GFTN Panel Discussion Report

On March 6, 2025, a session titled "Evolution of Payments in Japan," held as part of the Global Finance & Technology Network (GFTN) Forum in Tokyo, garnered significant attention both domestically and internationally. The unique development of Japan's cashless evolution, which differs from global trends, has become a phenomenon of great interest within the financial industry. This session proved to be a valuable opportunity that went beyond mere analysis of the current situation or institutional theory discussion, and provided a valuable opportunity to hear candid opinions and future prospectives of "change makers".

The speakers were Mr. Keita Suzuki from GMO Payment Gateway, Mr. Ryosuke "Luke" Nomura from Sony Payment Services, and Smartpay CEO Sam Ahmed. The moderator was Ms. Camilla Bullock from Emerging Payments Association Asia, who is well-versed in the Asian payments industry.

This session was structured in two parts, with a panel discussion in the first half, and then Sam's presentation in the second half. It was a time where insights into the uniqueness of the Japanese market and consumer psychology and players' willingness for evolution all intersected.

To Break Through the Wall of Japan's 40% Cashless Payment Ratio

Ms. Bullock first posed a question to the audience: "How many of you are carrying cash right now?" Only about 10-20% raised their hands. While this might appear to suggest that cashless payments have become widespread, the panelists quickly pointed out the reality that "Japan is still very much a cash-based society."

Mr. Suzuki noted that while transportation IC cards like Suica became widespread in the early 2000s, the fact that this technology differed from the contactless credit cards, which were common in other countries, actually "put the brakes on" the increase of Japan's cashless payment ratio. He also mentioned that the 2016 amendment to the Payment Services Act, which allowed non-bank entities to enter the market, was a turning point.

Sam nodded in agreement with these points and shifted the discussion to Japanese consumers' "fundamental psychology" toward payments.

"In Japan, cash has established itself as something that can be trusted. Especially homemakers in Japan want to manage their household finances carefully, and many do this management on a cash basis. Having money in their wallet that directly corresponds to their available spending amount provides an incredibly strong sense of psychological security."

Credit cards, with their system of billing coming a month later, tend to create a discrepancy with one's budget sense. In other words, it's not just about the convenience of payment methods - the 'compatibility with daily money sense' is the decisive factor in their payment method choice.

Mr. Nomura agreed with this, stating "While Japan's cashless ratio has reached 40-50%, cash still dominates in regional areas and small businesses." He further pointed out that "the more than 30 payment stickers at convenience store registers are not choices but symbols of confusion," and noted how this crowded ecosystem is hindering decision-making of users.

Sam then delved deeper into the importance of "incentives" for successful innovation.

"We at Smartpay work very closely with METI (Ministry of Economy, Trade and Industry), Jeppo (Japan Electronic Payment Promotion Organization), and FSA (Financial Services Agency). Japan's regulatory authorities are exceptionally cooperative compared to other countries, taking a partnership approach to creating systems together. This is a characteristic rarely seen in other countries."

As a concrete example, he cited a cooperation with Jeppo. "For instance, through our partnership with Jeppo, we are integrated with over 200 banks and able to access more than 90% of Japanese banking network."

He also discussed utilizing the concept of "data sovereignty" as an incentive. "For banks, maintaining data sovereignty serves as an incentive. Some people use credit cards, others use bank accounts. It's important to have a system that benefits both."

He then shared valuable observations about the dividing line between success and failure in the Japanese market.

"In every industry in Japan, there are traces of foreign brands that came and failed. Most of them are big Western corporations. The reason is that Japanese consumer psychology is unique. It's not a technology issue. That's why it's crucial to carefully understand values for consumers”.

Redefined "Buy Now, Pay Later" To Support Household Financial Management

In 2020, Sam founded Smartpay. After graduating from Harvard Business School, he led digital business initiatives at several global companies, including serving as Head of Payments and Fintech for Facebook Asia Pacific, as well as at Starbucks and Mastercard. Named one of the "Top 10 Harvard Business School Graduate Leaders" in 2023, Sam's more than decade-long stay in Japan led him to believe "this market could be better," which became the catalyst for founding Japan's first embedded digital financial company.

"I came to Japan in 2010 for a Starbucks project. At the time, Japan was the second country in the world to implement in-app payments, but it was significantly behind in terms of regulatory framework. It wasn't until our prepaid balance exceeded $100 million that authorities finally took action and began developing regulations. Through this process, I became acutely aware of the gap between Japan's systems and practical needs."

Sam's vision for Smartpay wasn't just about offering a simple Buy Now Pay Later service, but rather "a BNPL solution with UX that aligns with Japanese consumers' psychology."

Smartpay's system is simple yet powerful. Users can connect their bank accounts and utilize three installment payments without using a credit card. The service adopts a performance-based fee model for partner merchants while remaining completely free for users. This business model is built on trusting relationships with merchants, without placing any burden on consumers.

Strategic Approach with Clear Target Market

"Our target is not young people in their 20s but people in their 30s to 50s who manage their family budget. These people value being able to see their money flow in real-time. That's why we've designed our system to focus not on 'bills that come later' but on 'how to pay within the current budget." Sam provided further details about this targeting strategy.

"Personalization begins with 'establishing clear target groups.' The younger a company is, the more important it is to focus on specific segments first. While giant corporations like Amazon and Rakuten need large-scale, general personalization, startups like us are achieving results through more precise targeting."

Sam emphasized that "while many BNPL (Buy Now, Pay Later) services are designed to defer payments, Smartpay focuses on 'payment visibility.'"

Smartpay has already partnered with Jeppo and owns a proprietary payment rail (infrastructure) directly connected to over 200 domestic banks. This structure, different from existing credit card networks, enables more flexible and real-time operations.

This strategy is gaining solid market support. Since launching in November 2021, Smartpay has grown rapidly, with merchant numbers increasing by 1,800% in 2023 and user base growing by 200,000. Notably, customer satisfaction is exceptional, with a repeat rate more than 10% higher than competitors.

This success demonstrates that Sam's strategy of "UX that fits Japanese consumer psychology" is producing tangible results. Furthermore, merchants using Smartpay see clear benefits, with Smartpay users showing an average order value 40% higher than other users.

Tectonic Shifts in Japan's Payment Market: A Two-Year Forecast

In the final part of his presentation, Sam spoke about the "tectonic shifts" that would likely occur in Japan's payment market over the next two years.

"The PayPay example makes it clear. Initially, they acquired market share by offering free services, then tried to monetize by steering users toward their own credit cards, but consumers started leaving. Now they've reversed their business policy again. This case demonstrates just how delicate user trust can be."

Sam emphasizes that in the Japanese market, "convincing value" matters more than "convenience." "That's exactly why we're trying to give meaning to the payment experience itself. Payment isn't just a transaction point - it's a moment that touches on how we want to live our lives."

Smartpay has built partnerships with financial institutions like SMBC and MUFG, creating a position that leverages both the agility of a startup and the credibility of financial institutions. At a time when foreign companies are increasingly entering the Japanese market through M&As, this structural advantage should serve as a major tailwind for Smartpay's future.

Rules for Success in Japan: Smartpay's Three Cultural Strategies

Sam highlighted three crucial cultural elements in building a business in Japan. This explains why Smartpay has gained support in the Japanese market, unlike other foreign companies.

"The first one is 'power distance.' While Japan has a clear hierarchical society, what's important isn't the relationship with upper management, but rather the trust relationship with the first person you meet from the company. They don't think 'Is this business good for our company?' but rather 'Will I lose face if I introduce this internally?' That's why detailed documentation and patience are essential."

The second point raised was "uncertainty avoidance."

"As founders, we love uncertainty and ambiguity because that's where business opportunities lie. However, in Japan, such ambiguity is viewed as a risk. For example, direct connection with bank accounts was a major risk for regulators. So we decided to 'never be ambiguous about security' and documented detailed safety measures. What's more surprising is that our approach of developing products together with regulators proved successful. This would be unthinkable in the West."

The third point is "long-term orientation."

"Rather than the Western 'beautiful vision statement in three lines,' what's valued here is a detailed five-year execution plan and weekly KPI monitoring. If you miss even one KPI, you need to meet in person to explain and present improvement measures. This meticulous execution management is Japan's strength, and we've gained trust by respecting this approach."

New Challenge: Expanding Financial Experiences through "Embedded Insurance”

During the session, Sam also announced Smartpay's new service "Embedded Insurance." They will begin offering Japan's first embedded travel insurance product in partnership with a major insurance company.

"Payment is not just about transactions; it's also about protecting life. We are going to offer such services, for example, when booking travel, you can easily select insurance right there, which is seamless without complex input or switching to another app. This is true 'embedded finance,' embodying the peace of mind we aim to provide to consumers." Embedded insurance is gaining attention as an international trend in financial services. It simplifies the traditional insurance purchase process, offering convenience by allowing users to enroll in necessary insurance at the right moment. This new service is a concrete step in extending Smartpay's philosophy of "UX that fits Japanese consumer psychology" beyond payments to encompass the entire financial life.

The Future of Payments: "Freedom of Choice" Brings New Experiences

This presentation demonstrated Smartpay's pursuit of a "new form of payment experience." Sam particularly emphasized the importance of "consumer trust" in the Japanese market. Japanese consumers seek experiences that align with their lifestyle habits and values, not just convenience or new features.

Smartpay's approach is to deeply understand these uniquely Japanese sensibilities and redesign the payment experience from both technical and user psychology perspectives. Finance is a system, and payment is an experience. We're working to create essential value by making that experience not just convenient, but trustworthy.

Evolution begins not with novelty, but with the feeling of "being understood." Creating this sensation is a crucial element for gaining support in the Japanese market. What emerged through the discussions at this GFTN Forum was the perspective that an approach attuned to consumer psychology is just as essential, if not more so, than technological advancement in Japan's payment revolution. The "value creation" that Smartpay aims for embodies precisely this perspective.