Payment Related

There are 33 types of cashless payment. Which one will survive?

Do you know how many cashless payments there are in Japan now?

These are just a few, such as “SUICA, WAON, Amex, Visa, Rakuten Pay, Amazon Pay, d-Pay, PayPay”, with only 33 types of services called cashless are known to Nippon Banks now（※1).

Moreover, 33 types are the numbers excluding traditional cashless payments such as automatic bank debits, ATM transfers, and cash on delivery.

How should ordinary consumers understand the cashless society that has increased so far?

Therefore, this time, we will classify cashless as “NFC / QR / credit card / prepaid/immediate withdrawal” to get an overall picture of cashless. And which of the 33 types will survive?

※1：https://www.boj.or.jp/announcements/release_2018/data/rel181205a2.pdf

NFC or QR

The 33 types can be divided into 13 types of NFC and 20 types of QR. From there you will be divided into QR, credit card, prepaid and immediate withdrawal.

Cashless belonging to NFC (13 types)

The following 13 types of cashless are classified by the Bank of Japan as NFC.

● SUICA ● WAON ● Rakuten Edy ● NANACO ● iD ● Quick Pay ● VISA ● WAY ● WAVE ● American Express ● Contactless ● JCB ● Contactless ● Mastercard ● Contactless ● Osaifu-Keitai ● Apple Pay ● Google Pay

What is NFC?

NFC is an acronym for Near field communication, which translates to “near-field communication” in Japanese. It is a function that brings two machines close to each other and exchanges data wirelessly.

For example, if a restaurant has an NFC-equipped reader and a customer has an NFC-equipped smartphone, payment data can be shared by bringing them closer together. Payment is completed when the reader of the restaurant gets the data of “received money” and the smartphone gets the data of “paid money”.

Also, if you place an NFC-equipped ticket gate at a train station and the passenger has an NFC-equipped card, you can pay the fare simply by holding the card over the ticket gate. In the case of a card, the NFC function is incorporated into the IC chip.

As long as you can exchange data on money exchanges, you can use that data to put money into your bank account or withdraw money from your bank account.

Cashless belonging to QR (20 types)

There are 20 types of cashless payments in which the Bank of Japan is classified as QR.

● Hama Pay ● Rakuten Pay ● Amazon Pay ● d Payment ● Epos Pay ● Line Pay ● Origami Pay ● Pay B ● Pay ID ● Pay Pay ● Pixiv Pay ● Pulling ● Sukiyaki Pay ● Smash Pay ● Yoka Pay ● & Pay ● Aqua Coin ● Sarubobo Coin ● Shima Toku Currency ● Shimokita Coin

The Bank of Japan made this classification in September 2018, and in September 2020, Origami Pay terminated its service and the business was absorbed by Melpay.

And at that time, the Bank of Japan had not yet counted Melpay as cashless. These violent movements also make it difficult to get a complete picture of cashless payments.

QR Mechanism: Customer Reading and Store Reading

QR is a system that uses a pattern type code called quick response, and was developed by Denso Wave in Japan.

Pattern type codes have barcodes, but QR codes have the advantage that they can contain more information than barcodes and that they are less likely to be misread.

There are two types of QR cashless: a user scan method in which the customer reads the QR code presented by the store with a smartphone, and conversely, a store scan method in which the QR code presented by the customer on the smartphone is read by the scanner on the store side.

With the user scan method, the customer can confirm the payee by scanning the QR code of the store. Once you enter the fee, that amount of money will be transferred from the customer’s bank account to the store’s bank account.

In the store scan method, the store can confirm the recipient by scanning the QR code of the customer’s smartphone. If you enter a fee, that amount of money will be transferred from the customer’s bank account to the store’s bank account.

QR can be divided into Credit Card, Prepaid, and Immediate Withdrawal

The 30 types of QR are further divided into the following three types.

Rakuten Pay and d-payment linked with credit cards
Line pay, etc., which is a prepaid system
Immediate withdrawal method, Hama Pay, etc.

This classification is very complex, for example, Amazon Pay belongs to credit cards, prepaid and immediate withdrawals. Origami Pay before the end belongs to credit card and immediate withdrawal. Hama Pay works with Visa, iD, and Apple Pay.

In addition, there are two types of immediate debits: debit card method and direct debit.

Since cashless businesses are enthusiastic about improving user convenience, they are increasing their functions one after another and linking with services of other companies.

Which Cashless Payment will Survive?

With 33 types, there is a lot of interest in which cashless will survive. For example, Line Pay and PayPay will be integrated in April 2022, and PayPay will remain (※2). As I mentioned earlier, Origami Pay has disappeared.

Cashless survival is also being watched by the media. Let’s check what kind of views each media company has.

※2：https://www.nikkei.com/article/DGXZQODZ016LS0R00C21A3000000/

Nikkei X Trend sees Fees as Key

Nikkei X Trend, a magazine of Nikkei Inc., surveys five major cashless companies and considers that the key to survival is fees (* 3). Fees are the money retailers pay to cashless businesses.

This is because retailers bear the cost of cashless payments. I bear the cost with a fee.

For credit cards, the retailer’s commission can be as high as 7{5f3ac39ba1b9031997b955ac72c92bb5456d725b06fa10f02cdda1ab745591c7} of sales. However, cashless businesses have set a fee of 3.25{5f3ac39ba1b9031997b955ac72c92bb5456d725b06fa10f02cdda1ab745591c7}.

However, Nikkei X Trend believes that cashless operators will not be able to recover costs at 3.25{5f3ac39ba1b9031997b955ac72c92bb5456d725b06fa10f02cdda1ab745591c7} and will raise commissions in the near future. At that time, the cashless who raised the fee earlier may be canceled by the retail store.

In that case, cashless businesses with abundant funds and strong corporate strength will be able to stop raising prices or hold back with minimal price increases, making it easier to survive.

※3：https://xtrend.nikkei.com/atcl/contents/18/00313/00011/

SuperApp Determines the Game

Coincheck Japan, a financial media company, believes that SuperAppli will determine the game during the cashless Warring States period（※4).

A super app is a cashless app on your smartphone with various services attached to it.

You can only pay for cashless apps, but with the SuperAppli, you can call a taxi, book hotels, and shop online. Of course, you can pay for a taxi, hotel, and shopping with the cashless function.

The convenience of payment (settlement) is about to reach its peak with technologies such as NFC and QR. In other words, it is difficult to determine the superiority or inferiority of cashless payments.

When that happens, there is no choice but to make a difference in shopping, which is the pre-payment stage. In addition, if shopping and payment are combined, the cost of the payment business (cashless operating cost) may be covered by the shopping business. This will reduce the fees charged to retailers and give you an advantage over other companies.

※4：https://www.coindeskjapan.com/32975/

Summary – It is Necessary to Actually Use it Properly

There are various types of cashless payments, and the services and benefits are different. There are so many types that it’s not easy to understand.

So smart consumers are using multiple cashless services to find a service that fits their lifestyle. Since shopping and payment are experiences themselves, it may be a reasonable decision to feel multiple cashless payments and decide the superiority or inferiority.

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