Shopping by debit card at last moved into high gear in Japan on March 6, 2000. Consumers can now use the ATM cash cards of 617 financial institutions to pay for purchases at 100,000 stores all over the country. This follows a trial that began in January 1999 and in which nine financial institutions and 19 major retailers took part. A debit card withdraws money from the user's bank account and immediately transfers it into an account designated in advance by the shop concerned.

Quicker than Credit Cards
In practical terms, this means that consumers can pay for goods at the supermarket or other stores by inserting their debit card into a terminal and, having checked that the amount shown on the display is correct, inputting their personal identification number (PIN) to confirm the transaction. The money is withdrawn from their account and sent to the store's account electronically. The process only takes about 20 seconds, quicker than credit card transactions, which cannot be completed until the validity of the card has been verified. The practice of paying by debit card spread rapidly in Europe and the United States during the 1990s, and the launch of this system is an attempt to bring it similar acceptance in Japan.

Debit cards resemble credit cards in that they allow people to shop even if they are not carrying any cash. Special features of debit cards, however, are that shoppers pay no transaction fees and that the fees paid by shops to financial institutions are low.

Cash Convenience
Soon, customers using debit cards will be able to withdraw cash even as they make their purchases. This "cash-out" service will allow them to request payment of more than the actual price of the goods they buy and receive that extra amount in cash. This will effectively enable consumers to withdraw money from their bank accounts outside of normal banking hours.

The convenience of debit cards means that they are being welcomed by department stores and other large retailers. An executive at a leading household electronics store predicted: "Debit cards are very convenient, so they will spread rapidly." They are not, however, without their disadvantages. There is no escaping the danger that someone may steal a look at a shopper inputting their secret PIN or may be able to get at information stored magnetically by hacking into the terminals. There is also the problem that for small shops that sell relatively small amounts of goods to each customer, such as convenience stores, the fees charged by financial institutions whenever a customer uses a debit card in their store will squeeze their already small profit margins. Some analysts suggest that the use of smart cards and the system of bank fees will need to be reviewed in order to tackle these problems.

Pinning Hopes on PINs
In Europe and the United States, which have a head start in the use of debit cards, a variety of systems are in operation. Some function semi-online, and many use a signature to confirm the identity of the customer. The Japanese service is different in that all processing will take place online, and confirmation of customers' identity will be by the PIN method. According to an organization that promotes debit card use, the chances of an online system being misused are lower than offline operations, because there is no time difference between the purchase and the actual transfer of money. As for the use of PINs, this method was chosen because the practice of making a signature to verify one's identity is not very widespread in Japan.

Japanese people have historically viewed payment by cash as superior, while payment by credit card--with its connotations of going into debt--was looked down upon somewhat. Just like cash, however, payment by debit card effectively involves giving an amount of money equivalent to the price of goods to a store at the time of purchase. This may allow people to overcome the psychological barriers to noncash payment methods.

Edited by Japan Echo Inc. based on domestic Japanese news sources. Articles presented here are offered for reference purposes and do not necessarily represent the policy or views of the Japanese Government.

---