The mobile payment service au PAY in Japan was created by KDDI Corp., a major Japanese telecommunications operator, to serve the country’s growing demand for convenient, secure, and cashless transactions. This smartphone-integrated and user-friendly digital payment solution lets customers make payments by scanning a QR code at participating businesses or by using the app for online transactions. Users can also load funds into the app’s digital wallet by linking a bank account or credit cards.
KDDI has made au Pay part of its broader initiative to diversify its offerings beyond traditional telecommunications services by using its existing customer base and network capabilities as it enters the digital payments space. KDDI, a major player in the telecommunications industry for decades, is known for its mobile network services, broadband, and related services, and au PAY represents its latest contribution to an evolving landscape in which financial technology and mobile applications are increasingly shaping customer behaviors and expectations. In 2023, au PAY had 41 million members, highlighting its prominence throughout Japan.
Below, we’ll cover what businesses should know about au PAY: key features, primary users, benefits of accepting au PAY, and how to accept this payment method.
What’s in this article?
- How does au PAY work?
- Where is au PAY used?
- Who uses au PAY?
- Benefits of accepting au PAY
- au PAY’s security measures
- Working with au PAY
- Alternatives to au PAY
How does au PAY work?
Here’s how people use au PAY as a payment method.
Account setup: To get started with au PAY, users download the au PAY app and create an account by entering personal information, including their name and mobile number. Next, users link a payment method to their account, such as a bank account, credit card, or au WALLET prepaid card. The app provides a straightforward interface where users can view their balance and transaction history and manage their linked payment methods.
Making payments: Once account setup is complete, users can make contactless payments with the au PAY app. For in-store payments, users pay by scanning a QR code provided by the business or by presenting a QR code generated by their app for the business to scan. For online transactions, users select au PAY as the payment method at checkout and authenticate the payment through the app. In some regions, users can pay for public transportation with au PAY by linking a transit card to the au PAY app.
Connected services: The au PAY platform integrates with other au services, such as mobile phone services and loyalty programs that let users earn and redeem points through transactions.
App updates: Users must update the au PAY app regularly to access the latest features, security updates, and bug fixes.
Where is au PAY used?
The au PAY platform operates in Japan, and its role in that market reflects the country’s evolving digital payment landscape as well as an important focus on localized features. The integration of au PAY with the broader au brand has been key to its adoption and growth in Japan, and as digital payments continue to gain popularity in the country, au PAY is likely to maintain a substantial presence in the digital transaction space. The key factors influencing au PAY’s adoption include:
Market trends: Digital payment methods are becoming increasingly popular in Japan as the country shifts away from cash, with total digital payment transaction value in Japan projected to reach $397.6 billion in 2024. au PAY uses that growing interest and provides a user-friendly digital payment option with the brand recognition of the au brand, a popular mobile carrier, behind it. au PAY is a trustworthy and convenient option for users already in the au environment, facilitating an easier transition to digital payments in a country with a growing ecommerce scene and increasing preference for contactless transactions.
Regulatory conditions: The Japanese government has encouraged the shift toward cashless transactions, promoting digital payments through various initiatives and supporting the growth of fintech platforms such as au PAY. The government has launched initiatives such as Cashless Vision and created incentives for businesses to adopt digital payment systems. Among other regulations, the Fund Settlement Act sets guidelines for electronic payment services that ensure platforms such as au PAY provide secure and reliable services to users.
Local preferences: In part, au PAY’s success in Japan comes from its ability to adapt to the preferences of Japanese customers, such as by integrating with popular features including loyalty point systems and mobile phone services.
Who uses au PAY?
The au PAY service has a diverse user base that reflects its many applications and the needs of Japanese customers and businesses. Here’s a look at au PAY’s primary customers and how they use the service:
Retail customers: A large segment of au PAY’s users are retail customers who use au PAY to buy groceries, clothing, and electronics—and appreciate quick, cashless transactions.
Small and medium enterprises (SMEs): au PAY focuses on building connections with small and medium enterprises (SMEs) in Japan. These businesses consider au PAY to be an accessible digital payment solution and benefit from its integration with other au services, which can improve operational efficiencies and yield cost savings.
Online shoppers: For online shoppers, au PAY is a convenient and secure payment method for buying goods and services.
Commuters: Commuters in urban areas can use au PAY for public transportation fares. Many users find the digital payment-integrated commuting experience much easier than carrying additional payment methods.
Travelers: Though au PAY primarily serves the Japanese market, tourists and travelers in Japan use it for hotel bookings, restaurant bills, and other travel-related expenses. The platform’s ease of use and widespread acceptance make it a convenient option for visitors.
Loyalty program participants: au PAY integrates with a variety of loyalty programs, attracting users interested in earning and redeeming points and maximizing their benefits across the au network.
Tech-savvy customers: au PAY appeals to tech-savvy customers who prefer to use the latest technological solutions for their transactions and value the platform’s innovation and convenience.
Older users: au PAY has recently seen adoption among older users. The system’s user-friendly interface and widespread acceptance at Japanese businesses make it an accessible alternative for people starting to shift away from cash.
Benefits of accepting au PAY
Businesses that accept au PAY can benefit from these features:
Integration with au: au PAY’s integration with the larger au brand can provide businesses with several advantages. First, businesses using au PAY have a direct line to au’s dedicated customer base because customers who are already within the au environment are more likely to use au PAY. These businesses can also engage in cross-promotional activities with other au services such as running special offers or discounts for au mobile or internet subscribers who use au PAY.
WALLET point system: Through au PAY’s integration with the au WALLET point system, customers can earn points for transactions made through au PAY and redeem them at participating stores. Businesses that accept au PAY can benefit from the incentive this creates for repeat purchases and may see a boost in customer retention.
Customer data: au PAY’s sales data can give businesses valuable insights on their customer base’s spending patterns and preferences within the au network, allowing businesses to design highly targeted marketing campaigns and personalized promotions.
Expedited payments: au PAY’s real-time transaction processing accelerates the payment cycle, reducing the time between sale and payment receipt. This can help businesses manage cash flow.
Low transaction costs: Compared with traditional credit card transactions, au PAY often charges lower transaction fees. This can be particularly beneficial for small and medium businesses where margins are often tighter.
User-friendly payment process: au PAY’s user-friendly interface and quick payment process make transactions smoother for customers, leading to a better shopping experience and potentially contributing to increased sales.
Trusted brand name: By using a well-known and trusted payment platform such as au PAY, businesses can enhance their reputation for security and reliability. au PAY’s strong security measures assure customers their financial data is safe.
au PAY’s security measures
Though au PAY doesn’t provide much public detail about its security measures, these are standard practices in mobile payment security:
Encryption: Sensitive data such as account numbers and personal information is encrypted, making it unreadable to unauthorized parties.
Authentication: To verify personal information, a user must provide a password or fingerprint or use facial recognition.
Tokenization: Tokenization replaces card numbers with a token, or unique identification symbols, for each transaction, which protects sensitive data.
Fraud detection: Systems continuously monitor for suspicious activity and take action if they detect unusual patterns.
Data privacy compliance: Mobile payment platforms comply with all applicable data protection regulations to ensure users’ personal information is handled responsibly.
In addition to these industry standards, there are Japanese regulations for payment systems such as au PAY that emphasize customer security and operational transparency. These regulations protect users from fraud, safeguard their confidential data, and maintain the financial integrity of the payment system.
Act on the Protection of Personal Information: This law governs how businesses must handle personal data, setting standards for data protection and encryption.
Payment Services Act: This law mandates the segregation of customer funds from business funds, regular reporting on business conditions, and maintaining a certain level of capital. For services such as au PAY, this means implementing transparent, rigorous financial management practices.
Working with au PAY
To start accepting au PAY payments in Japan, whether as a Japan-based or foreign business, there are several important steps and considerations.
First, businesses should consider the infrastructure and operational requirements of a mobile payment system such as au PAY. Accepting au PAY could involve setting up specific hardware (such as QR code scanners), integrating software to process transactions, or boosting internal security measures to comply with system requirements. au PAY provides businesses with support for integrating this payment system into their operations.
For businesses based outside Japan that want to accept au PAY payments from Japanese users, key considerations regarding international payments must be taken into account. These businesses must ensure regulatory and tax compliance in the originating and receiving countries of all payments and establish currency conversion practices. They may need to open multicurrency accounts or hire third-party services to handle multicurrency transactions.
Working with payment gateways or processors such as Stripe that support multiple currencies can be a useful option for businesses that engage in global commerce. These businesses will also want to research target markets, enhanced fraud protection measures given cross-border transactions’ increased vulnerability, and localized methods of improving the customer payment experience abroad. These methods could include displaying local currencies, providing multiple language options, and accommodating different payment preferences.
Alternatives to au PAY
In Japan, businesses have several alternatives to au PAY. The key features of these alternatives are outlined below.
PayPay: This popular mobile payment service in Japan was created through a partnership between SoftBank Group and Yahoo Japan. It lets users pay for purchases out of their PayPay accounts, which they can link to debit or credit cards or preload with funds at ATMs. PayPay has a broad user base and is accepted across Japan.
Rakuten Pay: This mobile payment service lets users pay for purchases via linked credit cards or bank accounts. It offers payment processing devices to businesses for handling credit card payments and is widely accepted by retailers in Japan.
Jkopay: Jkopay, a popular mobile payment service in Taiwan and Japan, lets customers make payments by showing businesses a QR code or scanning the store’s QR code. Users can earn points on payments to redeem for future purchases.
Alipay: Popular digital wallet AliPay lets users save their debit or credit card information in the app to make payments in person or online.
WeChat Pay: WeChat Pay, which is connected to China’s WeChat messaging system, is another increasingly popular digital wallet option in Japan and offers similar services to Alipay.
JCB: JCB is a Japan-based card network with international credit card services. It has a wide customer base in Japan and other countries.
Konbini payments: Konbini is a local cash-based payment method that lets customers order products and services online and pay for them at convenience stores such as 7-Eleven, Lawson, and FamilyMart.
LINE Pay: LINE Pay is a mobile payment service from Japanese messaging service LINE. Customers can link their credit or debit cards to the LINE Pay digital wallet to pay for purchases online or at participating businesses.
Merpay: Developed by Mercari, Merpay is a digital wallet that lets users link their bank account information to pay for purchases at online stores, convenience stores, restaurants, and drug stores across Japan.
Pay-Easy: This service lets customers pay for everything from online shopping to tax bills from their computer or smartphone or an ATM.
Paidy: Paidy is a popular buy now, pay later (BNPL) method in Japan that has a substantial user base and is accepted by a high number of ecommerce sites. It’s known for its swift growth in the Japanese market.
Suica: This prepaid card payment service is primarily used for transportation but is also accepted by grocery stores, restaurants, and vending machines. It’s part of a broader range of “pay-as-you-go” transport options in Japan.