E-money - Big, and Getting Bigger in Japan

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http://blogs.wsj.com/japanrealtime/2010 ... tab/print/

July 23, 2010, 7:58 AM JST
E-money - Big, and Getting Bigger in Japan

Though Japan is known as one of the most technologically advanced countries in the world, it’s curiously still a cash-based society. The one exception is electronic money, which is stored in a tiny chip in a special card or one’s cell phone.

Bloomberg News

The logo of Seven & I Holdings Co. is displayed at a Seven-Eleven convenience store in Tokyo. The company introduced the Nanaco card in 2007. The concept is pretty cool: one can make purchases by simply swiping their cell phone on an electronic reader. And it’s growing in popularity too. During the first half of 2010, the number of electronic money transactions swelled by 39% compared with the same period a year ago, according to the Nikkei newspaper.

Electronic money became popular around 2007, when two major retailers, Aeon Co., Ltd. and Seven & i Holdings Co., Ltd., started their own versions of electronic money. The transactions by Aeon and Seven & I account for roughly 50% of all transactions in Japan.

Retailers have promoted the use of their money by giving points to shoppers. For example, users of the Nanaco card, offered by Seven & i, earn 1 point for every 100 yen of shopping, which can later be used to pay at a rate of 1 yen per point.

“Convenience increased because stores (in which electronic money can be used) expanded, and the usage of electronic money has started to become established,� said Yukinobu Kitamura, a professor of economics at Hitotsubashi University.

Aeon is the operator of several retailers, including a convenience store chain, while Seven & i operates the Seven Eleven stores and retailing stores such as Denny’s Japan.

However, experts think the popularity of electronic money will not change how people pay for more expensive goods. The current outstanding amount of electronic money in Japan is only about 0.11% of Japanese currency, according to a 2009 Bank of Japan report.

According to a 2009 survey by the Central Council for Financial Services Information, 25.2% of singles said that they would use electronic money to pay for shopping goods cheaper than 1000 yen, while only 12.4% responded credit cards. In contrast, only 2.7% said they would use electronic money for payments greater than 50,000 yen, and 68.5% said credit cards.

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