TOKYO: Japanese financial institutions are strengthening their debit card offerings. The cards, which withdraw money directly from deposit accounts when used, first became available in Japan in 2000, but have not seen wide adoption.
But with the increasing popularity of cashless transaction services, financial institutions expect stronger consumer interest in debit cards, and increased revenues from associated fees. Consumers may prefer to use debit cards, which use only immediately available funds, in contrast with credit cards, which require payments to be settled later.
ATM cards featuring debit card functionality can be used only at businesses that participate in the appropriate service networks. At the time of payment, the customer will input his or her personal identification number, and the transaction will be settled immediately against the associated bank account.
At present, there are two groups of debit card service operators in Japan. The first group uses J-Debit cards and belongs to the Japan Debit Card Promotion Association. The other group uses cards from Visa Inc, the major US credit card service company behind the Visa brand. The J-Debit group is Japan’s largest, with about 1,200 financial institutions in Japan using the network since its start in 2000.
In principle, existing ATM cards from participating institutions can be used as debit cards without issuing new cards for the service. The service is available at about 450,000 businesses in Japan.
One advantage of Visa debit cards is the far larger number of stores participating in the service network, about 36 million worldwide. This difference has encouraged major Japanese banks to begin making ties with the service network. The Bank of Tokyo-Mitsubishi UFJ, home to approximately 40 million bank accounts, began offering the service in November last year.
JCB Co, a major credit card service company, will begin its own debit service from autumn this year. A senior official at one major bank also attributed the shift to the proliferation of electronic money, such as Suica cards, which “have lowered consumers’ psychological resistance to paying with cards.”
Financial institutions are also seeing the April rise in the consumption tax rate, which will potentially annoy consumers by forcing an increased use of small coins, as an opportunity to popularize debit cards.
Only about 18 percent of Japan’s consumer spending, about 300 trillion yen, is settled using cards for payment. That figure is far lower than the 48 percent of the US and the 62 percent of South Korea, showing that Japan’s adoption of cashless shopping still lags behind.
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