Alipay Challenges Japan's Love for Cash

The operator of Alipay, the world's leading mobile payment platform, is looking to expand its services across Japan. Eric Jing, the CEO of Ant Financial Services, announced in Tokyo that the firm plans to collaborate with more businesses to promote cashless transactions in smaller cities and rural areas.

What's Alipay

The Alipay payment method is simple. Customers use their smartphone to scan a QR code displayed by a business, or the business can scan the QR code in the customer's phone. Each user's app is linked to a bank account in China. The transaction goes through Alipay. More than 700 million Chinese people use the service to pay for groceries, public transport, street food, and more. Chinese people are increasingly traveling overseas, and Ant Financial is keen to expand its global business to cater for them. It currently provides payment services in more than 40 countries and regions, and supports 27 currencies.

Opportunities and Challenges

Alipay entered the Japanese market in 2015. It's now available at major retailers, restaurant chains, and in airports at big cities. The challenge is to expand its coverage. The pitch by Ant Financial to smaller businesses and rural areas is that it can help them grab a bigger share of tourist spending by offering travelers a familiar payment method. In 2017, Chinese visitors to Japan spent over 1.6 trillion yen, or 14.3 billion dollars. Eric Jing says Alipay can be "the bridge between inbound visitors and local merchants" and it would contribute to "driving the local economy".

But the campaign may not be an easy one. Many shops and restaurants, especially in regional areas, take cash only. They're reluctant to pay to set up terminals for online transactions. They say their customers typically feel that cash is a more safe and secure form of payment.

Figures show that in Japan, cashless payments account for less than 20% of all consumer transactions. That puts the country far behind South Korea, with nearly 90%, and China, on 60%.

Government Push

The time is right for Alipay to challenge Japan's preference for cash. In April, an industry ministry panel proposed that Japan aim to double the rate of cashless transactions to 40% by 2025, and in the longer term, to hit 80%.

Government officials worry that businesses will miss out on a big source of potential revenue in the lead up to the 2020 Tokyo Olympics. They note that many tourists have complained about the way some businesses only accept paper bills and coins. Officials also say online transactions will make it easier to cope with the worker shortage. The government is looking at ways to encourage digital payments, including with tax breaks or subsidies for terminal installation, and running ads to promote the merits to consumers.