As cashless payment methods have become increasingly popular worldwide, PayPay – a smartphone app based in Japan – has attracted quite a bit of attention from customers. This payment app is now widely used in physical shops and on e-commerce sites in Japan, allowing customers to make payments quickly and easily. In this article, we'll explain how businesses can integrate PayPay into their payment processes. We'll also cover the advantages, disadvantages and safety issues for businesses considering introducing PayPay as a payment method.

What's in this article?

• What is PayPay?
  
• What businesses should consider before using PayPay
  
• Advantages of PayPay for customers
  
• What customers should consider before using PayPay
  
• How do PayPay payments work?
  
• How secure are PayPay payments?
  
• How can businesses integrate PayPay?
  
• What other payment methods are available?
  
• How does PayPay improve the payment experience?
  

What is PayPay?

PayPay is a very popular cashless payment provider in Japan. With the PayPay app, payments can be made using just a smartphone, eliminating the need to carry a wallet. And because using it doesn't require a credit card, offering PayPay as a payment method enables businesses to reach new customer demographics: namely people who don't own – or otherwise don't want to use – credit cards.

There are three payment options customers can use in the PayPay app:

• Balance payment: Money is loaded onto the app in advance and payments are made within the balance limit.
  
• Credit payment: The total amount used is paid off the following month.
  
• Credit card payment: The customer registers their card information in the app and makes payments using PayPay. The total amount used with the app (i.e. the total amount charged to the registered card) must then be paid off on the credit card's due date.
  

As PayPay's user base grows, the app is becoming more widely available nationwide, both in physical shops and on e-commerce sites. In addition to being used for shopping, customers can use PayPay to send money to friends and family. The PayPay app also offers a wide range of features, including paying utility bills, ordering food deliveries and investing.

In-store payments

To integrate PayPay payments in a physical store, a business owner can choose one of the following options:

• Use a multi-payment terminal: Multiple payment methods and contracts – such as credit cards, QR codes and electronic money – can be processed via a single point-of-sale (POS) terminal.
  
• Offer QR code payments: A business can post a PayPay QR code in their store for customers to scan.
  

Online payments

You can use PayPay online payments for your business if you meet any of the following conditions:

• You own an online store or app.
  
• You're currently creating or considering creating an online store or app.
  
• You use a partner online store (i.e. an e-commerce site).
  

What businesses should consider before using PayPay

Here are some key points of consideration for businesses thinking about adopting PayPay.

Handling fees

PayPay fees are similar to credit card handling fees, with slight variations depending on the type of business and transaction volume involved. Compared to some post-payment and cash-on-delivery (COD) services, the fees are often slightly lower, so many businesses feel PayPay offers good value for their money.

However, if PayPay is introduced through a payment agent, the fee structure will vary depending on the provider. Before introducing PayPay, make sure that you've compared the payment processing fees and that they're appropriate for your operations.

PayPay support

To prepare for any problems, make sure you know how to contact PayPay support – or the support team for the payment agent you're using to introduce PayPay.

System compatibility

Some legacy systems can require additional development to support PayPay. Be sure to confirm whether it is compatible with your current checkout system and payment flow before adopting it.

Processing refunds

You'll need to establish internal rules on how to respond to things like cancellations and returns after payments have been completed. These rules will ensure smooth, consistent customer support.

Advantages of PayPay for customers

PayPay can be beneficial to integrate into your business, as it offers multiple advantages to customers.

No need for a credit card

Because PayPay balances can be funded using bank accounts or PayPay-designated cash machines, customers don't need to have credit cards to safely make online payments.

Few technology requirements

When making a payment, the transaction can be completed with a smartphone alone, eliminating the hassle of entering and confirming a card number. This gives customers peace of mind, particularly when it comes to security concerns.

PayPay points

PayPay Points are awarded based on the amount spent, allowing customers to enjoy substantial discounts on their purchases.

What customers should consider before using PayPay

Although PayPay offers significant benefits to customers, there are still some points they should keep in mind.

Insufficient balance

The customer can set up PayPay so that funds are automatically added from their bank or financial institution account whenever their PayPay balance gets low. However, if they haven't set this up in advance and their PayPay balance is insufficient, the payment will not be completed. If a customer doesn't want to use the auto-reload feature, they'll need to check their PayPay balance before making any purchases.

Not accepted everywhere

Although PayPay has a large number of registered users in Japan, not all businesses accept PayPay online payments. To avoid any troubles at checkout, customers should check in advance whether it is accepted.

Fraud

According to a warning issued by the Consumer Affairs Agency (CAA), consumer affairs centres around Japan have received reports of fraud using the following method: a fraudulent actor takes an order on a fake e-commerce site. They then reach out to the customer to tell them that the order will be cancelled due to a supply shortage. The fraudulent actor offers to refund the payment via PayPay. They then pretend to initiate a refund, but in reality they send a request link to the customer. If the customer believes that the link is a genuine refund link and taps it without checking carefully, they'll end up sending money to the fraudulent actor instead of receiving a refund.

Customers must therefore be very careful before tapping any links they believe are meant to process refunds or payments.

How do PayPay payments work?

Here are different ways to make contactless payments using PayPay.

Paying at a physical store

If a store is registered with PayPay, a customer can pay using one of the following options:

• The customer presents a bar code to the cashier: The customer can tell the cashier they'd like to use PayPay. The customer will then open the PayPay app and present a bar code at the register.
  
• The customer scans a bar code or QR code at self-checkout: At self-checkouts, the customer can select "Bar code payment" or "QR code payment" and then scan the bar code or QR code using the PayPay app.
  
• The customer scans the bar code provided by the cashier: The customer can tell the cashier that they are paying with PayPay, open the PayPay app, tap "Pay" and select "Scan to pay". After that, they can scan the designated QR code, enter the amount they wish to pay and proceed to payment.
  

Paying on an e-commerce site

To make payments to an e-commerce site using the PayPay app, the customer can do one of the following:

• If using a smartphone: Select PayPay on the payment screen for the e-commerce site – this will automatically launch the PayPay app. Tap "Pay" in the app and wait to be automatically redirected back to the e-commerce site.
  
• If using a home computer: Select PayPay as the payment method when checking out on the e-commerce site. A QR code will appear. Launch the app on the smartphone and scan the QR code. Then click the "Pay" button on the payment screen and wait to be brought back to the e-commerce site.
  

Customers can make payments with PayPay even if they don't have the app. However, this method requires additional steps, such as entering the mobile phone number and password that they registered with on PayPay, as well as an authentication code that will be sent via text message. To make PayPay online payments as easy as possible, downloading the app is the best option.

How secure are PayPay payments?

PayPay has implemented multiple security measures to prevent a wide range of problems for its users.

Phishing prevention

PayPay leverages its proprietary detection system and threat intelligence from external organisations to swiftly identify phishing sites that are impersonating it. PayPay then proactively issues alerts to both internal teams and external stakeholders.

Vulnerability assessment

In addition to vulnerability assessments and penetration testing conducted by external organisations, PayPay's in-house Red Team performs year-round, around-the-clock assessments. This system, which identifies both internal and external vulnerabilities, helps ensure the safety and security of PayPay's customers.

Data protection policy

PayPay customers' personal and payment information is encrypted for storage using the encryption and hashing technologies recommended by the National Institute of Standards and Technology (NIST). These standards are revised accordingly as certain technologies become obsolete.

Additional security measures

There are several other security measures PayPay employs, including:

• Monitoring unauthorised communications
  
• Performing internal training
  
• Maintaining a Payment Card Industry Data Security Standard (PCI DSS) certification
  
• Maintaining an Information Security Management System (ISMS) certification
  
• Securing data transmissions
  

How can businesses integrate PayPay?

PayPay online payments can be integrated into your business' payment environment either through a direct contract with PayPay or via a payment agent. You should choose the option that makes the most sense for the scale of your business and its technical structure.

Direct contract with PayPay

If signing a contract directly with PayPay, you will simply follow the application procedure on the PayPay official website.

Payment agent

If you use a payment agent, they can help you more easily integrate PayPay alongside your other payment options. Research and consult with a variety of payment agents and select the service that best suits your business.

What other payment methods are available?

By integrating PayPay alongside a wide range of other payment methods, you allow the customer to choose their preferred way to pay. This can reduce your business' risk of basket abandonment and boost customer satisfaction.

Here are a few other commonly used payment methods in Japan:

• Credit cards (e.g. Visa, Mastercard, JCB, American Express)
  
• Debit cards
  
• Other QR code payment services (e.g. Rakuten Pay, LINE Pay)
  
• Electronic money (e.g. Suica, PASMO)
  
• Post-payment, buy now, pay later (BNPL) services
  
• Konbini (convenience store) payments
  

How does PayPay improve the payment experience?

PayPay is appealing because it's easy to adopt and available to a wide range of customers across Japan.

In April 2025, it became the first code-based payment service in Japan to be available through Stripe Payments. This makes it easier for businesses using Stripe to integrate PayPay into their payment environments.

Stripe offers high security and flexible payment processing capabilities that are PCI DSS-compliant. It supports PayPay, as well as credit cards and other major domestic payment methods in Japan. Use Stripe Payments to help achieve smoother and more efficient business operations.