Missing Link: How small Japanese stores are using digital payments
Japan was once the home of cash. This is still partly the case, but not only. A short tour of Tokyo's outskirts shows why.
Choice of digital payment methods in a bar in Tokyo: go big, don't go small.
(Image: Ben Schwan)
Japan was once famous for being the country where cash is still king: every tourist was advised to run to the nearest mini-market such as 7-Eleven, Lawson or FamilyMart, which they call konbini here, as soon as they arrived at the airport to pick up enough cash. "Nothing works without yen", as the saying always goes – and the ritual of handing over bills and receiving the change with a small bow, almost royally with two hands, is a classic Japanese courtesy cliché.
And to some extent this is still true, for example when you realize that you can only buy and top up your Suica or Passmo card for travel (and the daily little things) at the vending machines if you don't know how to do this in your mobile wallet. And there are also various traditional restaurants where the slogan "cash is king" is still upheld: It's not uncommon to see highly complex vending machines for ordering individual dishes and drinks in front of the door, into which bills are then inserted at the end because they still don't understand cards.
Pandemic as a driver of digitalization
But a lot has happened since the pandemic: thanks in part to government support, both large and small stores, restaurants and service providers have upgraded to electronic payment methods. As a result, I actually managed to get by almost without cash during my last visit to Tokyo. Only very occasionally did my research assistant have to reach for my wallet to advance me a few paper yen because I had left them at the hotel. For example, in a classic and delicious soba restaurant in the Ueno district, which looked as if it had been left over from the 1980s, or at a stall selling temple souvenirs at a shrine.
(Image: Ben Schwan)
To see how Japan pays today, I took an evening trip to Kunitachi. It's a town – Tokyo, which is also a prefecture, made up of many towns – pretty much in the middle of the capital region, with a population of just under 75,000. There is a beautiful modern train station in the center, which is on the JR East Chuo Line (Rapid) and just under 35 kilometers from Tokyo Central Station. If it is cherry blossom season, the avenue directly adjacent to it is particularly pretty. However, we don't have time for trees this evening, but visit various pubs and restaurants and talk to the owners.
Japan between (very) old and (very) new
As a newcomer to Japan, it is important to know that the country constantly oscillates between hyper-modernity and (sometimes frighteningly bureaucratic) tradition. The chatbot-supported robot café and the high-speed train every 15 minutes meet – here, somewhat exaggeratedly, – with press departments that do not allow journalists to take photos alone with their cell phones at train stations, which is why you have to fill out a multi-page fax form beforehand so that a chaperone can be assigned to you. But to a certain extent, this is also part of the charm of Nippon, because what comes out in the end simply works. People are friendly, polite and often simply excited to show you what they can do. There is still pride in their own work and that of the company. Ergo: It feels a bit like how you imagine Germany "used to be", even if that is probably a lot of imagination.
(Image: Ben Schwan)
Our first excursion, just behind Kunitachi station, is to the Fusa restaurant. It is barely bigger than a living room and owner Kenjiro Takaku is also the chef. There are classic seafood dishes and some meat. Thick pipes lead the exhaust air from the charcoal grills upwards. A friendly guest, who looks like an old rock'n'roller, refrains from lighting a cigarette at our request, which is actually permitted here due to the size. Takaku talks about how the situation has changed since the pandemic. Like so many here, he was faced with fewer customers and more takeaway orders when it started. And the customers who were there increasingly turned to digital payment methods. This also worked out well because more and more people were getting rid of payment terminals. The Japanese were the inventors of the QR code, but China then showed them how to use it as a means of payment with WeChat Pay and AliPay. However, the Softbank subsidiary PayPay (which will be discussed in a future article) is now storming onto the market to conquer this area. It was launched in 2018, just at the right time.
Paying with QR code comes to Japan
In fact, PayPay is also the most widely used digital payment method in the Fuso, although Takaku offers both credit cards via NFC (including Google Pay and Apple Pay) and the digital money Suica, and has even purchased a separate terminal for each. PayPay works from cell phone to cell phone and even from paper to cell phone: the customer scans a QR code, enters the amount and pays, debited from a bank account previously linked in the app (unfortunately currently only Japanese). It is a QR-based debit system. In China, WeChat Pay and AliPay are already being used by beggars on the street. PayPay also benefited from the fact that there were initially many benefits: both for the seller, who had to pay low or even no commission (in contrast to the 3 to 5 percent for credit cards) plus numerous special offers and price reductions for users of the app.
(Image: Ben Schwan)
The second appointment on our little evening tour is with Masashi Miwa. The man runs a total of two bars and restaurants and his store in Kunitachi is a little further down the street from the station. It's not actually open yet, but we are allowed to watch him prepare. The restaurant has a mixed beach theme, at least there is sand under the bar table. Miwa is a baseball fan and admires the Saitama Seibu Lions cap I've just bought. He has prepared something for guests so that they can pay: A Plexiglas sign complete with stand, on which (see lead picture) a whopping two dozen different payment options can be found. There is practically nothing missing, and that in an establishment that holds perhaps 50 people.
From bar to two dozen payment options
"In this area," says Miwa proudly, "there are some restaurants and bars that don't even accept credit cards, they only work with cash." He himself was cautious at first and initially bought a traditional payment terminal. He has since switched to the aforementioned super combination. It is offered via a local service provider called AirPay, which sells all-in-one devices that support both traditional credit cards and the Japan-only Felica system, on which Suica and Co. are based. In addition, there is the contract with PayPay and the support of various mobile payment options via the cell phone bill offered by local providers such as au and Docomo.
In the third restaurant of the evening, a gastropub that combines Italian and Japanese cuisine, Kohei Miyamoto wields the wooden spoon. The "Bico", named after one of Miyamoto's cats, is also about the size of a living room, with a single long row in front of the counter. Despite the fact that the store is still quite new – It opened in 2021 – Initially, payment was by cash only. But Miyamoto quickly learned that the future was moving towards electronic payment. Customer demand grew, he benefited from government digitization programs and, last but not least, from PayPay's low fees. The question now is how this will all continue.
Despite introductory rates and government support, digital payment methods always cost entrepreneurs commission, which they have to recoup somehow. But cash is not free either: it has to be collected from the bank and taken to the bank and more and more banks are charging handling fees. In any case, Western visitors are happy when they come to Japan and don't have to carry cash in an increasing number of smaller areas. But sometimes what the stores accept is also confusing: in a branch of the US donut chain Krispy Kreme, of all places, they didn't want my Apple Watch as a means of payment and I used Suica, funnily enough both on the same iPhone.
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