Electronic payment is widely used in Japan today, not just for online shopping on ecommerce malls, but also for a wide variety of items at brick-and-mortar shops, e.g., convenience stores and restaurants. These networks let shoppers pay without carrying cash, offering several benefits for businesses and customers alike.

You might find yourself asking questions such as, “What does the term ’electronic payment’ actually mean?” or, “Why are they becoming so popular?” In this article, we’ll answer those questions and add context, as well as explain the background of electronic payments, the different types on the market, and their advantages and disadvantages.

What’s in this article?

• What are electronic payments?
  
• How big is the electronic payments market in Japan?
  
• Why are electronic payments on the rise?
  
• What kinds of electronic payments are there?
  
• Advantages of electronic payments for businesses
  
• Disadvantages of electronic payments for businesses
  
• Advantages of electronic payments for customers
  
• Disadvantages of electronic payments for customers
  
• How can electronic payments improve customer satisfaction?
  

What are electronic payments?

Electronic payments are transactions made using digital currency, also known as electronic money. In other words, these transfers are processed through a digital system rather than physical cash.

Examples include card payments such as credit and debit cards, as well as mobile payments via apps that scan QR codes. We’ll examine the details of each option later on in this article.

Electronic vs. cashless payments

Electronic and cashless payments are often confused with one another. However, noncash transactions cover any settlement without notes and coins including checks and traveler’s checks, which Japan stopped issuing in 2014. Digital payments sit inside that broader group and rely on data representing money. This has somewhat deeper implications than the term “cashless payments.”

Payment processing timeline

There are three key timelines to keep in mind with digital settlements, depending on the specific method chosen:

• Advance payment (prepaid methods): An integrated circuit (IC) card or payment app stores a prepaid balance in advance. Spending beyond the loaded sum isn’t possible.
  
• Post-payment (postpaid methods, such as buy now, pay later): In this case, the system debits the product price from the customer’s bank account after checkout, either through credit card or by linking its details to a payment app.
  
• Immediate payment (debit): Here, the system immediately debits the owed amount from the holder’s financial institution. Payments exceeding the balance is not allowed. This covers pay-by-debit, linking a debit card to a payment app, and internet banking.
  

Payment process

When a customer makes an electronic payment, the system completes the payout to the business through the steps below. The same flow applies to prepaid, postpaid, and debit types described above.

• A purchaser pays at a business—in person, online, or elsewhere.
  
• A payment agent confirms and authenticates the data.
  
• A relevant financial institution processes the transfer.
  
• Funds move to the payment agent.
  
• The agent then transfers the payment to the business.
  

How big is the electronic payments market in Japan?

Each year, adoption expands. According to a graph released by the Ministry of Internal Affairs and Communications in March 2025, the rate of electronic payments in the country reached 42.8% in 2024, exceeding the 40% target. The Japanese government stated that it will continue to promote efforts to achieve a rate of 80% in the future.

Why are electronic payments on the rise?

As mentioned earlier, usage has risen annually. Four factors have driven the widespread adoption of electronic payments:

Heightened awareness of hygiene due to COVID-19

In the wake of the COVID-19 pandemic, electronic payments that do not require cash handovers have become commonplace. People have grown significantly more aware of their hygiene and reduced physical contact with others in brick-and-mortar stores to limit infection risk. This has likely helped promote the spread of digital options.

Staff shortages

With the aging of Japan’s population and declining birthrate, some establishments are facing labor gaps. From a long-term perspective, there are concerns that many workplaces will need to address the issue of a shrinking workforce in the future.

To address future personnel shortages, businesses will need to review and rethink their policies to improve productivity and efficiency in various areas. Broader adoption of electronic payments could be one such measure.

Inbound tourism

With the growing demand for inbound tourism to Japan, an increasing number of businesses are diversifying their checkout methods to enable visitors to have a smooth shopping experience. For example, some have started offering popular Chinese payment services such as WeChat Pay.

Burden and cost of cash payments

Cash-heavy operations are shifting to digital flows to cut the burden and costs associated with accounting and management of cash. Electronic transactions can prevent problems including counterfeit notes and theft. Businesses can avoid issues such as giving the wrong amount of change and improve the efficiency and safety of their payment operations.

What kinds of electronic payments are there?

Let’s look at the different kinds of electronic payment methods that are available. These fall into three main categories: mobile, card, and online bank payments.

QR code payments

This is a method where a payer scans a QR code or barcode to settle. Customers must download a payment application to their smartphone or mobile device, and then register for an account. When a shopper pays with a QR code, the app deducts the amount from the linked credit card or bank account.

When using this option, either the business or the customer displays the QR code, resulting in two slightly different processes.

• If the business displays the QR code: The customer scans it with a mobile device and enters the amount to complete the transaction.

• If the customer displays the QR code: The business scans it on the customer’s mobile device and enters the amount of money to complete the transaction.

Carrier payments

Carrier payment is offered by major mobile operators such as NTT Docomo, au, and SoftBank. Shoppers add the cost of goods together with their cellular service fees. No credit card information is required because identity was confirmed during carrier signup, making payment more convenient.

Nevertheless, this method solely supports lump sum charges and limits the usable amount. It might not be suitable for purchasing expensive items.

NFC payments (contactless IC)

NFC-based checkout refers to contactless IC payment that incorporates near-field communication technology. With NFC, data is transmitted simply by holding a smartphone or credit card equipped with a contactless IC chip near a terminal. For this reason, tap-to-pay is commonly referred to as “touch payments.”

Prepaid card payments

Prepaid cards let shoppers pay by loading cash onto the card before using it. Examples include transit fare cards (PASMO, Suica), and cards such as nanaco and Ponta. Users can load cards with money at financial institutions, via online banking, at convenience stores, or—for transit cards—at ticket machines and charging units at train stations.

With prepaid cards, you cannot spend more than the amount loaded on the card, so there’s no need to worry about overspending. Older adults and children carry them around safely as an alternative to cash.

Credit card payments

Credit cards remain widely accepted in Japan. Beyond shopping online and in stores, customers also use them to pay utility bills.

Credit card payments rely on credit extended to the shopper. Instead of it being charged on the purchase date, the system pulls the amount from the linked bank account on a set schedule.

NFC-enabled credit cards are also becoming more common.

Debit card payments

For debit, the amount is withdrawn from the bank account at the time of purchase, unlike credit cards. As a general rule, spending cannot exceed the available balance, helping customers manage money and avoid overspending. On the other hand, features provided by credit cards, such as installments, revolving payments, and cash advances, are not available, and just a lump sum settlement is possible.

Online bank payments

Online banking lets payers settle through a dedicated web portal. One clear benefit is that customers don’t need to bring a paper passbook to the financial institution or ATM. They can log in from a computer or smartphone at any time or place and conduct their transactions.

Advantages of electronic payments for businesses

Digital options deliver many advantages—here are a few:

Simplified cash register processes

Cash handling requires coins and bills on hand for change. Electronic payments eliminate the hassle of handling money, speeding up the procedure, and reducing congestion around the register. You also don’t have to worry about giving the wrong amount of change. This simplified process boosts customer satisfaction.

Expanded sales opportunities

Offering several digital options highlights ease and reaches a broader audience, ultimately increasing sales opportunities. More customers are likely to visit because they can pay using their preferred method, and there’s a strong chance they’ll become repeat buyers.

As discussed earlier, businesses targeting tourists from outside Japan also need to support checkout methods that are popular abroad, to make payment more convenient for them.

Increased customer spending

For cash payments, customers cannot make purchases that cost more than the amount of money they have on hand. Most people avoid carrying large amounts of money for safety reasons—digital checkouts let shoppers pay without having currency on hand. Customers could spend more on average if they do not need to carry cash.

Disadvantages of electronic payments for businesses

Despite their advantages, there are some drawbacks to be wary of.

Costs and fees

Beyond initial expenses, accepting electronic payments will also incur additional fees. For instance, deploying terminals requires investment. It is important to be aware of these costs, as they can quickly add up.

Note: Be sure you understand all the fees you’ll be paying when accepting digital payments.

Payment terminal troubleshooting

If the terminal fails—due to a system error, connectivity, or power outage—electronic payments are paused until the issue is fixed. Act promptly to avoid losing sales.

Note: In case of any unexpected incidents, ensure you can contact the terminal provider at any time and are prepared to manage any issues that arise. Create a response manual to handle potential problems so staff know how to resolve errors. Also, support multiple payment methods, including cash.

Cash flow timeline

When processing digital payments, it’s advisable to pay close attention to cash flow. Unlike notes and coins, electronic settlement doesn’t provide immediate funds. Keep in mind that businesses receive the payout only after a delay. Considering implementation expenses and transaction fees mentioned earlier, it’s wise to maintain stable financial management while assessing cost-effectiveness.

Note: One solution is to choose a payment service that allows you to set a relatively short payout cycle, such as the day or week after settlement. Be sure to confirm the pay schedule in advance.

Advantages of electronic payments for customers

Below are ways digital options benefit shoppers:

No need to carry cash

Electronic payments remove reliance on cash; it saves an ATM trip while shopping. If a wallet is left at home, payment still works via mobile device, and checkout proceeds smoothly. Carrying smaller amounts can also minimize theft and reduce loss.

Quicker payments

Digital checkout lets a quick tap or scan at the terminal finish the transaction. Just like cash, transactions are quick—but without the hassle of handling coins or bills.

Improved bookkeeping

Tracking spending matters: the when, what, where, why, and how much of each purchase. Digital records let customers view order histories anytime on devices, eliminating the need to organize or store paper receipts. This makes it easier to manage household finances.

Points and discounts

Some digital methods—for example, cards and QR payments—run cash-back or point reward campaigns. Shoppers can redeem these points for discounts, saving more than if they paid in cash.

Disadvantages of electronic payments for customers

Electronic payments do have their disadvantages as well. Customers need to understand these downsides before opting in:

Card loading

Any stored-value option that involves topping up in advance can be time-consuming and inconvenient, as with prepaid card payments. If the balance is low, checkout fails, and reloading takes time in a rush.

Risk of fraud

Enrollment for digital checkout involves registration, which requires personal information. This can cause some individuals to feel reluctant to use the service. Review each provider’s fraud prevention measures first, then decide.

To ensure safe use, it is also important to set strong passwords and enable biometrics when possible. Protecting your computer or phone screen from prying eyes when away from home helps reduce the risk of fraud.

Lack of widespread acceptance

Electronic payments can occasionally fail due to issues such as a malfunctioning smartphone or a credit card error. Carry a backup tender—for instance, cash and a credit card—in case your phone is lost or stops working.

Also, not all storefronts accept every type of digital option. So when you’re out and about, it’s best not to rely too heavily on just a single device or credit card—you might find yourself unable to pay when you least expect it.

Before adopting a new method, start by checking which services your go-to stores and online shops accept. That way, you can choose a payment method that fits your needs.

How can electronic payments improve customer satisfaction?

Broader payment choices lead to easier shopping. Higher customer satisfaction encourages repeat engagement and helps increase sales.

There are various electronic methods available, and the right mix depends on the business and audience. Before deciding on a checkout method, evaluate necessity and whether it will drive revenue. Additionally, if rolling out several options at the same time, partner with a payment agent that can provide a comprehensive support system, such as purchase trend analysis and sales management, for greater peace of mind.

Stripe offers a wide range of tools and features to help increase efficiency in daily payment operations, including the integration of various cashless methods such as credit cards, as well as information processing and revenue management. For example, Stripe Payments allows you to build a payment environment tailored to your business without the need to develop your own system from scratch. Payments also has high-level security measures that prioritize safety, allowing you to provide customers with a secure shopping experience.

By adopting Stripe, you can simplify checkout, trim operating expenses, and enjoy many other benefits. Integrating the multiple payment methods offered through Stripe can enhance the overall convenience of your services and increase sales.