Accepting the Right Japan Payment Methods

Japan is a densely populated nation of over 125 million but has one of the lowest cross-border shopping rates in the world at just over 10%. This has created an untapped market with an excellent opportunity for businesses who are prepared to localise the Japanese shopping experience to meet cultural expectations in Japan.

Around 99% of Japan’s population only speaks Japanese, so the website must be in Japanese, designed for the Japanese market, and the payment platforms must provide access to the Japanese yen and local payment methods.

Many Japanese, especially elder people still shop on desktops and Japan has a lower smartphone penetration when compared to other developed nations so these factors must be taken into consideration when making the website design.

Japan remains a largely cash-based market, where convenience store payments are hugely popular for making online purchases. Credit cards are still the most used payment method, however, customers are very careful with trusting their card information online and might prefer an alternative payment method if it is provided.

Credit Cards

Recent surveys show that credit cards serve as a preferred payment method for 57.6% of the population with a credit card penetration rate of 84%. Credit card ownership is particularly high among older age groups, and leading areas of credit card usage included retail stores, online shopping, and regular payments, such as phone bills.

Japanese consumers pay for more than half of their online purchases with credit cards with the average number of credit cards per individual is 3.

Convenience Store (Konbini)

Cash accounts for 13% of ecommerce in Japan with a preference of consumers in a highly developed financial market to use convenience stores to make cash payments for online transactions.

This allows customers who can’t or don’t want to use a credit card to pay safely at the convenience store.

Cash as a payment method also carries a cultural perception of offering security and anonymity when making payments in Japan and is available for cash-on-delivery options.

Digital Wallets

The fastest emerging payment methods in Japan are PayPay, Rakuten, Merpay and LinePay.

Smartphone payments have recently been exponentially growing in popularity. It is an easy way for consumers to make payments online by scanning a QR code with their phone camera, or by using their mobile phone app. 

Digital wallets are used in just seven percent of sales in 2021. The digital wallet brands that have made an impact in Japan are mostly offshoots from large e-commerce brands, like Yahoo! Wallet and Rakuten Wallet.

The corresponding contactless IC chip technology, called “FeliCa” was invented by the Sony Group. FeliCa is not only used for automated fare collection via smartcard but also enables NFC payments on mobile devices such as smartphones.

Bank Transfers

In Japan, it is common to leverage bank transfers to pay companies directly. 

Bank transfer, or Furikomi, is the third most popular payment method in Japan. This can be attributed to the fact that Japanese adults hold more bank accounts per capita than anywhere else in the world.

Furikomi can be done online, at a bank branch, or via ATM. ATMs found in convenience stores (Konbini) allow consumers to make payments in either cash or card. With ATM payments, merchants can reach all shoppers that have a bank account. This ensures a lower drop-off compared to Konbini payment which typically involves buying online, then paying offline at the convenience store.

Online payment services

Online payment services like Paypal or Payoneer are used mainly for cross-border payments to overseas e-retailers in Japan, but the platform is still relatively small in Japan’s domestic payments market and there is a large room for growth. PayPal has over 4.3 million active accounts in Japan though this only accounts for 1 % of the entire accounts. 

Mobile payments

Compared with their neighbours in China where 83% of payments are made via mobile devices, and South Korea where only 20% of payments are made via cash, Japan is a long way behind.