Cashless Roadmap 2024

In December 2024, Payments Japan published its "Cashless Roadmap 2024", focusing on Japan's cashless payment trends, the activities of the Cashless Promotion Council, international comparisons, and progress toward the goals outlined in previous roadmaps. The report highlighted the growing adoption of cashless payments in Japan, while also acknowledging challenges and areas for further improvement.

1. Japan's Cashless Payment Trends

Growth and Volume:

• Cashless payment volume in 2023 reached 126.7 trillion yen, comparable to the total amount of banknotes and coins in circulation.
• The government's expenditure in the fiscal year 2023 was also approximately 127.5 trillion yen, further indicating the scale of cashless transactions.

Payment Method Breakdown:

• Credit cards are the most used cashless method in terms of value, though growth has slowed to 37.5% in 2023.
• Code payments have seen significant growth and are now the second most used method, with an estimated 248 million accounts across various providers.
• E-money experienced a 5.3% increase in 2023 after slow growth the previous two years, likely due to increased travel and public transport use.

Average Transaction Values: Credit cards have the highest average transaction value at 5,000 yen, followed by debit cards at approximately 4,200 yen. E-money has lower average values, approximately 1,000 yen, and code payments fall in between around 1,600 yen.

Bank Transfers: 60.2% of withdrawals from personal salary receiving accounts are cashless, predominantly via credit card debit and online banking transfers.

Multiple Payment Methods: Japanese citizens have a high average of 10.8 cashless payment tools per person, with e-money being the most prevalent.

International Comparison: While Japan has a high rate of possessing various cashless payment methods, its overall cashless payment ratio remains relatively low compared to other developed nations.

Cashless Payment Ratio Progress: The report notes that both France and the United States had cashless payment ratios of less than 40% at some point and that they reached 50% roughly 6 years after they reached 40%. With Japan reaching 39.3% in 2023, the document forecasts that Japan might reach 50% around 2030.

A2A Payments & BNPL: The report emphasizes the growing significance of Account-to-Account (A2A) payments where funds are transferred directly between bank accounts as well as the popularity of Buy Now Pay Later (BNPL) services in some European countries and how these might be affecting cashles payment ratios in general.

2. Cashless Promotion Council Activities

• Membership: The Council comprises 283 members, including corporations, organizations, local governments, and individuals.
• Focus: Activities are shifting towards implementing previously discussed strategies and include both 'seeds-oriented' (identifying new trends) and 'needs-oriented' initiatives with more practical, implementable actions.

Key Projects:

• Roadmap 2024: Focused on investigating cashless policies in countries such as Taiwan, Singapore, and South Korea, to derive lessons for Japan.
• B2B Promotion: Addressed issues and risks in B2B payment services, looking to develop guidelines.
• Real & Online Integration: Examined challenges in combining online and physical retail experiences, along with the associated risks.
• Local Currency Guidelines: Developed guidelines for implementing local digital currencies for regional revitalization.
• Other Initiatives: Consumer Insights Survey
• Code Payment Trend Surveys
• Cashless Trend Surveys of Convenience Stores
• Information sharing platform for cashless
• Local Government and Industry support
• JPQR expansion
• Guideline Management
• Contributions to Government Policies
• Global collaboration on international standards.

3. International Cashless Policies (Taiwan, South Korea, Singapore, Denmark)

Taiwan:

• Aims for 90% mobile payment penetration by 2025 through a comprehensive strategy of digital infrastructure, legal reforms, and awareness initiatives.
• Implemented a cross-industry platform "e-Taiwan Pay" and a unified QR Code standard "TWQR".
• Aggressively expanding the applicability of mobile payments to government services, hospitals, national parks, and public transportation.

South Korea:

• Focused on tax evasion prevention by incentivizing the use of credit cards.
• Offered tax deductions for consumers and subsidies for stores accepting credit card payments.
• Implemented a system for tracking cash payments and integrated with electronic tax systems.
• Lowered fees on card transactions to encourage adoption of cashless.

Singapore:

• Embraces the "E-Payment Society" concept using a comprehensive approach that included government initiatives, infrastructure development, and regulatory framework.
• Developed the "Singapore Payments Roadmap" to unify payment systems and promote digital inclusion.
• Emphasized interoperability by consolidating POS terminals and enabling bank transfers via mobile numbers and email through PayNow.
• Established a central digital identity system for users and integrated it into MyInfo to facilitate information sharing between private and public organizations.

Denmark:

• Recognizes the dominance of cashless payments with only 12% of transactions being cash-based.
• Established a legal framework to allow some stores to choose to not accept cash while enabling some payments to always be cash.
• Lowered the threshold for cash payments, reflecting an effort to curb money laundering and promote digitalization.

4. Key Insights and Implications for Japan

• Government Leadership: The need for a strong governmental direction and coordination across ministries to effectively drive cashless adoption is crucial.
• Regulatory Framework: A more streamlined and adaptable legal framework for payment services is needed to accommodate emerging technologies and new services.
• Reevaluation of Cash: Rethinking the role of cash in society, including possible limitations, may be necessary to further promote the transition to cashless.
• Common Infrastructure: The importance of building a common digital infrastructure, rather than relying on private companies to set up their own systems, is emphasized.
• Data Sharing: The report highlights the need for better systems for data sharing to further promote cashless adoption and counter risks.
• Universal Design: Emphasis on designing cashless payment systems with accessibility for everyone in mind, including those with disabilities and older adults.

5. Progress Against 2020 Cashless Roadmap

• Choice of Payment Method: While there is a high level of choice available, there's a need to educate consumers on which tools fit their needs best.
• Cashless Prevalence: Cashless payment is becoming more common in retail and government payments, but there is still room for growth in some areas.
• "Benefits" of Cashless: While consumers are aware of financial benefits of using cashless, the document also mentions the convenience of cashless methods and how that increases quality of life.
• "Erosion of Payment Act": The trend of automation and seamless transactions is becoming more pronounced and the report notes the integration of payment processes into other activities.
• Digital Money Transfers: Digital money transfers are now a normal part of Japanese life.
• Data Utilization: Data utilization is not yet fully accepted by the Japanese public, and there are still privacy concerns to address.
• Seamless Lifestyle: The move to a fully digital lifestyle, not just for payments but also for other functions is being noted and is still on the rise.

Conclusion

The Cashless Roadmap presents a comprehensive overview of Japan's cashless payment landscape, emphasizing the progress made and the remaining challenges. The international comparisons and detailed analyses underscore the necessity of government leadership, infrastructure development, and regulatory reform to achieve a truly cashless society in Japan. The insights are not only relevant to industry stakeholders, but also offer valuable lessons for those involved in policy making related to financial inclusion, technology adoption, and economic development.

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