We often think of Japan as a technologically advanced payments market where people regularly use their mobile phones or contactless cards to pay. The reality is that Japan remains strongly a cash based economy.
I just got back from skiing in Hokkaido, an island in the northern part of Japan, in a village called Niseko, considered to be the best ski resort in Japan for fresh powdery snow, which we got lots of. Using a credit card was a real pain, even at ATM’s, which mostly accept cards issued by local banks, and nothing else. Lots of merchants don’t accept cards. Others apply a surcharge to cover the interchange fees.
Here's an example. This snowmobile rental service on one of the ski slopes doesn’t take cards at all, even though there are lots of foreigners, especially Australians (notice the prices in English). I was waiting for a friend who went into the shop to get his snowboard fixed, when I saw the sign and couldn’t resist taking a picture.
Then a few hours later, at dinner in a local restaurant, I noticed a little sign at the counter, advertising a 5% surcharge for credit card customers. Camera phones are great.
It was easy to use my card at the hotel in Niseko, as well as in hotels and department stores in Sapporo and Tokyo, without a surcharge. I also watched people pay with their contactless cards at a sandwich counter in the Tokyo airport, apparently at the same price as cash customers. But as you venture a little bit away from hotels and department stores (and the airport) and explore local restaurants and stores, you quickly discover that electronic payments are actually rare in Japan, even in the big cities.
Credit card companies do try hard to get their cards used more, with every incentive possible, including high tech gadgetry like NFC enabled mobile phones and contactless cards. But all of this effort doesn’t appear to be promoting widespread use and acceptance of credit or debit cards. I imagine that cash usage is most likely falling in Japan, as it is elsewhere, but it doesn’t seem to be falling very fast. It will take a long time at this rate to catch up with other developed nations. This may be why credit card companies in Japan are so keen on exploring things like mobile payments, while banks in other countries have trouble finding a viable ROI for such massive investments.
In most cases, these investments are a waste of money, even in Japan. They focus almost entirely on creating incentives for customers to use a card, or mobile phone, or whatever, to pay, when they need to be focusing instead on creating incentives for merchants to accept cards. That’s a completely different mindset.