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Japan prefecture adopts 'smart' payments to lure cashless tourists

Tourists from China and other countries used to cashless societies are the main attraction

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A Chinese tourist making a payment with her smartphone at Yoshitakaya at the Arima hot springs area in Kobe, Japan. Shrinking suburban population is also one reason for the shift.

Kobe

ELECTRONIC payments using smartphones are becoming increasingly common at tourist spots, shopping streets and other locations around Hyogo Prefecture.

A declining population means a shrinking market for shops in the prefecture, and efforts are being stepped up to secure a revenue stream from foreign tourists, such as those from China and other countries that are trending towards cashless societies, by making it easier for them to make purchases electronically.

"In China, we don't carry much cash. It's very convenient and helpful," said a Chinese tourist with a smile at the Yoshitakaya souvenir shop at the Arima hot springs area in Kobe.

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The 36-year old woman was paying for a purchase by WeChat Pay, a smartphone payment service offered by leading Chinese social media company Tencent. A shop clerk scanned the QR code on the woman's smartphone with a special device, and the transaction was quickly completed.

A business association of shops, eateries and inns in the Arima area, aiming to appeal to Chinese tourists, implemented the payment system in July with subsidies from the prefectural government. Currently about 30 shops offer electronic payments, a number expected to increase to 80 this fiscal year.

Yoshitakaya, using a sticker at the entrance and other means, has been promoting its ability to handle smartphone payments, and the use of electronic payments by tourists from China and other countries has become a daily occurrence.

Yoshitakaya president Yoshinobu Yoshida expressed his satisfaction and expectations for the system, saying: "It's easy to operate, and it places little burden on our staff. If word spreads that you can pay via smartphone at any shop in Arima, we'll bring in more tourists from overseas." This fiscal year, the Hyogo prefectural government established a programme to subsidise one-third of the costs of introducing the WeChat Pay system and the Alipay system offered by Chinese e-commerce giant Alibaba Group.

The prefectural government especially wants to encourage the introduction of these systems along the "Hyogo Golden Route," which connects the three cities of Kobe, Himeji and Toyooka, which boasts the Kinosaki spa.

In addition to Kobe's Arima hot spring area, about 60 establishments in the Sannomiya Center-gai shopping street and surrounding area introduced a smartphone payment system in September using the subsidies. Currently about half of those in the shopping street can process smartphone payments.

Elsewhere in the prefecture, the Minami-Awaji city government concluded an agreement with a company that leases tablet devices for WeChat Pay and other payment systems in June, and equipped 15 tourist facilities and Michi-no-Eki roadside rest areas with about 30 tablets.

One major reason for shopping streets and other merchant associations speeding up the introduction of smartphone payments is the decline in population in the prefecture.

As of Jan 1 this year, the prefecture's population stood at about 5.5 million, down about 17,000 from a year ago to mark the eighth straight year-on-year decline.

"The shift of population from rural areas to Tokyo has produced an outward flow of young people," said Hisashi Ietsugu, chairman of the Kobe Chamber of Commerce and Industry. "Consumption is also shrinking." This has also increased the number of bankruptcies of small businesses.

The prefecture is also facing a tough battle to lure inbound tourists. According to Mitsubishi UFJ Research and Consulting Co, spending by inbound tourists in the prefecture totalled 29.2 billion yen (S$353 million) in 2017, down 8.5 per cent from a year earlier and the second consecutive yearly decline.

"As the use of electronic payment spreads, tourists will stay away from areas that don't have the shops to handle such payments," said Hideyuki Araki, a senior researcher at Resona Research Institute Co. WP