• What is cashless payment?
  • Types and features of cashless payments

In recent years, cashless payments have become more widespread as companies roll out various services. Opportunities to see cashless-related advertisements on TV and other media are also increasing.

Key Takeaways

  • The three main cashless payment types are prepaid (e-money cards), real-time debit (QR codes, contactless), and post-pay (credit cards)
  • Cashless payments reduce cash-handling costs for businesses and provide automatic transaction records for bookkeeping
  • Security features like tokenization and biometric authentication make cashless transactions safer than carrying physical cash

This article explores users’ attitudes toward cashless payments and examines how widespread they are.

What is cashless payment?

Cashless payment refers to any payment made using digital or electronic methods instead of cash. There are various types of cashless payments, such as credit cards, debit cards, electronic money from transportation and retail stores, and code payments using barcodes and QR codes.

Cash payments are declining year by year, and cashless payments are becoming a part of our daily lives. First, let’s look at the features and benefits of cashless payments.

There are three types of cashless payments.

Cashless payments can be divided into three types depending on when the payment occurs: advance payment, immediate payment, and deferred payment.

The prepaid method involves paying in advance, often using electronic money. Immediate payment occurs when the amount is deducted from your bank account at the time of the transaction, similar to using a debit card. Deferred payment means you are billed at a later date, as with a credit card.

Payments are made by reading information from a card or smartphone with a dedicated terminal. There are three types of reading: “contact type” where the card is inserted into a card reader, “contactless type” where the card is read by short-range wireless communication just by bringing the card or smartphone close to the terminal without having to touch it, and “code reading type” where the payment is made by reading a barcode or QR code.

The code-scanning type involves reading a QR code placed at the storefront with a dedicated smartphone app, or displaying a QR code or barcode using a barcode reader at the cash register or a dedicated smartphone app, then reading it at a dedicated terminal at the store. The timing of these payments can be prepaid, immediate, or deferred, depending on the service.

Three benefits of cashless payment

There are three main benefits to using cashless payment:

  • Earn and use points
  • Payment can be made quickly
  • Easier payments and management

Earn and use points

Some cashless payment methods offer points based on the amount you spend . You can use the points you earn to make new purchases or exchange them for products, so they offer better value than cash payments, which is a big attraction.

Payments can be made quickly

Another benefit is that you can complete the payment in a short time because there is no need to hand over cash. There is no need to waste time calculating coins or handing over change at the register, so you can make a smooth payment even when you are in a hurry.

Easier payments and management

Cashless payment removes the need to find an ATM and withdraw cash. Even for expensive purchases, there is no need to carry large amounts of cash, and you can make payments easily with just your card or smartphone. You can also check your usage on the app or website, which is useful for managing your household finances.

We will explain this in more detail in the survey results below, but these three points are prime examples of the benefits that can be gained through cashless payment.

Types and features of cashless payments

There are four main types of cashless payment:

  • Credit card
  • Debit Card
  • Electronic Money
  • QR code/barcode payment

We should examine the characteristics of each. It is important to identify their advantages. We should also consider their disadvantages.

Credit card

Credit cards are the most common cashless payment method. They allow deferred payments based on personal credit. The spent amount is deducted from the registered bank account later.

Credit cards can be used for in-store and online purchases. They can also pay utility bills like electricity and gas. In some places, they can pay national health insurance and pension premiums too.

Advantages

  • Points provided by the card company are earned according to the amount of spending.
  • Cards with international brands such as Visa and Mastercard® can be used at affiliated stores around the world.
  • You can enjoy additional services such as domestic and international travel insurance, and discounts and preferential treatment at affiliated facilities.
  • Recently, the number of cards that can be used for touch payment has increased, making payments faster.

Disadvantages

  • In order to apply for a new card, a credit check is required, and in principle, you must be 18 years of age or older to be issued or be able to use a card.
  • When using a credit card at a store, you will generally need to enter your PIN and sign.
  • Some cards require an annual fee.

Debit Card

A debit card allows for cashless payments, similar to a credit card. The key difference is that the amount is immediately deducted from your bank account when you use the debit card. There are two primary types of debit cards: “branded” debit cards, which are issued by international networks like Visa and Mastercard, and “bank-issued” debit cards, which are provided by banks and other financial institutions with a debit function.

Advantages

  • It can stop you from overspending
  • No credit check required when applying for a new card
  • In principle, anyone aged 15 or over, excluding junior high school students, can issue and use the card.

Disadvantages

  • You cannot make purchases that exceed your payment account balance.
  • Revolving payments, installment payments, bonus payments, etc. are not supported
  • Some cards incur annual fees

Electronic Money

Electronic money can be divided into “transportation-based” cards, which function as tickets for trains, buses, and other modes of transport, and “distribution-based” cards, which can be used mainly at convenience stores, supermarkets, and when shopping online.

Advantages

  • No need to enter your PIN code, making payments quicker
  • Many prepaid cards have no age restrictions and can be used by anyone.
  • Points can be earned based on the amount spent

Disadvantages

  • Prepaid cards require a lot of effort to charge and have a maximum charge limit.
  • In most cases, the amount once charged cannot be converted back into cash.

QR code/barcode payment

It is a payment method that uses QR codes and barcodes, and is one of the “smartphone payments.” You install a payment app on your smartphone in advance, and by reading the QR code or barcode, you can make payments from the money you have loaded on your smartphone, or from a set bank account or credit card. Some of the most popular payment methods are Apple Pay, Google Pay, PayPay, WeChat Pay, and Alipay.

Advantages

  • Payment can be made with just one smartphone
  • Some offer high reward points depending on the amount you spend.
  • There are also services that allow person-to-person remittances.

Disadvantages

  • Cannot be used when your smartphone has problems such as dead battery
  • Beware of “sticker scams” that use fake QR codes to encourage fraud, especially overseas

FAQs

What is the difference between credit cards and cashless payments?

The big difference is the payment method you can choose. Credit cards are generally paid later, but electronic money has multiple payment methods to choose from, such as “prepaid,” “postpay,” and “real-time pay (debit).” After applying for a credit card, you must go through the card company’s screening, but electronic money can be used without any screening.

What are some typical cashless payments?

Cashless payments mainly consist of prepaid cards and transportation IC cards. Popular mobile payment apps are Apple Pay, Google Pay, LINE Pay, and PayPal.

Related Articles:

Related Articles

Frequently Asked Questions

What are the most common types of cashless payments?

The most common cashless payment methods include credit and debit cards, mobile wallets like Apple Pay and Google Pay, bank transfers and ACH payments, digital payment apps like Venmo and Zelle, and contactless NFC payments. Each method serves different use cases, from in-store tap-to-pay to online invoice payments.

Are cashless payments safe for small businesses?

Cashless payments are generally safer than cash for small businesses because they create an automatic digital record of every transaction, eliminate the risk of theft or counterfeit bills, and include fraud protection from the payment processor. The main risk is chargebacks, which can be mitigated by keeping clear transaction records and delivery confirmations.

Do cashless payments cost more than accepting cash?

Yes, cashless payments involve processing fees typically ranging from 1% to 3% per transaction, while accepting cash has no direct transaction cost. However, cash handling has hidden costs including bank deposit time, theft risk, counting errors, and the inability to accept remote payments, which often makes cashless payment fees worthwhile for most businesses.

Share

Was this article helpful?