Japan loves cash. For many tourists visiting the country for the first time, this can often come as a surprise – surely the land of bullet trains and robot toilets would accept the humble credit card! But while there are signs that the Japanese payments industry is gradually adapting to new technologies, it’s not in the way you might think.

“Some 80% of retail payments in Japan are still made with cash,” says Yusaku Matsuda, who manages the Strategy Planning Group of Rakuten Edy, one of Japan’s leading e-money services. Matsuda has been with Edy since 2004, in the early years before it was acquired by Rakuten in 2010. “People in Japan are often scared of inadvertently spending too much money with their credit cards,” he explains.

That’s not to say that Japanese attitudes toward credit cards aren’t changing. Some sectors of the industry are booming – in fact, Rakuten Card, Rakuten’s credit card business is now growing at around 20% each year, placing it among the most popular cards in Japan, and achieved 5 trillion yen in gross transaction value in 2016.

But despite that growth, many Japanese consumers still tend to save their cards as a convenient option for online shopping or settling monthly utilities bills or for more significant purchases that need to be budgeted for, such as an overseas flight.

With e-money cards, you can only use what you’ve got

For day-to-day shopping, it’s another kind of cashless payment that is increasingly coming into play: electronic money. E-money cards, whether in the form of plastic cards in your wallet or apps on your mobile phone, have become ubiquitous in daily life in Japan, and they can be used for just about anything, from catching the train to shopping for groceries or just grabbing a drink from a vending machine.

A recent report showed that the retail e-money industry grew 10% in 2016 to reach a total of 5 trillion yen – a particularly impressive feat when you consider that the average purchase price for e-money is just 1,000 yen. So why has e-money been so successful in Japan?

In addition to the obvious benefit that users don’t need to carry around bulky notes and coins, Matsuda points out another reason for e-money’s popularity.

“E-money in Japan is mostly prepaid – you put money in your account and can only use that amount, until you put more in,” he explains. “This is, in a sense, just like putting physical cash in your wallet, in that you can only use what you have.”

This self-imposed restriction on spending evidently appeals to cautious Japanese consumers.

Rakuten Edy covers more locations than any of its competitors

Rakuten Edy is Rakuten’s flag-bearer in the e-money world. Many of the competing e-money services in Japan originated from a specific business, such as a convenience store chain or a railway network, but Rakuten Edy’s relative neutrality when it comes to brands has meant that over the past 16 years it has built up a broad-reaching client base that covers more locations than any of its competitors.

“Rakuten Edy is also extremely convenient for users of other Rakuten services,” says Matsuda. The service can be integrated into users’ Rakuten Card credit cards, and it can be used to earn and exchange Rakuten Super Points, which can be used at a wide range of services within the Rakuten Ecosystem.

Matsuda believes that synergy will help Rakuten Edy continue to grow. And, likewise, he thinks the future of e-money in general looks good. “5 trillion might sound like a large number, but that’s just a small drop in a pool of the approximately 300 trillion yen spent by consumers annually,” he says. “E-money still has a long way to go.”