1. Transport
November 13, 2015updated 15 Jul 2021 4:42pm

How Japan's railway systems accidentally invented contactless payments

By Rachel Holdsworth

Last month, as well as knocking over a small child while playing rugby, London Mayor Boris Johnson spent part of his trade visit to Japan extolling the benefits of contactless payments on public transport. “I can get on the tube, I can get on a bus and just wave it in the general direction of the cashless receiver and, completely painlessly, very small amounts are deducted from my bank account,” he told a bemused audience.

There’s a reason his audience was so nonplussed. You see, Japan has had wave and pay systems – known as IC cards – in place since 2001. And they do it better than London.

Japanese IC cards will be familiar to all transport smartcard users: they’re credit card sized pieces of plastic that you pre-load with money.  The fare is then calculated and deducted when you touch the card onto readers as you enter and exit the subway and buses.

For anyone used to London’s transport system, this will produce a resounding sense of deja vu. Yet Japan’s historic attachment to cash means the various transport cards had the freedom to expand into places that credit and debit cards colonised decades ago in other countries.

The result is that, almost by accident, the Japanese have created a more seamless system. Want to pay for a pastry in a lovely bakery? Tap your IC card. Thirsty? Here’s a vending machine with its welcoming reader. Need to stash your bag at a train station? No need to fiddle for coins, just swipe.

At this point you’re probably thinking: sure, but we have contactless for transport and buying things in shops. I’ve yet to see contactless on vending machines in the UK, but I’m sure it’s coming.

But here’s the stumbling block that was put to Transport for London when it stopped taking cash on buses: that’s fine if you have a bank account in the country of use, but a bit of a pain if you don’t. If Japan wanted me to use my debit card rather than my Suica card (the Toyko equivalent of Oyster; it literally means “watermelon”), I’d get charged 2.75 per cent every time I used it.

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That works out at a few quid for a fortnight’s travel round Tokyo; a foreign-issued card used in London would rack up about the same. But then if you start adding up transaction charges for that pastry, and that bottle of water and that locker…

It is, in effect, a tax on tourists for using contactless cards. And since visitors inevitably need to pick up an Oyster card to avoid being bled dry by London’s eye-watering cash fares, or simply to catch a bus, it’d be nice if the money on it could also be used for small payments elsewhere, too.

The generally accepted version of events is that this will never happen. TfL would prefer to let banks bear the costs of operating an electronic payment system than it would to continue to maintain its own; investing to extend it seems entirely out of the question.

But this version of events is built on the assumption that everyone has access to a contactless card. That simply isn’t true in a country where around 1m people don’t have a bank account, and where not all “basic” account providers are willing to issue contactless cards. A top-up smartcard is available to everyone; and there’s none of that occasional faffing around with PIN numbers, either.

There’s another huge benefit to Japan’s IC cards: they’re all compatible with each other. There are a bewildering array of cards (the area around Fukuoka alone has three), yet since 2013 you can use one of 10 in different locations around the country.

There isn’t 100 per cent coverage – but still, imagine stepping onto a bus in Edinburgh or Manchester and being able to pay with your Oyster card. Or onto a bus in London and being able to pay with your Transport for Edinburgh “citysmart” card. Or – and here’s the dream – onto a bus in Germany or New York and just swipe with whatever you already have in your pocket. To illustrate quite how far away that dream is, this week we all got excited when it was announced Oyster will soon be accepted on the Gatwick Express. FFS.

There’s an argument that we already have a system for international payments, and it’s Apple Pay. But there’s a high entry barrier: an iPhone 6, and I’m not made of money. If only we’d followed the Japanese and invented Oyster before debit cards.

Rachel Holdsworth is a senior editor at Londonist. She tweets as @rmholdsworth.

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