Smartphones and Person-to-Person Money Transfer Systems: The Essentials of the Cashless Society
Although it may take some time before cashierless grocery stores become commonplace, some countries have already become cashless societies where cash is not needed in daily life. For example, in Sweden, a country known for being a cashless society, people do not have to carry cash because they can buy almost anything by credit or debit card. Even fees for use of bathrooms in department stores can be paid by card.
Cashless societies benefit not only users but also stores. For cash payments, stores must prepare change and manage cash on premises. Cashless payments eliminate the need to prepare change and the trouble of passing and receiving cash. This also reduces the risk of becoming a victim of cash robbery or theft.
In Sweden, since the government is actively promoting cashless payment and many citizens favor it, more than a few stores and services (including public transportation operators) have stopped accepting cash to pay for goods/services. Stores that do not accept cash have signs that read "NO CASH ACCEPTED." You can see such signs while walking around Stockholm.
However, there are transactions in daily life that cannot be handled by credit cards, such as lending and borrowing money among friends when going out to eat. Person-to-person money transfers are easy with cash, whereas a society in which people do not carry cash requires an alternative. Any advanced cashless society must have an instrument for such transfers, namely mobile payment services that enable individuals to quickly transfer money electronically. More specifically, this refers to smartphone payment services that use a special smartphone app to enable transferring money promptly between individuals as well as between individuals and stores. In Sweden, Swish is a no-fee smartphone payment service for individuals. If most citizens can use smartphone payments, it is also more convenient to use for person-to-person money transfer than cash because it eliminates situations in which someone says "I don't have enough money now" or "I'll have to do it later because I don't have small change."
Conversely, if few people use smartphone payments, one must carry cash. Japan is still in this phase.
Smartphone Payments for Daily Shopping: Two Major Brands Prevail in China
The representative country in which smartphone payments are widespread is China, which has two major smartphone payment services, namely Alibaba Group's Alipay and Tencent's WeChat Pay. Many people have accounts with both services and use them to make daily cash payments via special smartphone apps. These two smartphone payment services can be used in many stores in China and also have features for transferring money promptly between individuals.
In China, it is common for individuals to use smartphone payments for person-to-person money transfers. Smartphone payments are more convenient than cash because they enable payers to transfer money on the spot simply by specifying the amount and for payees to immediately confirm receipt of the funds. Thus, there is no need to carry cash in China, and as a result more and more people do not.
When Chinese people go abroad for pleasure or a business trip, they want to use smartphone payments even in foreign countries, just as they do in China. If they can use smartphone payments abroad, they can shop without worrying about how much money they have in the local currency. Stores can expect increased sales. In light of this, stores that want to attract Chinese tourists are rushing to support Alipay and WeChat Pay payments.
Active efforts are underway to address this need of stores. The aim is to support Chinese mobile payment services by extending existing credit card payment services. For example, Fujitsu Kyushu System Services has added support for Alipay by extending Card-SaaS/CHANNEL Value Credit Payment Relay, a credit payment service that Fujitsu Payment Center offers to the retail industry.
Biometric Authentication for Hands-free Shopping without Credit Card or Smartphone
Another advanced cashless country in Asia is South Korea. Since the 1997 Asian currency crisis, the South Korean government has implemented various measures to promote the cashless society, which have led to popularization of payments by credit card, debit card, and electronic money in the country. One factor that contributed to this popularization is preferential treatment for general users. For example, using a credit card instead of cash is advantageous taxwise.
In South Korea, an advanced cashless country, new payment methods beyond credit cards and smartphones are coming into practical use. To use a credit card or smartphone payment, a user must remove the credit card from his or her wallet or open a smartphone payment app and then display the QR code or scan a QR code provided by the store. Such procedures require a bit of time and are inconvenient when carrying things in both hands.
To eliminate such inconveniences, efforts to utilize biometric authentication are underway in South Korea. For example, LOTTE CARD has launched the HandPay payment service, which achieves hands-free shopping by adopting PalmSecure, Fujitsu's palm vein authentication device.
HandPay payments require only a user's hand. The user types in his or her registered phone number and then holds a hand over the device in order to perform online authentication using the registered palm veins. This eliminates the need to use a credit card or smartphone, making it possible to shop empty handed.
This article gave an overview of trends in early cashless societies in the US, Indonesia, Sweden, China, and South Korea from the perspective of users. Eliminating procedures related to cash transfer provides users with many benefits. The reason why Japan is backward in terms of cashless payments is that many citizens do not understand the benefits. I hope that we can obtain the benefits of cashless payments that advanced cashless countries now enjoy.
The next article will report on trends in the commercialization of unmanned convenience stores, which will soon be launched in Japan as well, and use of payment data, which is expected to be part of the social transformation brought about by the cashless society.
- Author Information
Chief Research Officer
NIKKEI BP Intelligence Group
- Graduated from Tohoku University's faculty of Engineering in 1985 and joined Nikkei Business Publications, Inc. in the same year. As reporter and assistant editor for Nikkei Data Pro, Nikkei Communication, and Nikkei Network, he wrote about advanced technologies related to communication/information processing as well as trends in standardization/commercialization. Chief Editor of Nikkei Byte in 2002, Chief Editor of Nikkei Network in 2005, and Chief Editor of Nikkei Communication in 2007. Publisher of ITpro, Nikkei Systems, Tech-On!, Nikkei Electronics, Nikkei Monozukuri, Nikkei Automotive, etc. before becoming Director of the Overseas Business Division in January 2014. Has been in his current post since September 2015. Writing the series Jido unten ga tsukuru mirai (A Future with Self-driving Cars) since August 2016 on Nikkei Online Edition. Issued Sekai jido unten kaihatsu project souran (An Overview of Global Self-driving Development Projects) in December 2016 and Sekai jido unten/connected car kaihatsu souran (An Overview of Global Self-driving/Connected Car Development) in December 2017. Serving on the CEATEC Award Review Panel since 2011.