TOKYO -- Amazon.com of the U.S. has brought the Amazon Pay service to unaffiliated brick-and-mortar shops for the first time -- in Japan.
The big U.S. retail and tech group appears to see a lot of cashless potential in Japan, where most consumers still pay for groceries and other goods with bank notes and coins.
Its Amazon Japan unit has partnered with startup Nippon Pay and is providing the service at dozens of small businesses in Tokyo and Fukuoka.
A consumer can use the service with a smartphone and the Amazon.com app, which displays a QR code ahead of a transaction. The merchant uses a tablet provided by Nippon Pay that has a camera to scan the QR code.
"There are so many payment services in Japan, and we really didn't know which one to use," said an owner of a central Tokyo cafe that has introduced the Amazon Pay service. "Amazon is a world-renowned company, and our customers will feel comfortable using the service."
Amazon already accepts QR code-based payments at its physical Amazon Books stores in the U.S., but Japan is the first market where the conglomerate has brought the same service to nongroup retailers.
Amazon usually tests services in the U.S. before going into full launch mode. But Japan is tempting to cashless payment service operators.
Japanese love their cash. Credit cards, electronic money and other cashless systems account for only 20% of all consumer payments in Japan. In China, the rate is 60%, and in South Korea it is 90%.
If one service provider eventually succeeds in changing Japan's pocket money habits, it has a chance to dominate one of the world's largest consumer markets.
Takuya Inokawa, head of Amazon Japan's Amazon Pay Division, said the company will decide whether to cast a larger net with its service after it gauges consumer sentiment.
Amazon is starting with small merchants who do not accept credit cards. Nippon Pay will bear the transaction fees until the end of 2020 if stores sign up for the service by the end of this year. The startup intends to cover these expenses with revenue it expects to earn by providing translation services to foreign visitors to Japan and music streaming service.
Businesses in Japan must pay 3% to 4% of the total transaction to service providers when a customer uses a credit card or other noncash tools. And managing cash costs businesses about 1% of their revenue, so Amazon Pay will be cheaper than cash for partner retailers, at least until the end of 2020.
Nippon Pay's tablets have also synced with Alibaba Group Holding's Alipay and other payment services. And as of the end of June, Nippon Pay had given the hardware to 15,000 stores.
Amazon is encouraging small merchants to use its service and will consider teaming up with convenience stores and restaurant chains that introduce point-of-sale cash registers.
The service is available to anyone who has provided Amazon Japan with their credit card information and has its app on their smartphone. Consumers could find the arrangement convenient. For its part, Amazon, if the service takes off, will be able to track its customers' offline buying behavior as well.
And that is what Amazon Japan is after -- a treasure trove of consumer data. The company says this data could help it improve the recommendations it shows to its online shoppers.
But other companies are after the same treasure trove. Like Amazon Japan, PayPay, a joint venture between Yahoo Japan and SoftBank, is trying to entice small merchants by promising no transaction fees for a limited time. Rakuten, one of Amazon's main competitors in Japan, NTTDocomo , the country's largest cellphone service provider, and Line, almost a must-have chat app in Japan, have launched their own smartphone payment services.