How Japan Became a Prepaid Card and Digital Wallet Powerhouse [Japan Pulse #2]

Imagine a typical Japanese office worker named Hiroshi who lives in Tokyo. This is how his day might look like: He starts his day by buying breakfast at the nearest convenience store using his Nanaco prepaid card, which he can also use to earn points and discounts. He then hops on the train using his Suica card, which he can easily top up online or at any station. While on the train, he checks his Line Messaging app for messages from his friends and family, and also checks his stock portfolio performance on Line Securities, a digital wallet service that allows him to invest in various financial products. He receives his monthly salary in his PayPay account, another digital wallet service that he can use to pay for goods and services at millions of merchants across Japan. He decides to treat himself to a nice dinner at a restaurant that accepts PayPay as well.

Hiroshi’s life is not real, but it is an example of how prepaid cards and digital wallets are integrated into the daily lives of millions of Japanese consumers. Japan is a leading market for prepaid cards and digital wallets, known for its innovation and progress in this sector. The Japan Prepaid Card and Digital Wallet Business and Investment Opportunities Databook reveals that Japan’s prepaid card market experienced a CAGR of 6.8% from 2018-2022, and it’s projected to grow at a CAGR of 10.4% between 2023 and 2027, reaching US$274.66 billion by 2027.

This growth is accompanied by some emerging trends and developments that are shaping the future of this industry in Japan. Some of these include the integration of artificial intelligence, blockchain, biometrics, and QR codes into prepaid card and digital wallet solutions. These technologies enable more personalized, secure, and convenient payment experiences for the consumers and more efficient, transparent, and cost-effective operations for the providers.

In this article, we will explore the factors contributing to the development and diversification of Japan’s prepaid card and digital wallet industry, the key events that have shaped its evolution, and the future prospects and opportunities for investors interested in this sector.


The origins of Japan’s prepaid card and digital wallet industry can be traced back to the 1980s when prepaid cards first appeared as gift cards or vouchers for specific merchants or services. These cards served as a convenient way to offer cash gifts or incentives to employees or customers, eliminating the need for coins or bills. Early examples of prepaid cards include book cards, record cards, telephone cards, and meal tickets. The first IC card for transportation was introduced by the Skyrail Midorizaka Line monorail in Hiroshima in 1998, followed by JR East’s Suica card in 2001. Since then, dozens of train and bus operators across Japan have started issuing their own IC cards, which became compatible with each other in 2013.

During the 1990s and 2000s, prepaid cards evolved into more versatile and convenient payment instruments. This transformation was marked by the emergence of open-loop cards that could be used at multiple locations, online shopping cards for e-commerce transactions, and rechargeable cards that could be topped up at convenience stores or online. These cards provided consumers with increased flexibility and functionality, enabling their use for various purposes such as shopping, travel, entertainment, gaming, or remittance. Advanced prepaid cards like Visa Prepaid Cards, Mastercard Prepaid Cards, Edy Cards, Suica Cards, and Nanaco Cards are prime examples.

Several factors contributed to the popularity of prepaid cards in Japan. One factor is the high penetration of convenience stores, which facilitated easy access to purchasing or recharging prepaid cards nationwide. Additionally, a low credit card usage rate in Japan—due to strict credit screening criteria, a low consumer debt culture, high annual fees, or security concerns—made prepaid cards an attractive alternative. Moreover, the preference for cashless payments, driven by the convenience, speed, hygiene, and safety of using electronic money instead of cash, played a significant role. Finally, the regulatory environment allowed non-bank entities like retailers, telecom operators, or online platforms to issue prepaid cards without obtaining a banking license.


The current landscape of Japan’s prepaid card and digital wallet industry is defined by its diversity, innovation, and competitiveness. Various prepaid cards and digital wallets cater to the unique needs and preferences of consumers and businesses. For example, Visa or Mastercard branded prepaid cards are issued by banks or financial institutions like SMBC (d Card Prepaid), Rakuten Bank (Rakuten Debit Card), JCB (Quo Card Pay), or Seven Bank (Seven Card Plus), and can be used at any merchant that accepts Visa or Mastercard. Retailers or online platforms such as AEON (WAON Card), Lawson (Ponta Card), or Yahoo! Japan (T Point Card) issue prepaid cards linked to loyalty programs or point systems, offering rewards or discounts to customers. Companies like LINE (LINE Pay Card), Kyash (Kyash Card), Vanilla (Vanilla Visa Gift Card), or JTB (JTB Travel Card) target specific segments, such as teenagers or travelers, who may struggle to obtain credit cards or bank accounts.

Digital wallets, accessible through smartphones or wearable devices, enable contactless payments using NFC technology or QR codes. Companies such as PayPay, LINE Pay, Rakuten Pay, d Barai, and Apple Pay offer these services.

Several trends and drivers shape the industry. The adoption of mobile payments, particularly among younger generations, has significantly increased. This is driven by several factors, such as the government’s promotion of cashless payments to boost consumption and tourism; the impact of the Covid-19 pandemic on consumer behavior and preferences; and the innovation and competition among mobile payment providers in Japan.

An image showing a smartphone screen with the PayPay app open and a QR code displayed.
PayPay-A cashless payment smartphone app that pays with a QR code

New technologies, like QR codes and biometrics, enable faster, easier, and more secure payments without physical cards or terminals. PayPay allows users to scan QR codes at participating merchants or generate their own for peer-to-peer transfers. Another example of biometric payment is BioPay, a facial recognition system that works even with masks on. BioPay is currently being tested in Niigata city, where customers can pay by showing their faces to a tablet device at the cashier. Customers need to register their faces and bank accounts in advance to use BioPay.

Japanese city pilots facial recognition payment tech with no mask removal required (Mainichi)

The growth of cross-border transactions, especially with China—Japan’s largest trading partner and a major source of inbound tourism—also impacts the industry. Many Japanese merchants accept digital wallets popular among Chinese visitors, such as Alipay or WeChat Pay. These digital wallets have partnered with local payment platforms, such as LINE Pay, to expand their acceptance network and offer seamless payment experiences for their users. Another aspect of cross-border transactions is the development of central bank digital currencies (CBDCs) by both China and Japan. China has been testing its digital yuan in several cities and plans to use it for cross-border payments in the future. Japan has also launched a pilot program for its digital yen and aims to cooperate with other countries on CBDC research.


The future prospects of Japan’s prepaid card and digital wallet industry appear bright and promising, thanks in part to a robust regulatory environment that encourages digital payments. The Japanese government has launched several initiatives to foster innovation, competition, and consumer protection in this sector.

One such initiative is the Cashless Vision, formulated by the Ministry of Economy, Trade and Industry (METI) in April 2018.  It evaluates Japan’s current standing on cashless transactions and settlements, compared to other countries, and outlines the actions it will take to achieve its goal of increasing the ratio of cashless payments to around 40% by 2025 and to 80%—the world’s highest level—in the future. The vision also highlights the benefits of cashless payments for consumers, businesses, and society, such as convenience, efficiency, security, transparency, and inclusion.

Additionally, the Financial Services Agency (FSA) revised the Payment Services Act (PSA) in May 2020, which regulates the provision of payment services in Japan, including digital wallet operators. The act aims to ensure the soundness and reliability of payment service providers by requiring them to register with the FSA, while protecting users’ rights and interests and promoting innovation and development of payment services. It also introduces new requirements for digital wallet providers, such as registration, disclosure, security measures, dispute resolution, and supervision by certified self-regulatory organizations.

Lastly, since 2016, the FSA has been working on creating the Fintech Innovation Hub, which was officially launched in 2018 to provide a platform for dialogue and collaboration between fintech startups, financial institutions, regulators, and other stakeholders. The hub aims to foster a fintech ecosystem in Japan that can create new value and services for customers and society. It also offers a regulatory sandbox program allowing fintech firms to test their innovative products and services under certain conditions without being subject to existing regulations.

These initiatives are likely to support the further penetration of digital payments and wallets in Japan by creating a more conducive and attractive environment for both providers and users of these services. By encouraging innovation, competition, and consumer protection, the government can help overcome some of the barriers and challenges that hinder the adoption and acceptance of cashless payments in Japan, such as lack of awareness, trust, convenience, interoperability, and incentives.

However, potential challenges could hinder growth, such as market saturation, as the number of prepaid cards and digital wallets increases, competing for a limited pool of customers. The industry must differentiate itself by offering value-added services, personalized features, or cross-industry collaborations. Moreover, competition from other payment methods like P2P platforms or decentralized wallets like crypto wallets could surpass prepaid cards or digital wallets in terms of convenience, benefits, or innovation. Adapting to the evolving payment landscape and changing customer preferences is crucial.


In this article, we have explored the past, present, and future of Japan’s prepaid card and digital wallet industry. We have traced the industry’s evolution from its humble beginnings as simple gift cards to its current state as versatile payment instruments that offer convenience, flexibility, and innovation to both consumers and businesses.

We have also examined the challenges and opportunities that the industry faces in the rapidly changing payment landscape, such as market saturation, competition from other payment methods, and customer preferences. We have provided some recommendations for investors or stakeholders who are interested in entering or expanding in this dynamic and promising market.

Japan’s prepaid card and digital wallet industry is a vibrant and growing sector that has much to offer to the global payment ecosystem. If you are interested in learning more about this industry or investing in it, please do not hesitate to contact us for additional information.

Recommended reading:

The State of Cashless Payment Methods in Japan, Plus Alpha Digital

The Bank of Japan’s Approach to Central Bank Digital Currency, Bank of Japan

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