MAG Insights

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International Perspective: Smartphone use in Asia – a catalyst for moving from cash to digital payments around the world (MAG Quarterly- Volume Six, Issue One)

By Dan Skaling, Executive Vice President, JCBUSA

March 8, 2018

More than a thousand years have passed since paper bills were first used in China, and in many Asian countries, cash is still king.  But in recent years, as payments technology has advanced and consumers and merchants alike see the benefits of digital payments, including more convenience and better margins, we are starting to see that changing rapidly.  In China and Korea, for example, more than 50% of payments are now cashless.  But in other major Asian economies including Japan, Indonesia, and Thailand, cash is used much more frequently. In Japan for example, over 60% of consumer payments are made in cash, compared with around 20% in the US.

Rising smartphone ownership – now ranging from around 55% of mobile users in Japan to well over 85% in China and Korea – and the plethora of services they provide access to, are creating more awareness of alternatives to cash payments.  And more international travel by Asian consumers is encouraging partnerships to meet consumers’ needs.  Ant Financial’s Alipay and Tencent’s WeChat, for example, which together dominate the market in China and can be loaded with JCB or other domestic credit and debit brands, are teaming up with global payment solution providers to reach important markets in Asia, North America, and beyond so that customers can pay with their preferred method when they travel abroad.   

The number of foreign travelers to Japan has increased dramatically over the last decade from 7 million in 2006 to over 24 million in 2016.  This is helping to push forward wider acceptance of cards and contactless payments at the point-of-sale, as many tourists are often inconvenienced by being forced to use cash, even in areas with high concentrations of foreign visitors.  In fact, it was only recently that McDonalds in Japan began to accept Visa, MasterCard, JCB, and other card products.  Part of the slow pace of adoption is the expense merchants are often required to pay to set up a POS system.

With the Olympics coming in 2020, the Japanese government is addressing this issue with increased urgency, and the government has a set a goal of doubling cashless payments over the next 10 years by subsidizing the cost to merchants of setting up point-of-sale payment terminals.  Not only will this help ensure a positive experience for guests from abroad, but more non-cash payments mean higher spending by consumers, and more sales and better margins for merchants. 

As more of our own cardmembers – in Japan and elsewhere in Asia – increasingly demand to use their preferred payment method, JCB is working with global partners such as First Data in Hong Kong and Nets in Europe, to set the table for seamless spending experiences around the globe.  The goal is for all merchants across Europe, Asia, North America, and anywhere else our cardmembers go, to be equipped to accept payments from JCB cardmembers with dual-interface cards and smartphones.

The US is of course, one of our most important markets outside of Japan, and our partnership with Discover has resulted very high acceptance at brick & mortar and ecommerce merchants across the country.  Now that our J/Smart EMV chip solution rollout is well underway, we are focused on working with Discover and other partners to add JCB Contactless EMV functionality at points-of-sale across the US.  While the number of dual-interface cards and contactless devices is still relatively low, we anticipate significant growth and will be ready when usage becomes more widespread.

As card payment markets around the globe and smartphones proliferate, the need for contactless card and mobile payments, and the convenience, enhanced services, and profitability they bring will only further expand.  As a proud member of MAG, JCB is excited about the future and we look forward to forging new and deeper relationships with fellow MAG members to better serve our mutual customers, merchants, and payments industry partners.