daily life that have evolved and are not going back. Merchants who do go back to cash face the risk of fewer customers: when offered a choice people choose cashless.

This realization hit me yesterday when my partner complained about his Docomo dPAY points taking a hit because the Summit supermarket staffer tapped a wrong payment button on the new POS cashless menu options added on July 1. He wanted to pay with iD. A year ago he never used iD, dPAY or Apple Pay and never wanted to, but life changed.

These days I hear contactless reader sounds everywhere, FeliCa chirps and EMV beeps are common as clear plastic sheeting and foot position floor stickers at checkout. And just when posting this the Ministry of Land, Infrastructure, Transport and Tourism announced that Japanese Expressways will be going cashless only with ETC. If there’s anything that defines this sea change it is this: it’s not a ‘victory’ over cash that the media sometimes depicts, nor does it feel like progress. In the COVID era it merely feels like survival.

Another Japanese government cashless promotion gimmick: My Number Point (Updated)

Now that the CASHLESS Rebate program is over, we have a new Japanese government program promoting cashless use for points: My Number Point. And yes it comes with an app. There’s just one tiny gotcha: you have to have a plastic My Number card because as the campaign name makes clear, the whole enterprise is about motivating people to register for a one. The program runs July 1~March 30. Users can get the equivalent of up to ¥5,000 in points in exchange for ¥20,000 worth of cashless shopping.

The basic idea is that starting from July 1, you use the My Number Point app to read the NFC tag in your My Number card and register your cashless payment service of choice: Suica, PayPay, credit card, etc. The full list is here.

After you buy ¥20,000 worth of stuff by August with your registered cashless payment, you get points. We won’t know how bad the sign up process is until it goes live. At best it looks convoluted, and a lot of hoops for only ¥5,000 in points. COVID is already more than enough motivation for going cashless but payment players are dutifully offering extra points for registration.

As your dutiful field reporter, I volunteer to dive into the NFC tag registration process on July 1 and tell you all about it. Here’s the official list of compatible iPhone devices.


Suica/JRE POINT Registration
Okay, I did it. The registration process, like the app, looks and acts like a government bureaucracy product. It’s not pretty but gets the job done. But it’s a fun exercise using the My Number Card NFC tag for secure login. Here is a quick summary.

Before you start: you’ll need a My Number Card, and a JRE POINT account with your Mobile Suica registered.

(1) Have your My Number Card and 4 PIN login code ready and launch the app. The My Number Card NFC tag read with iPhone seems very allergic to any surrounding metal. Hold the card in your hand, it takes about 8 seconds for a successful read.
(2) Follow steps 1~6 shown here to login and get to payment system registration
(3) You need 3 pieces of info from your JRE POINT account: the JRE POINT exchange number, the registered katakana account name, the registered birth date. Tap the link to the JRE POINT page and login, copy the JRE POINT exchange number and paste it in the Payment Service ID, past the katakana name (no spaces) in Security Code 1, enter the registered birth date into Security Code 2. Enter the last 4 digits of your current iPhone number in the last field.

JRE POINT Info for My Number Card Point registration

(4) After entering and confirming your JRE POINT information you have to enter your My Number Card PIN and read NFC tag again. This completes the process, you should see a green confirmation checkmark.

From here all you need to do is purchase ¥20,000 worth of goods or recharges with Mobile Suica by August 31. The timing and details of the My Number Point bonus into your JRE POINT account should be coming soon. Check the My Number Point page for details.

Sayonara Cashless Rebate Program, we hardly knew you

The CASHLESS Rebate program ends June 30. After that date we have 8% consumption tax for takeout, 10% for eat in, and 10% for everything else. In the long ago world of October 2019 the CASHLESS Rebate program looked like the perfect run up to an economic boost courtesy of the Tokyo Olympics with lots of inbound cashless using visitors.

Now the program is ending. Inbound business has collapsed. And a Japanese economy in retreat needs relief, especially the 5% family business rebate sector. There has been talk of extending some tax relief for family owned ryokans, hotels and the like, but no action has been taken.

It’s impossible now to analyze how much cashless transaction growth the program drove because COVID pushed cashless use into hyperdrive. Nobody wants to handle anybody else’s anything, especially cash.

The real value of the program was that it helped smaller businesses get onboard with cashless payments. The little Colorado Cafe near the office added cashless with the start of the program in October. At the end of the program 50% of the transactions are cashless. That’s not bad considering that most of the clientele is retirement age. In another era we might call this success. In this age, it’s survival.

Smartphone payments grow with Japan CASHLESS Rebate program

Good news: Japanese consumers are using less cash and more cashless payments. The winners are smartphone contactless apps like Mobile Suica (NFC) and PayPay (QR) which saw use rates grow from 16.4% to 28.6% in the August 2019 to January 2020 period. The CASHLESS Rebate program has clearly lifted all cashless methods which it was designed to do. The bad news? We have no idea where the economy is going in the coronavirus crisis with the Tokyo Olympics in the balance.

The new cashless payments market report from Mobile Marketing Data Labo (MMD) has a few other interesting tidbits. Apple Pay Suica is the most used payment method on iPhone followed closely by PayPay, convenience store purchases are nearly 80%.

The growth of smartphone payments makes sense because it’s one the easiest ways for users to enjoy the benefits of the CASHLESS Rebate program with multiple payment choices, and most convenience stores offer an instant 2% rebate for cashless purchases. The next challenge is how cashless payment trends play out after the rebate program ends June 30.

UPDATE: The Covid crisis will drive cashless payment growth in Japan more than the rebate program and the Tokyo Olympics could ever hope to achieve.