Japan's cash preference presents challenge to cashless ambitions
Japan's Prime Minister Shinzo Abe continues to push his cash-loyal nation towards a more digital and less cash 2020, this time by setting a goal to double the total GDP share of smartphone, credit and store valued cards from 18% to 40% by 2027.
Did you know that 62% of Japan's consumer payments are made in cash? Over the last 30 years, the amount of cash in circulation in Japan has doubled, making up a 20% share of GDP. Cash in circulation in other developed countries has maintained at a steady 5-10% GDP share, which reinforces the view that Japanese residents prefer using cash.
This, combined with the celebrated use of ATMs and convenience stores as a 'second wallet' create an environment where locals and visitors can always turn to cash. Therefore, the government should not be looking to limit, restrict or take away the people's preferred payment choice.
Fortunately, findings from Nomura Research Institute foresee a painfully slow yet gradual growth in e-payments, 'leaving Japan well behind the front-running cashless societies such as Sweden'. Unfortunately, analysts from the institute figure that 'drastic measures' will likely be put in place in order to 'break set consumer ways'. An article from Nikkei Asian Review muses, 'One possibility is to introduce a penalty for using cash. Public transport systems could give discounts only to those who pay electronically, for instance'.
A red flag if we ever saw one, turning to cash restrictions (such as penalising consumers for using cash for public transport) in order to artificially incentivise the cash-happy population can be considered a blatant abuse of power as it sacrifices people's preference to cash for economic and data gains. World Alternative Media's Josh Sigurdson and analyst/author John Sneisen have referred to a cashless society with unlimited access to a nation's personal data as a 'dictator's toolkit'.
Catch up: Japan joined the cryptocurrency race
Japan's plan to launch J-Coin by 2020 is a key response to the quick and recent reach of Alipay and WeChat Pay, which threaten to dominate mobile payments within the island country. However, as this plan is largely driven by Mizuho Financial Group, Japan Post Bank and over 70 regional banks, it is evident that the aburpt move to digital is not designed to answer the public's needs but to instead claim an apparent gap in the market.
Excerpts from Nikkei Asian Review article
'"Black ships are coming," warned Daisuke Yamada, a senior executive at Mizuho Bank, comparing Alibaba to U.S. warships that forced feudal Japan to open up to international trade in 1853.'
'Japan may be behind other global players in the collection of Internet data, but starting late is better than never, Yamada says, calling the development of a digital payment environment "a must."'
'To consumers, it matters little who provides e-payment services -- Japanese or Chinese companies. But it matters enormously to financial institutions. At stake is access to information about customers and their spending and financial data, which can be mined for marketing and product development purposes. Online retailer Amazon is an example of how a gatekeeper of online transactions can create new services in retail, entertainment and finance.'
'Accounting for over 75% of all retail payments, cash is a store of value trusted by humanity and the number one back-up plan when electronic systems go down... We support the peaceful co-existence of cash and cashless payments so there is maximum choice and convenience for all citizens.'
The question is, how will the people react when policy-makers further restrict cash as the 2020 deadline looms closer?
Early last year, Japan introduced Negative Interest Rate Policy and the economically-savvy population responded with a 'flight to cash', preferring to stash their savings themselves than to pay a bank to do it for them.
Meanwhile, China saw the volume of mobile payments double to $5 trillion (of which Alipay dominated 54% and WeChat Pay covered 40%), perhaps inspiring their neighbours. If Japan doesn't accept mobile payments soon or widely enough for the Prime Minister's goals, will the public protest or adapt to severe cash cuts? If they public protests, will they lead a people's pro-cash movement in Asia?
Mitsuri, Obe. "Japan dabbles with mobile payments, but cash still king." Nikkei Asian Review. October 27, 2017. Accessed October 30, 2017. Web.