February 25, 2019
Businesses, consumers increasingly turn to smartphone payments as modus operandi.
More and more businesses are introducing cashless payment services via smartphones, with quick, easy methods such as scanning QR codes encouraging the spread of these payments. However, the field is getting crowded, which will lead to various issues.
Just a few seconds
At Bic Camera’s Ikebukuro main store in Toshima Ward, Tokyo, on Saturday, one customer paid for his shopping via the PayPay smartphone payment service. The 49-year-old man from Kawaguchi, Saitama Prefecture, bought a tripod, and received 20 percent back in points.
“I can buy things at a lower price than with cash, and the bill is settled in an instant,” the man said.
Payment systems using QR codes are essentially the same among their various providers.
At the cash register, the customer tells the cashier which service they want to use and opens the corresponding app on their smartphone. A QR code and a bar code are displayed on the screen.
The clerk scans the QR code or bar code with a terminal, and two or three seconds later a message arrives on the smartphone containing such information as the amount paid and the name of the store. This completes the payment.
There is also a method in which the customer scans a QR code displayed by the store. The purchase made Saturday at the Bic Camera store with PayPay was conducted this way.
Users register such information as a bank account or credit card number with the app. In the case of a credit card, payment is made later; with a bank account the purchase amount is immediately deducted.
“Hardly any of my friends in China carry a long wallet around anymore,” a 24-year-old female graduate student from China said. She expressed hope that QR payments would spread in Japan.
What triggered expansion?
The Osaifu-Keitai service from NTT Docomo Inc. was one of the forerunners among smartphone cashless payment services. Suica and other electronic money cards provided by transportation companies can also be used through smartphones.
One factor that has slowed the spread of such services was that business establishments needed special terminals or peripherals to read electronic data from smartphones.
The smartphone payment services that are increasingly popular these days read such things as QR codes and bar codes. With these systems, business establishments can complete payments with a smartphone or tablet terminal and the bar code reader attached to a cash register, so there is no need to have specialized terminals.
This makes the payment services easy to introduce for businesses such as independently operated eating and drinking establishments, as well as very small to midsize retailers.
Drawing in customers
Different providers are competing over such elements as reward points and additional functions, seeking to draw in customers.
Line Pay, the service offered by the free communications app Line, allows users to split their bill at eating and drinking establishments and elsewhere. They can also send money to friends. Already 1.3 million shops and other businesses have joined the service.
About 60 regional and other banks are participating in the J-Coin Pay service to be introduced by Mizuho Bank in March. The aim is to have at least 300,000 business establishments participating within a few years and at least 6.5 million users.
One of J-Coin Pay’s selling points is that when money transferred to a smartphone from an account is returned to the account, there is no fee for the transfer.
PayPay held a “¥10 billion point-back campaign” at the end of last year, which received a significant response. The second edition of this campaign will begin this month, in a bid to increase PayPay’s user base even further.
Each provider is trying to devise ways to use points to their advantage.
The spread of smartphone payment services using QR codes and other methods has just gotten started. According to trial calculations by the JMA Research Institute Inc., such payments are expected to reach ¥600 billion in fiscal 2019. This represents only about 1 percent of the approximately ¥60 trillion to be spent via credit cards.
In fiscal 2023, the amount of smartphone payment purchases is expected to expand to about ¥8 trillion, on a level with about ¥5 trillion spent via electronic money in fiscal 2017.Speech