I've been living in Tokyo for almost three months now. Combine that with my elementary schooler level Japanese literacy and I've basically become an expert on the Japanese payments landscape. Lack of expertise notwithstanding, here are a few things I've noticed so far that have surprised, delighted and confused me, sometimes all at the same time.
Being able to choose your card brand
Like in the US, when applying for a credit card from a specific card company, you often have a choice between what card you want, with each coming with different benefits, yearly fees, etc. However, something that I've never seen in the US is also having a choice of what card brand you want your card to use.
Why would consumers care about this? I honestly have no idea. For me it was useful recently because Costco.co.jp only accepts Mastercard cards, but the two Japanese cards I had were Visa, so I had to resort to using an American card. But now I have a Mastercard card (thank you Rakuten) so I don't have to use an American card for Costco anymore!
Point systems
Oh god there are so many different loyalty point systems here. 7/11? Of course. Supermarket chain? Naturally. Electronics store? Yep. One each for the innumerable number of transit operators in the Tokyo area? Sure, why not. Amazon? Yes, Japan is the only country in the world with Amazon points. I could keep going but I'll spare you.
As an example, the Japanese government is trying to encourage people to apply for their new My Number identity card system as part of its efforts to modernize and digitalize government operations. However, people have been generally hesitant about applying, often seeing the potential privacy downsides as outweighing any increase in convenience. So naturally the government is resorting to bribing people to the tune of ¥20,000 (~$150) to get the card. But instead of forking over cash or doing an electronic transfer, they decided to pay out the money through the point systems! Simply choose from one of the 82 currently available point systems and the free money can be yours!
Alternative payment methods
This goes hand in hand with the point systems, where each system generally has a way to exchange the points directly for goods and services instead of just giving you a post-hoc discount or something. For example, maybe you've been collecting Nanaco points at 7/11. Well congratulations, you can directly spend these points at not just 7/11 but also McDonald's, IKEA or many other large chain stores! Got Waon points from the supermarket? You can spend them at national number 2 and 3 convenience store chains FamilyMart and Lawson, at the ubiquitous gyudon restaurant Yoshinoya or hundreds of other places.
Both of these cards go beyond being just point cards, but are full blown payment methods in and of themselves. You can load value onto them in a variety of ways, with depositing cash into a dedicated machine being the main way this was done historically. However, both of these cards can be provisioned directly into Apple Wallet via the Wallet app and used and re-charged with Apple Pay. Both cards use Sony's FeliCa contactless technology and would fall under the category of E-money cards.
In addition to E-money cards there are various QR/barcode payment methods. The most popular one is PayPay, but many others exist including Rakuten Pay and cell giant Docomo's d払い ("D-Barai", Japanese for D-Pay). And of course each of these methods has their corresponding point systems: PayPay Points, R Points and D Points.
In the US we're used to walking into a store and seeing a little sign that says they accept Visa, Mastercard, AmEx, Discover and maybe a couple other logos on there. In Japan those signs are a little… busier. For example, here are all the payment methods that big convenience store chain FamilyMart accepts:
By my count there are 47 distinct logos! And it's not just like you fork your card over and the cashier knows what to do. You have to say exactly which method i.e. box on the above chart you're going to use.
Cash as intermediary
With all these cashless payment methods available, I've been able to mostly avoid using cash to pay for things. What I haven't been able to avoid is using the ATM. Using cash as an intermediary is often quicker and cheaper than going the digital route. What do I mean by this? Well take for example transferring money between my bank accounts at bank A and B. Like most Japanese banks, Bank A charges me a fee for external transfers. Also if it's outside business hours, the transfer won't arrive until the next business day. So what do I do if it's Saturday and I want to transfer money between my accounts instantly and for free? Well I go to an ATM that bank A lets me withdraw from for free (e.g. at 7/11), withdraw cash, then deposit that cash right back into the same ATM into my account at bank B and boom! Free, instant transfer.
Another example is loading money onto your PayPay account. You can directly link your bank account via the PayPay app, but to do that you need to have completed identity verification, which requires the aforementioned My Number card. Unfortunately the My Number card takes a couple months to arrive so what do you do until then? You go to an ATM, withdraw cash, scan a QR code on the ATM screen with the PayPay app, then stick the cash right back into the ATM.
Why is it like this? I'm not really sure, but it seems like cash is still the lowest common denominator, and the ATM provides a simple and universal entry point for integration that provides companies a unilateral, low risk way of letting customers deposit money.
That's it
Stay tuned for next time, when I'll not forget to mention Setagaya Pay, the QR code payment method brought to you by the Tokyo ward of Setagaya. Maybe counties in the US will follow Setagaya's lead and we'll one day see Dekalb or San Mateo County Pay…