Cash-loving Japan is taking bold steps towards a cashless economy and Rakuten is leading the way.

Rakuten has long been at the forefront of Japan’s cashless payments industry, having created Japan’s most popular credit card Rakuten Card, the ubiquitous Rakuten Edy e-money brand, as well as Japan’s favorite loyalty points program, Rakuten Super Points.

In late 2016, the company launched the Rakuten Pay app, which allows users to make payments with a quick scan of a barcode from their smartphone. The app rapidly caught on among users, spawning a brand-new industry and healthy competition from a variety of companies.

Recently appointed as President of the newly-formed Rakuten Payment, Inc., Koichi Nakamura is the man leading this cashless charge. Since 2012, Nakamura has led the development of the Rakuten payment business, including the Rakuten Edy e-money service, the Point Partner reward program and Rakuten Pay smartphone payments.

Rakuten Today sat down with Nakamura last week to hear his unique perspective on the industry.

Japan: fashionably late to the cashless party

“Japan respects cash. They take care of it,” Nakamura says. “You could call it a national identity.”

In Japan, cash means safety. “The Japanese yen is extremely stable and counterfeit bills aren’t really a problem ⁠— you’ll never see a Japanese person holding a bill up to the light,” he continued.

Fear of debt is another factor contributing to the country’s love for cash. “In Japanese supermarkets, e-money is actually more popular than credit cards. It may sound surprising, but people will go to the trouble of charging their e-money account with cash just to pay at the register, even if they have a credit card. Why?” Nakamura poses. “I asked this to a customer once, and they asked me back: Should I really be going into debt just to eat breakfast today?”

How to transform an industry

“No matter what new technology comes out, it’s unlikely that anything will completely change the industry overnight,” Nakamura says. Big changes require a new culture and a serious infrastructure investment from the merchant side.

“Credit cards, for example, are everywhere in the United States,” he explains. “Yet NFC (contactless) credit card payments are still a pretty rare sight there. You aren’t going to spend billions of dollars on one system then turn around and say, ‘Let’s switch to a different system!’”

Rakuten Pay’s system of employing users’ smartphones as payment terminals lowers these barriers significantly.

“With QR payments, it’s not that the protocol itself is particularly revolutionary ⁠— it’s how economical it is for merchants. It’s not easy for merchants to invest in a 300,000-yen credit card reader ⁠— that cost is on the merchant. But now, customers themselves are providing the infrastructure: their smartphones!” Nakamura reasons. “The cost to the user is the time it takes to unlock their phone, open the app and read the code… The burden is spread across the entire network of users.”

Japan’s cashless revolution has received a helpful boost courtesy of the Japanese government’s recently announced “Cashless Vision.”

“Private consumption in Japan is about 300 trillion yen each year. About 50 trillion of that is through credit cards, and about 5 trillion e-money. That’s after 50 years of credit cards and 20 years of e-money. The government wants to double that amount by 2025. They aren’t messing around,” Nakamura says. “There are high hopes that QR payments (like Rakuten Pay) will help the government reach that target.”

Rakuten Pay: Leader of the pack

Since its inception, the Rakuten Pay app has proved a hit with consumers, consistently ranking in as the most popular payment app in Japan. Nakamura lists three core reasons for this success: “The Rakuten ID, Rakuten Super Points and the merchants.”

He elaborates: “Firstly, the Rakuten ID (there are more than 100 million of them) is the same one users have for Rakuten Ichiba, Rakuten Travel and other services. That means their payment information is already registered, which is a huge advantage.”

But while this low barrier to entry for new users may give Rakuten an advantage, it alone may not be enough to beat out other e-commerce platforms, which may also have users’ payment information registered.

“That’s where Rakuten’s points program comes into play,” he explains. Users can not only earn Rakuten Super Points, but also spend points earned from using other Rakuten services. “The program is stronger and more popular than anything else out there.”

The third factor for success is the Rakuten merchant network. “There are already 3 million places in Japan where you can use Rakuten group’s smartphone payments Rakuten Edy and Rakuten Point Card.” That number has grown to nearly 3.6 million since Rakuten recently partnered with a major e-money card used as a fare card for trains and buses in Japan.

Over its long history in the payments industry, Rakuten has built up relationships all around the country ⁠— something Shigenobu Kobayashi, executive officer of Rakuten Payment, Inc. and general manager of the Rakuten Pay Business Division, emphasized in a previous interview with Rakuten Today. “We didn’t start the Rakuten Pay business from scratch,” Nakamura concludes. “It’s the culmination of 20 years of hard work on a number of different services, all coming together. That’s why Rakuten Pay is number one.” 


Koichi Nakamura will be speaking about what’s next for Rakuten Pay on July 31 from 15:15 JST at Rakuten Optimism 2019 ⁠— a completely cashless event.