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Japan is on track for a radical shake up of its payment landscape. This is being driven not only by changing technology, consumer preferences, and business demands, but also by an official push to digitize cross-border payments for a changing world.
With rapid rises in both foreign investment and domestic business appetite for instant payments, banks, financial institutions, and enterprises are seeking faster and more cost-effective ways to move money to and from Japan.
This requires a new approach to cross-border infrastructure and partnerships, moving from traditional methods such as banking correspondent networks and wire transfers to global real-time payments.
Nium recently became one of the first global fintechs to secure a Type 1 Funds Transfer Service Provider (FTSP) license from Japan’s Financial Services Agency (FSA), representing a major step forward in helping businesses to move funds quickly, securely, and reliably in and out of the country.
Heishi Masayasu, Nium Japan Country Manager, discusses the trends driving rapid changes in Japan’s B2B payments landscape, and how both global and domestic businesses can take advantage of this growing opportunity.
Q: What makes Japan’s payments landscape different from other developed countries?
Heishi Masayasu: Japan has always been a highly distinct country, and that applies to payments as well. While the country has a reputation for technology and innovation, there was, traditionally, a cultural dimension that has influenced the way payments work.
You only have to look back a few years to see this in action. Zengin-net, Japan’s domestic payment clearing network, only started operating 24/7 in 2018; a full decade after many other countries implemented similar systems.
Before this, businesses were constrained by banking hours, which was obviously a big limitation. Before the introduction of Zengin EDI in December 2018, which allowed businesses to attach commercial details, like invoice numbers, to transactions, you might have to send a fax alongside a payment to explain what it was for.
There has also long been a strong preference for cash – it’s seen as secure and reliable, though this is changing. In 2017, cash had a 67% market share for transactions, but this is predicted to fall to 31% by 2027.
Q: Given the slow start, why is the focus in Japan moving from domestic to cross-border payments now?
HM: Japan is subject to the same commercial and geopolitical forces as the rest of the world and there’s a clear recognition of the key role that payments play in creating a competitive economy. Business is becoming more global, and international money movement is a key part of that, especially for services like e-commerce and digital products that are intrinsically borderless.
The yen’s depreciation against the U.S. dollar has also made Japan more attractive for outbound trade and foreign direct investment (FDI). In 2024, Japan's exports reached a record 107.9 trillion yen (approximately $691 billion), the highest level since 1979.
Domestic technology development, such as in the semiconductor sector, has created a generation of ambitious companies that both want to trade internationally and are ready to embrace modern cross-border payments.
At the same time, data is becoming an increasingly valuable cross-border commodity. Japan now hosts 2.5% of the world’s data centers, with major players like Amazon and Microsoft operating facilities here. The 2024 protocol signed between Japan and the EU is part of the same trend. As businesses buy and sell data internationally, they expect similarly seamless payment experiences.
Q: How are payment systems and preferences changing in Japan to meet business demands?
HM: Firstly, the Japanese government is fully onboard with making payment digitisation a priority. We’ve seen the establishment of the Cashless Promotion Council to move Japan towards a cashless society with a goal of cashless transactions reaching 40% this year.
Japan is also building connections in the region. For example, in 2021, the Bank of Japan (BOJ) and the Hong Kong Monetary Authority (HKMA) launched a cross-border delivery-versus-payment (DvP) link for faster settlement.
We’ve also seen a steady opening up of the playing field of who can support businesses in moving their money.
Money service business (MSBs) with a Funds Transfer Service Provider (FTSP) registration were only allowed into the market in 2010, and even then with a 1 million yen ($6,950) cap on transaction volume. While this cap was eliminated in 2021, a lack of trusted cross-border alternatives meant that the only way to send money overseas without transaction limits was via existing banking systems with high transfer fees – on average around 7%.
Until now. Nium’s Type 1 license, which allows transfers of up to 50 million JPY per transaction via Zengin-net, creates a new opportunity for banks, financial institutions, and businesses both inside and outside Japan to move money more quickly, cost-effectively, and securely.
Q: What do these changes actually mean for the businesses moving money in and out of Japan?
HM: With new providers like Nium entering the market, global businesses can send cross-border, real-time payments to and from Japan with lower costs and more transparency. Think payments that settle in minutes compared to the one to five days typical of correspondent banks, or fees under 3%, whereas traditional banks can charge anywhere from 3% to 10%, with additional hidden fees from intermediary banks.
It opens the door to more businesses competing in the global marketplace, which is huge for industries like eCommerce, where Japan is the world’s fourth largest market.
Q: So what’s next for payments in Japan?
HM: A lot of our existing customers around the world have started using Nium to send payouts to Japan, as their needs simply weren’t being met by traditional wire transfers or other cross-border payment providers.
Looking ahead, we expect this demand to continue to rise, driving more banks and financial institutions to partner with Type 1 licensed fintechs who can offer these services, enhancing their geographic reach, payments efficiency, and the customer experience.
At the same time, the appetite for digital payments in Japan is growing. We can see this in the rise of digital wallets, which nearly doubled between 2021 and 2023, and is expected to double again by 2027 as more people and businesses embrace cashless payments. The Central Bank is also exploring its own ‘digital yen’ as a digital currency.
Now that MSBs can freely compete within the Japanese cross-border payments landscape – more choice and more competition will bring innovation and new products to the market. And the end goal will always be to provide the best possible experience for businesses and their customers.
