Tokyo Cashless 2020: cashless transaction fees and platforms

The tempest in a teacup over Marukame dropping QR Code cashless payments at some restaurant locations turned out to be parent company Toridoll Holdings updating their POS system. QR Code support will return with the same cashless payment lineup supported at all locations.

The brouhaha is a good opportunity to catch up with an issue I have been meaning to blog about for some time: cashless transaction fees. The ever reliable Junya Suzuki did everybody a favor reporting the Toridoll situation with his levelheaded expertise and wide array of industry contacts. He also puts out a wonderful series called ‘Pay Attention’ that covers Japanese cashless and payment issues with a unique on the ground reporting style.

In a recent installment, “The Cashless Transaction fee paradox” he discusses the complex Japanese cashless transaction fee landscape. Actually it’s complex everywhere because listed transaction fees are not what merchants end up paying. It’s an ever changing game of negotiation. And it’s a shell game of POS equipment rentals, extra software services and consumable gotchas like paper receipt printer rolls.

As Suzuki san points out there are basic transaction infrastructure processing costs associated with the NTT Data ‘Credit and Finance Information Switching System’ (CAFIS) backbone and gateway. There are newer players such as the SMBC, Visa Japan, GMO co-venture stera payment network that bypass CAFIS altogether. NTT DATA announced a new lower CAFIS fee structure today that reduces processing fees for small transactions and counters the stera move. The lower CAFIS fees should benefit a lot of smaller payment network players.

Let’s make a deal
The real issue is transaction fees. AirPay and other middle range mobile based POS system players like Rakuten Pay and J-Mups all offer similar transactions fees that range between 3.24~3.74%. As Suzuki san explains, this works out to be roughly 0.5~1.0% higher than a cashless transaction in America using Square.

Those fees are not what all merchants end up paying, but real rates are kept secret. Even Suzuki san, who has comprehensively covered the cashless scene for over 10 years, has no hard numbers, just ballpark estimates. In general 3~5% for goods, 5~8% for services. Low margin but large convenience store chains, i.e. merchants with clout, are aggressive and negotiate lower transactions fees with their large sale volumes.

Super low margin businesses like family owned supermarkets get caught in a catch-22 situation where the more cashless is used, the more that transaction fees eat into their margins (razor thin 1% margins for smaller chains). It’s fascinating stuff and you should read the original Japanese article if you have the ability or translation software.

This complexity makes me skeptical of article claims like, “Apple’s arrogance angers Korean card issuers.” The reality is plain old fee negotiation, by any means necessary, to get the upper hand. I suspect the fact that only 30,000 or so Korean merchants out of some 2.8 million are equipped with NFC readers, is the bigger reason for Apple Pay Korea not launching. Nobody wants to buy new POS hardware just for Apple Pay, so it’s back to the negotiation table.

stera all-in-one cashless platform
The stera terminal cashless platform is launching July 6. FNN has a nice overview video of stera and what it hopes to accomplish. All major protocols (EMV, FeliCa, QR) and payment networks are supported in an all-in-one reader. The difference between stera other mid-market solutions is the integration of hardware and software frontend all the way to the GMO internet based transaction backbone and gateway. SMBC and Visa Japan will certainly use stera to promote EMV and Visa Touch, but it’s a smart solution that runs on Android OS so it can be updated and tailored for multiple POS systems. It will be interesting to see what the impact of stera is and how CAFIS based payment solution providers compete with it.

2019 Tidbits

The end of the year season is down for the count. Barring any news items like Apple Pay Octopus really launching this year, this is probably my last news post for 2019. No news really, just tidbits.

Lingnan Pass and ShenZhen transit cards coming to Apple Pay in 2020
This piece of news came from Twitter users noting that the Lingnan Pass will come to Apple Pay in 2020. The Lingnan Pass and ShenZhen Transit pages show announcements released today (December 11), a machine translation roughly says Apple Pay support is coming soon. China has had the PBOC 2.0~3.0 contactless standard and T-Union transit card architecture in place for some time, with local transit cards being updated to the new format. Beijing and Shanghai transit cards arrived on Apple Pay with iOS 11.3. Additional China transit cards were tested in a early developer preview of iOS 11.4 but dropped before the beta. Beijing/Shanghai transit cards were labeled beta up until iOS 12.2. Apple Pay Lingnan Pass and ShenZhen Transit will likely follow the Beijing/Shanghai transit card model with bank card recharge limited to China Union Pay (Interesting side note: Octopus and Lingnan Pass have a dual mode transit card). If Tim Cook does visit Hong Kong and China on his trip, things might shape up to be an excellent Apple Pay transit card year end Asian adventure.

Tim Cook’s Excellent Asian Transit Adventure?
The Tim arrived unannounced in Tokyo a few days ago, his first public appearance here since September 2016 and the first public demo of Apple Pay Suica just before the service launch. With Tim’s arrival in Tokyo I noticed an odd uptick in views from Hong Kong. When Tim landed in Singapore, Hong Kong views ticked up again. Obviously Hong Kong iPhone users are hoping that Tim will visit Hong Kong and launch the long delayed Apple Pay Octopus. I hope so too. Update: Apple Maps Hong Kong Transit information is available to China mainland users after a long absence.

12/19 UPDATE: Apple Pay Octopus has been delayed to later in 2020.

1/8 UPDATE: Apple announces new transit cards for China but not Octopus

Apple Pay Ventra
This was promised as ‘coming later this year’ back in May. As of December 10 Ventra Twitter support is still promising users to “stay tuned.” Let’s hope Cubic is working overtime to make it happen. Update: Ventra has changed the Apple Pay Ventra blurb from ‘coming later this year’ to ‘coming soon,’ we’ll see Apple Pay Ventra in 2020.

JP POST going Cashless
This was announced some time ago but is worth repeating: Japan Post is going cashless starting February 2020 in select central post offices, rolling out to all branches by May 2020. Your favorite plastic credit cards, eMoney cards (iD, QUICPay, Suica, etc.) and QR Codes (The PayPayPay crowd) can be used to pay for postage, sending packages, stamps, postcards, catalog items, etc. It would be nice if cashless payments improve post office lines and wait times, but I guarantee that’s not going to happen.

JAPAN CASHLESS: Cafe Veloce offers 5% cashless rebates

Finally! A cafe chain with JAPAN CASHLESS rebates and 5% at that. Sayonara Starbucks and hello Cafe Veloce, until July 2020 anyway.

UPDATE: as always some locations are not onboard yet even though Cafe Veloce parent company Chat Noir says they all are. Be sure to check for the CASHLESS logo on the door.

UPDATE 2: confirmed with Chat Noir that all locations are onboard.

JAPAN CASHLESS Rebate Month 1: Supermarkets

The JAPAN CASHLESS rebate program has been up and running for a month already and the first batch of Suica JRE POINT rebates should be coming this week. One of the interesting aspects of the program is how it favors smaller family owned businesses with larger 5% rebates to encourage cashless payment uptake on the cash register side. Large chains like AEON and SEIYU (Walmart) are excluded altogether.

Finding a supermarket with CASHLESS rebates isn’t easy but fortunately for Asagaya area residents there is one: CoCoS Nakamura that just opened a store last year. They offer 5% CASHLESS rebates for purchases made with Mastercard and VISA cards, JCB is ‘coming soon’ (no contactless options), there are other CoCoS Nakamura stores in the east part of Tokyo. 5% off everything, effectively the rare 3% ‘jackpot‘ consumption tax rate until June 30 which is nice and a big cashless shopping incentive, I just wish there was more of it lasting longer.

JAPAN CASHLESS iOS Map App v2 Update

After a weak start with bad data, the JAPAN CASHLESS rebate map app has finally gotten its act together. The data is fixed and today’s v2 update adds filtering, search by store type, rebate type, cashless payment type, etc. The app is finally useful but still only supports Japanese language, handy nevertheless. Download it if you don’t already have it.