In Japan, the term "Furikomi" refers to a bank transfer or electronic funds transfer. This process allows an individual or business to transfer money directly from their bank account to the account of another person or business. Furikomi, or Japan bank transfer, is widely used in Japan for a variety of transactions such as paying bills, purchasing goods or transferring money between personal accounts. It's a convenient way to handle financial transactions without dealing with physical cash or cheques.

This guide will cover what businesses need to know about Furikomi: how it works, who uses it and why, its associated costs and fees, and how to start accepting it as a payment method.

What's in this article?

• How do Furikomi payments work?
  
• Where is Furikomi used?
  
• Who uses Furikomi?
  
• Benefits of accepting Furikomi
  
• Furikomi security measures
  
• Accepting Furikomi as a payment method
  
• Alternatives to Furikomi
  

How do Furikomi payments work?

Furikomi payments are the same as other bank transfers across the globe. The term Furikomi simply refers to a domestic bank transfer within Japan. The process for completing a Furikomi is outlined below.

• Initiation: The sender initiates a Furikomi either through an online banking platform, mobile banking app or ATM, or directly at a bank branch. To initiate a transaction, the sender must enter the recipient's name, bank and branch, account type and account number. The recipient name must match the name registered on the bank account. The sender must specify the transfer amount and can add an optional reference note stating the purpose of the transfer.

• Fee notification: The chosen platform will inform the sender about associated transaction fees, which vary based on the banks and types of accounts involved in the transfer. Fees may be higher if funds are moving between different banks or if the sender requests a faster processing time.

• Payment authorisation: The sender's bank verifies the availability of funds in the sender's account and the accuracy of the recipient's details. Then the sender authorises the transaction, often through a secure method such as a password, PIN or biometric verification.

• Fund transfer: Upon successful authorisation, the sender's bank electronically transfers the funds to the recipient's bank. Processing speeds vary: typically, funds are transferred within one working day, but this could take longer depending on factors such as the time of day and day of the week on which the transfer was initiated.

• Fund collection: The recipient's bank receives the funds and credits them to the recipient's account. This bank also checks to ensure that the funds are deposited into the correct account.

• Transfer confirmation: Both parties receive a confirmation of the completed transaction in their banking app, via email or as a paper statement, depending on their chosen method of communication with their bank.

Where is Furikomi used?

Furikomi is a deeply rooted payment method in Japan's financial environment, reflecting the country's unique blend of traditional financial habits and a strong inclination towards technological innovation. This payment method's usage has been shaped by Japan's cultural preferences, technological infrastructure and regulatory policies.

Japan's population has shown a persistent preference for cash transactions, despite its reputation as a high-tech society. In 2022, cash transactions still accounted for about 51% of point-of-sale transaction value. Furikomi has been able to act as a bridge between cash and digital payments by merging traditional and trusted banking structures with technological changes.

This preference for cash payments has not made Japan immune to the global rise of digital payments, however. The total transaction value for digital payments in Japan is projected to surpass US$397 billion in 2024. This is relatively low compared to other advanced economies but still indicates a growing shift from reliance on cash. Japan's high internet penetration rate of over 90% in 2022 and mobile smartphone penetration of over 70% in 2023 has created a solid infrastructure for digital payments, and payment methods such as Furikomi are poised to play a major role in this growing industry.

Approximately 29% of Japan's population is over 65, and this demographic has shown a preference for Furikomi over other digital payment methods. Generally, older demographics are less inclined to adopt newer digital payment methods, and Furikomi has benefited from its accessibility, familiarity and perceived security. Though mobile payments are becoming increasingly popular in Japan among younger people, Furikomi has maintained its foothold in the digital payment environment. Specifically, customers trust Furikomi for high-value and urgent transactions such as bill payments or expensive purchases.

The Japanese government has also supported the shift towards digital payment methods such as Furikomi, with the aim of increasing the ratio of cashless payments to 40% by 2025. The electronic payments services industry is primarily regulated by Japan's Financial Services Agency (FSA), which has balanced promoting innovation with security, financial stability and fraud prevention. Legislative changes, such as the 2017 amendment to the Banking Act, have also impacted Furikomi by encouraging more integrated financial services.

Who uses Furikomi?

• Individual customers
  In Japan, people of all ages use Furikomi for high-value transactions, attracted in part by its security, precision and ability to confirm transfers immediately.

• Small and medium-sized enterprises (SMEs)
  SMEs across various industries, such as retail and manufacturing, rely on Furikomi for business-related transactions such as supplier payments and salary disbursements.

• Large corporations
  Major corporations in the automotive, electronics and finance industries use Furikomi for large-scale transactions, intercompany transfers and international payments. This payment method's popularity comes from its ability to handle large sums and be integrated with corporate banking systems. The property sector also frequently uses Furikomi to complete large transactions such as property sales and rental agreements, and to transfer funds between agencies, buyers and sellers.

• E-commerce platforms
  Online marketplaces and e-commerce websites often include Furikomi as a payment method for customers who prefer a secure alternative to credit card transactions and want to mitigate online fraud risks.

• Utilities and service providers
  Businesses that provide utilities – such as electricity, water and gas – or services, such as telecom and internet, use Furikomi for billing in Japan. Its direct, often automated payment process makes it convenient for managing regular bills and minimising late payments.

• Educational institutions
  Schools and universities use Furikomi to collect tuition fees, donations and other related expenses.

• Government entities
  Government entities including tax authorities and local municipalities use Furikomi to collect tax payments, fines and other dues from Japanese citizens.

Benefits of accepting Furikomi

Furikomi payments share some common benefits with general electronic transfers and also offer specific advantages unique to the Japanese financial system and business culture. Furikomi is deeply engrained in Japan's financial culture, and businesses that accept it can benefit from its status as a familiar and trusted payment method.

Businesses that accept Furikomi as a payment method may see the following benefits:

• Customer recognition: Customers in Japan consider Furikomi a preferred payment method for its security and familiarity. Businesses that accept this payment option can attract a broader customer base by catering to this preference.

• Minimised transaction errors: Unlike some electronic transfer systems, Furikomi requires the recipient's name to be an exact match of the name on their bank account records. This precision minimises transaction errors and fraud.

• Customisable options: By using Furikomi, businesses can customise different types of transactions including regular and recurring transfers and one-off payments. This flexibility enables businesses to handle a range of payment processes such as paying suppliers, refunding customers or managing subscriptions all through one payment method.

• Smoother transactions: Most customers and businesses in Japan are already well versed in using Furikomi, creating a smooth transaction process.

• Expedited dispute resolution: In case of disputes or errors, the traceability and standardised nature of Furikomi transactions facilitate quicker resolution.

• Improved business reputation: In Japan, business relationships are often based on mutual trust and long-term cooperation. Using a reliable and well-established payment method such as Furikomi can enhance a company's reputation and signal a commitment to upholding traditional business practices, which can be valuable in negotiations and partnership building.

• Predictable payout schedules: Furikomi's predictable processing times allow businesses to plan their financial activities with more precision.

• Digital accessibility: Furikomi has adapted alongside Japan's digital infrastructure, and the service is accessible via online and mobile banking platforms. This makes it a suitable option for e-commerce businesses, digital-first enterprises, businesses in areas with limited access to physical banking facilities, and businesses looking to reduce physical travel and cash handling needs.

Furikomi security measures

Furikomi incorporates several security measures to ensure safe and reliable transactions. These measures are designed to protect the sender and the recipient from fraud and errors. Furikomi's typical security features are outlined below, although exact security measures vary from bank to bank.

• Encryption: Furikomi transactions typically use Secure Socket Layer (SSL) or its successor Transport Layer Security (TLS) to encrypt data sent between the user's device and the bank's server, making it difficult for unauthorised parties to intercept and decipher transaction details.

• Transaction limits: Transaction limits for Furikomi can vary depending on the bank and the account type. For individual accounts, daily limits often range from ¥500,000 to 10 million. For business accounts, these limits can be higher. Some banks also allow customers to set their own limits.

• Two-factor authentication (2FA): Many Japanese banks have implemented 2FA for online and mobile banking transactions such as Furikomi. This means that the user submits a password or PIN as well as a second authentication, such as a one-time passcode sent via SMS or a token generated by a security device. Some banks have also started incorporating biometric authentication such as fingerprint or facial recognition for mobile banking applications, adding an extra layer of security.

• Real-time monitoring: Banks often use advanced monitoring systems to detect unusual transaction patterns that could indicate fraud. Customers are notified immediately of any suspicious activity through SMS or email alerts, enabling a swift response to potential security threats.

• Regulatory compliance: Japanese banks comply with the Payment Services Act, which mandates security measures including regular audits, compliance with data protection laws and maintenance of high cybersecurity standards to protect customer data.

• Customer education initiatives: Banks in Japan actively educate their customers about safe Furikomi practices, offering guidance on common phishing tactics, the importance of keeping passwords and PINs confidential and how to securely initiate transactions.

Accepting Furikomi as a payment method

Businesses that want to start accepting Furikomi must meet several requirements. Before starting the process to accept this payment method, businesses should ensure that they understand the associated fee structure and confirm that this payment method fits their needs and goals. Businesses will need to have a process in place for recording Furikomi transactions, reconciling them with their accounts and managing any discrepancies or issues that may arise. They should also plan to have a customer support system in place to address any queries or issues related to Furikomi payments.

Businesses must have the following basic operational features to be eligible to accept Furikomi:

• Business registration documentation: To accept Furikomi, businesses must have proof of business registration in Japan, such as a copy of the company registration certificate.

• Security measures: Businesses must ensure that they have adequate security measures in place to protect customer data, transaction details and any other sensitive financial information. This includes compliance with all applicable data protection laws.

• Japanese bank account: Furikomi is a domestic bank transfer system that relies on the use of Japanese bank account numbers and routing information, which are unique to Japanese banks. Businesses must have an active Japanese bank account in which they can receive Furikomi payments from customers.

If a business does not have a Japanese bank account but wants to accept Furikomi payments, there are a few ways around this:

• Partnering with a local entity: A business can partner with a local Japanese entity with a Japanese bank account. This entity can receive Furikomi payments on behalf of the foreign business and then transfer the funds through international banking channels.

• Working with international payment service providers: Some international payment service providers in Japan can facilitate the acceptance of Furikomi payments on behalf of foreign businesses. These providers can receive Furikomi into their Japanese bank accounts and then remit the funds to the business's account in another country.

• Enlisting cross-border payment services: Some financial institutions offer cross-border payment services, though these can be limited and typically come with higher transaction fees and more regulatory complexity. Institutions with these services can receive Furikomi payments to their Japanese bank account on behalf of foreign businesses, convert the currency and transfer the payment to the business.

If the business has the appropriate proof of business registration, security measures, and an active Japanese bank account or access to one via one of the options above, it can begin the process to accept Furikomi payments, as outlined below.

• Account verification: Firstly, the business must undergo an account verification process with the bank. This process includes providing detailed information about the business, such as the nature of the business, expected transaction volumes and company ownership details.

• Meeting Know Your Customer (KYC) standards: Japanese banks are required to adhere to KYC regulations and will need to collect detailed information from businesses that want to accept Furikomi payments. Businesses may need to provide identification for key business owners and directors as well as information about their ownership structure and the nature of their operations.

• Payment system integration: Businesses will need to integrate a system for processing Furikomi payments. This might involve setting up specific software or platforms that can handle these transactions and record them appropriately in the business's accounting systems.

• Customer notification setup: Businesses will need to establish a system to notify customers about their payment details for Furikomi transactions, including the recipient's bank account number and the name of the account holder (i.e. the business name as registered with the bank).

Alternatives to Furikomi

While Furikomi is a standard payment method in Japan, businesses have several alternatives to choose from, such as:

• Credit and debit card payments: Credit and debit card payments are a globally accepted, convenient payment method for customers and a widespread alternative to bank transfers. Businesses can process these payments via point-of-sale (POS) systems or online payment gateways. They are particularly relevant for retail and e-commerce businesses.

• E-money and digital wallets: Digital wallets have gained popularity in Japan. This payment method allows customers to complete quick and contactless transactions directly from their smartphones. Specifically, businesses that target tech-savvy customers can benefit from accepting this payment method.

• Bank drafts and cheques: While less common, bank drafts and cheques are still used for some business transactions in Japan, especially for large one-off payments. This option is less convenient due to longer processing times and the need to handle paper documents, but it does offer a certain level of security.

• Direct debit: With direct debits, businesses automatically withdraw funds from their customers' bank accounts for recurring payments. This is an ideal payment method for subscription-based services or regular billing models such as utility payments or monthly service fees.

• Cash on delivery (COD): In Japan, COD is a popular payment method for e-commerce transactions. It allows customers to pay in cash upon receiving goods, which can be reassuring for those wary of online payments. However, it does involve more complex logistics than digital payment methods.

• Wire transfers: Wire transfers are a common payment method for international transactions in Japan. However, these can incur higher fees and have longer processing times than domestic transfers such as Furikomi.

• Payment service providers (PSPs): Businesses can use comprehensive PSPs such as Stripe to process a range of payment methods including credit card payments, mobile payments and direct debits. PSPs provide an integrated solution for handling multiple payment methods through a single platform.

• Mobile POS systems: Mobile POS systems enable businesses to process payments on the go using a smartphone or tablet. This is particularly useful for small businesses, pop-up shops or those offering services at the customer's location.