As customer behavior diversifies, a wide variety of cashless payment methods have become widespread in Japan. For example, when customers visit ecommerce malls using their smartphones, they frequently use credit cards and e-money to make payments.

One way to provide a smoother payment experience for customers using smartphones while shopping on ecommerce sites is by offering short message service (SMS) payments. These payments connect websites with payment services.

In this article, we explain the basics of SMS payments that Japanese businesses need to know, including their advantages and disadvantages, ideal transaction types, and appropriate payment methods.

What’s in this article?

• What are SMS payments?
  
• The flow of SMS payments
  
• Benefits of SMS payments
  
• Disadvantages and challenges of SMS payments
  
• Transaction types for SMS payments
  
• Payment methods for SMS payments in Japan
  
• Key points for SMS payment implementation
  
• How Stripe Payment Links can help
  

What are SMS payments?

With SMS payments, a payment link is sent to the customer via SMS (i.e., text message). Then, the recipient uses that link to complete the payment on a web-based payment page. Although a payment agent manages the payment page, the business generates the link using the payment agent’s system and sends it to the customer.

Because SMS payments are offered by a payment service provider, businesses who adopt these payments are also able to use the provider’s management systems. The business can easily handle various tasks, such as checking payment status and addressing outstanding payments. Since the customer’s card details are stored and managed by the payment agent, there is a lowered risk of information leaks from the ecommerce site.

The flow of SMS payments

The basic process for SMS payments—from sending the link to completing the payment—includes the following steps:

• The ecommerce business generates a payment-only link based on the order details.
  
• It sends the link to the customer via SMS.
  
• The customer clicks the link and is transferred to the payment page.
  
• The customer selects their preferred payment method.
  
• The customer completes the payment using the selected payment method.
  
• A payment completion notification is sent to the business (e.g., via a management screen).
  
• The payment is reconciled based on the payout status.
  
• The customer receives a reminder (i.e., re-sent SMS) if there are any outstanding payments.
  

Benefits of SMS payments

The following are some of the advantages of SMS payments.

More efficient operations and shorter time to receive payments

When using SMS payments, payment details can be sent instantly just by sending a text message with a payment link. This saves time, effort, and costs associated with issuing and mailing paper invoices. Once customers receive the link, they can proceed directly to the payment page to complete their transactions. As a result, businesses can expect a significant reduction in the time it takes for funds to be deposited.

Less management of personal information

With SMS payments, the customer’s personal information is stored on the payment agent’s servers, so the ecommerce business does not retain it. In other words, the business doesn’t handle credit card information, greatly reducing the burden of managing and protecting that information. This allows the business to focus on other priorities.

Lowered fraud risk

Individuals receive payment links via their mobile phone numbers. Because there is a high degree of certainty that the recipient is the actual account holder, the risk of fraud is lower. This means that SMS payments automatically perform customer authentication.

Fewer late payments and nonpayments

In general, SMS is a more visible form of communication compared to email. As a result, customers recognize the need to pay at an early stage, and there are relatively fewer cases where they put off payments.

In addition, if payment is not received after a certain period of time, the business can send a reminder via SMS. This can help reduce the risk of nonpayment.

Disadvantages and challenges of SMS payments

While SMS payments offer various benefits, they also come with the following disadvantages.

Mistaken for spam

Sometimes, customers think the SMS payment messages are just spam. To ensure customers recognize the link’s legitimacy, it is important to design it with immediately clear payment instructions coming from the company. This allows the recipient to proceed confidently with the payment process.

Here are some specific measures to take:

• Ensure that all payment-specific links use the official domain.
  
• Clearly state the company name and purpose of the message in the body of the text (e.g., “Shop Name: Payment Notice”), along with the total amount, payment due date, billing details, and contact information.
  

Not delivered

SMS messages can be blocked by customers’ device settings or the carrier’s filtering functions. Therefore, it is important to include a brief message for customers at the time of placing the order. This could be: “Payment instructions will be sent via SMS. Please check your device’s message settings.” This encourages recipients to verify their settings.

It can also be beneficial to prepare a user guide explaining how to check and change message settings. This provides support for customer inquiries.

Restricted by character limits

With SMS, the number of characters for a single message is limited. This can sometimes make the message unclear and cause confusion for the recipient. Therefore, it is important that the body of the SMS is concise and focused on the key points. This can ensure recipients clearly understand the message.

Transaction types for SMS payments

SMS payments work well for smartphone users. Here are some other transaction types where SMS payments can be useful and effective.

Non-face-to-face transactions

In-person transactions—such as those made at physical stores—involve staff directly collecting payments. However, for non-face-to-face transactions—such as those on ecommerce sites—it is not always clear whether payment can be collected from customers after they place orders. In the worst-case scenarios, there are also risks that customers will fail to pay by the due date.

With SMS payments, payment details are instantly delivered to the customer, and the payment process is simplified. This ensures payments are completed more reliably.

Phone orders

SMS payments are suitable for orders placed online through ecommerce sites and for telephone shopping. When taking orders over the phone, it is important to confirm the order details and the total amount with the customer and inform them in advance that a payment link will be sent via SMS.

SMS payments also make it possible to more easily accommodate changes or additions to orders placed by phone. For example, a customer receives a text message after placing an order. However, they change their mind and want to adjust the size or quantity of their order. They can contact the business again to make those changes and receive a new payment link via SMS to make the payment.

Collections of unpaid recurring payments

SMS payments are also useful for collecting recurring payments, such as utility bills, rent, insurance premiums, and subscription fees for services (e.g., food delivery).

In particular, if a customer has missed a payment because they forgot about the due date, sending a reminder via SMS alerts them to the outstanding balance. This allows them to take immediate action.

Payment methods for SMS payments in Japan

According to the Ministry of Internal Affairs and Communications, certain payment methods are better suited for SMS payments. This data shows the frequency at which each of the following payment methods were used when purchasing products online in 2024, with multiple answers allowed.

• Credit card payments: 79.8%
  
• Electronic money payments: 43.5%
  
• Konbini (convenience store) payments: 33.7%
  
• Payment at bank or post office counters and ATMs: 23.0%
  
• Internet banking: 23.0%
  
• Carrier payments: 16.3%
  
• Cash on delivery (COD): 16.1%
  

Based on the data above, credit card payments are the clear leader, with electronic money payments and convenience store payments also popular. Therefore, businesses that offer SMS payments should consider adopting these three payment methods. In particular, credit card payments have a usage rate of almost 80%, which is significantly higher than the other methods. They have become an indispensable payment method in ecommerce and should be prioritized.

However, the target demographic could have a big impact on this decision. For example, some shoppers have strong preferences for bank transfers and mobile carrier billing. Therefore, it is important to select payment methods after thoroughly assessing the payment needs and preferences of potential customers.

Key points for SMS payment implementation

To implement SMS payments, it is important to use a payment service provider that offers SMS payment services. However, service details vary from provider to provider, so it is important to check the following points in advance before selecting one.

Can businesses use fixed sender numbers or common short codes?

If the sender number is unclear or unknown, recipients might mistake the message for spam. Therefore, it is ideal to have a fixed sender number so recipients can clearly identify the sender. It is also effective to notify customers on the website or via individual emails that “SMS messages will be sent from the following number.”

Using a common short code—such as one starting with “0005”—can make it easier to recognize that the message is legitimate. This can help put customers at ease.

Is there an automatic sending feature?

If the billing system can be linked to the SMS payments, it can automatically send SMS messages. Although manual sending is possible, if a business needs to send a large number of messages, it is preferable to use a payment service that includes an automated sending feature.

Are there features for tracking delivery status and checking message history?

Sometimes, follow-up for nonpayment is needed after sending the SMS message. However, it is important to determine why the customer hasn’t made the payment. For example, the customer might not have received the message. Therefore, it is important to ensure that the system includes features that allow the business to track delivery status and view and search message history. This can help the business respond appropriately to issues.

Are the security measures sufficient?

Ensure that the payment environment has solid security so customers can make payments with confidence. This isn’t limited to just SMS payments. Creating a payment environment that prioritizes customer safety is important for all transactions. For SMS payments, it is important to implement thorough security measures for the sending system, including managing the sender and configuring sending permissions.

How Stripe Payment Links can help

Stripe Payment Links is a no-code solution that allows you to quickly create and share secure payment pages online.

Payment Links can help you:

• Get paid faster: Share custom payment links with customers and accept one-time or recurring payments instantly, without invoicing or complex integrations.

• Improve conversion: Boost payment conversion rates with a mobile-optimized design and streamlined checkout experience.

• Save time: Easily create, customize, and share payment pages through the Stripe Dashboard—with minimal coding.

• Expand globally: Accept payments from customers worldwide, with Adaptive Pricing localizing prices for 135+ currencies and offering local payment methods that are ready to use.

• Access other Stripe products: Integrate Payment Links with other Stripe products—such as Stripe Billing, Stripe Radar, and Stripe Tax—to add more payment capabilities.

• Maintain control: Customize the look and feel of your payment pages to match your brand, and track all your payment activities in one place.

Learn more about how Payment Links makes it easy to accept online payments, or get started today.