Smartphones have become an important part of many people’s daily lives across the world. As a result, mobile payments have gained traction as a form of cashless payment, allowing customers to make payments on their mobile devices. These payments are now available for a wide range of transactions in Japan.

In this article, we explain the basics of mobile payments, including market size, main types used in Japan, and advantages and disadvantages for businesses and customers.

What’s in this article?

• What are mobile payments?
  
• How big is the market for mobile payments?
  
• What kinds of mobile payments are there?
  
• Advantages and disadvantages of mobile payments for businesses
  
• Advantages and disadvantages of mobile payments for customers
  
• How can businesses adopt mobile payments?
  
• How can businesses enhance their payment processes with mobile payments?
  

What are mobile payments?

A mobile payment is any electronic payment method that uses a mobile device, such as a smartphone or tablet. Customers can easily make these payments with a device, so there’s no need to have cash or credit cards on hand. Because of their convenience, mobile payments have grown quite popular.

To use this method, a customer downloads an app that supports mobile payments. Next, they register their payment information, including a credit card, bank account, electronic money, etc. Then, they’re ready to make payments.

Mobile payments are sometimes called “smartphone payments,” since they’re usually made with a smartphone. However, the definition of a mobile payment is broader, as it refers to a payment using any mobile device. The term “smartphone payment” only refers to payments using a smartphone.

Mobile payments vs. cashless payments

There are some differences between mobile payments and cashless payments. Cashless payments are all payment methods that do not use cash. For example, credit cards are one form of cashless payment. Mobile payments, however, are cashless payments made using mobile devices. It’s important to remember the term “cashless payment” is broader and encompasses mobile payments.

How big is the market for mobile payments?

Mobile payments are becoming popular in Japan and around the world. The advancement of communication technology has enabled more and more people to own smartphones. Cashless payments have also been promoted by governments worldwide, and mobile payments are rapidly gaining momentum as part of these efforts.

The 2024 White Paper on Information and Communications—published by The Ministry of Internal Affairs and Communications—claims that global mobile payment transactions are expected to reach approximately $6.11 trillion USD by 2028. This suggests mobile payments have become an important payment method for customers in various markets.

In addition, the use rate of cashless payments is increasing year by year. The Ministry of Internal Affairs and Communications has calculated the rate of cashless payments in Japan in 2024 as 42.8%. This rate exceeded the previous year’s figure (39.3%) and the government’s target of 40%. The Japanese government plans to continue promoting improvements to the country’s payment infrastructure, with a goal of eventually increasing the rate to 80%.

What kinds of mobile payments are there?

There are three main kinds of mobile payments:

Quick response (QR) codes

QR codes allow customers to complete a transaction by scanning a QR code or barcode with a mobile device. When a customer uses this method, the amount is deducted from their linked credit card or bank account.

QR code payments can be made in two ways. First, a business can display the QR code for the customer to scan with their mobile device and enter the amount to pay. Additionally, a customer can display a QR code on their mobile device for the business to scan and request payment.

Here are some examples of major QR code payment brands:

• PayPay
  
• LINE Pay
  
• Rakuten Pay
  
• FamiPay
  
• WeChat Pay
  

Near-field communication (NFC) or Tap to Pay

NFC payments use NFC technology to send payment information from a mobile device to a payment terminal. This method is also known as “Tap to Pay.”

Customers can use NFC payments by linking their devices to credit cards, electronic money, and transit fare cards, such as Suica and PASMO. When using NFC payments, the amount is deducted from these accounts. NFC payment can be used in a wide range of situations, including making payments at convenience stores and restaurants without having to carry cash or cards.

Here are some examples of major NFC payment brands:

• Apple Pay
  
• Google Pay
  
• Suica Mobile
  
• PASMO
  

Carrier payments

Carrier payments are offered by major mobile carriers, such as Docomo, au, and SoftBank. This method allows customers to combine the cost of a purchase with their monthly mobile phone bill. For businesses, this eliminates the hassle of collecting payments individually and helps reduce the risk of nonpayment. For customers, it’s a convenient option, especially for those who find separate payments burdensome or don’t have access to a credit card.

However, carrier payments are limited to lump-sum payments and have a maximum usage amount. As such, this method might not be suitable for high-priced items.

Here are some examples of major carrier payment brands:

• d Payment
  
• au Kantan Kessai
  
• SoftBank Matomete Shiharai
  

Advantages and disadvantages of mobile payments for businesses

There are many advantages and disadvantages for businesses who adopt mobile payments, as well as pitfalls they need to know about.

Advantages for businesses

Here are a few advantages of using mobile payments:

• Simplified register operations: Mobile payments help reduce the time spent handling cash, speed up the checkout process, and minimize congestion around the register. Since there’s no need to return change, they also help eliminate human error during cash transactions.

• Lower risk of nonpayment: With mobile payments, the affiliated payment processor collects the funds on behalf of the business. This reduces the burden on the seller and significantly lowers the risk of nonpayment.

• Flexible payment cycles: Compared to credit card payments—which often take about a month to settle—mobile payments can offer shorter payment cycles, such as daily or weekly transfers. This makes it easier for businesses to manage cash flow efficiently.

Disadvantages for businesses

Despite the many benefits of mobile payments, businesses should consider the following factors:

• Costs and fees: To avoid unexpected costs, businesses should carefully review the full fee structure of each payment service and processor. It’s also important to conduct a cost-effectiveness analysis to ensure the system aligns with the business’s financial goals.
  
• Payment cycle timing: While flexible payment cycles are a strength of mobile payments, the actual deposit timing into the business account can differ by provider. Businesses should research the specific payout schedules in advance to prevent any disruptions to cash flow.
  
• Customer preferences: The preferred payment methods among customers often vary by age, gender, and purchasing behavior. Before adopting mobile payments, it’s important to consider whether or not they will be popular with customers.
  

Advantages and disadvantages of mobile payments for customers

Here are the advantages and disadvantages for customers who shop using mobile payments:

Advantages for customers

• No need to carry cash or credit cards: Customers only need a mobile device to make a mobile payment. Even if they forget cash or cards, they can still pay at a store or on public transportation that accepts mobile payments.
  
• Quick completion: Mobile payments enable a customer to pay by simply holding their smartphone near a payment terminal or scanning a QR code. This makes transactions faster than using cash or credit cards.
  
• Easy recordkeeping: Customers can use their mobile devices to check their purchase histories anytime. This can make it easier to manage finances.
  
• Points rewards: Some payment services offer rewards or points. As a customer accumulates rewards, they might be able to use them to purchase products at a discount.
  
• Individual money transfers: Some payment services allow customers to use the app to transfer money to family and friends from their mobile devices.
  

Disadvantages for customers

• Not always accepted: Some stores do not accept mobile payments. Customers should consider carrying multiple payment types—including mobile payments—to account for businesses that don’t accept them.
  
• Dependent on cellular service: Sometimes, cell reception can be unstable. If reception is poor, it can take a long time to complete a mobile payment.
  
• Won’t work with a dead battery: If a customer uses mobile payments on a regular basis, they should fully charge their smartphone before going shopping.
  

How can businesses adopt mobile payments?

There are two ways to adopt mobile payments: establishing direct contracts with providers and working with payment agents.

Setting up multiple payment methods via direct contracts requires a business to apply to each payment service separately and go through their individual screening processes. Each one has different requirements, so the setup takes a lot of time and effort. It also requires a good understanding of how payment systems work.

Using a payment agent, on the other hand, allows businesses to outsource much of this work. In addition to acting as an agent for the work of forming contracts with each payment service, payment agents can provide useful analytics—such as sales, customer acquisition rates, and other metrics—which can reduce the burden of operational tasks.

Working with a payment agent

Here’s a simple breakdown of the process when working with a payment agent:

• Reach out to the payment agent, and request a quote.
  
• Review all costs, including setup fees and ongoing charges.
  
• Apply for the service, and go through the screening.
  
• Once approved, complete the contract.
  
• Test the system to make sure everything works smoothly.
  
• Start offering mobile payment options to customers.
  

During the setup process, a business will be unable to offer mobile payments. Therefore, it’s important to begin preparations in advance.

How can businesses enhance their payment processes with mobile payments?

Smartphones have become an indispensable part of our daily lives. With the advancement and widespread adoption of mobile payments, it’s easier and more convenient than ever to make a purchase. Because of this, it’s become important for businesses to adopt mobile payments, such as QR codes and NFC payments. Business owners should conduct thorough research to determine which mobile payment method is most suitable for them, developing a payment environment that will satisfy a variety of customers.

Stripe offers a wide range of tools and functions to support the efficiency of payment operations. Stripe makes it easy to introduce cashless payments, process information, and manage your revenue. By adopting Stripe Payments—which offers mobile payments such as PayPay—you can build a payment environment tailored to your business without developing a new system from scratch. Payments also employs security best practices, meeting all Payment Card Industry Data Security Standard (PCI DSS) requirements and providing customers with a secure shopping experience.

By using Stripe, you can enjoy many benefits, from simplified payment processes to reduced operating costs. By introducing new payment methods such as mobile payments, you can make your services easier and more convenient to use, which can boost sales.