Visa Worldwide (Japan) Co Ltd

Although there were over hundreds of millions of credit cards in circulation in Japan, credit card usage is actually quite low. For cultural, regulatory and other reasons, Japan still remains a predominantly cash society.

Furthermore, the way credit cards are used in Japan differs from overseas: in Japan, consumers use credit cards as charge cards, whereas in many other countries, the credit card is used as a borrowing device.

In Japan, the card penetration rate is only about 12% of all consumption a year, which is about 300 trillion yen, says Kazuhiko Okamoto, representative director and country manager for Visa Worldwide (Japan) Co Ltd.

Born in Tokyo, Okamoto majored in law at Keio University and then did his MBA at Stanford. He started his career at Matsushita Electric Industrial, managing marketing and sales of electronic calculators and cash registers to markets in Asia, Middle East, Africa, Europe, and the Americas. He spent two years as an adviser to the CEO of a real estate company in Tokyo, managed Bang and Olufsen Inc Japan, a local entity of a Danish audio equipment manufacturer, and was with American Express for over 11 years, before joining Visa in 2006. He has been in his current position since 2008.

Japan Today editor Chris Betros visits Okamoto at the Visa offices in Marunouchi to hear more about the credit card business.

What sort of a year was 2011?

The March 11 disaster had a big impact for the first few months afterward. Day-to-day spending started to come back in June. The biggest impact was on inbound traffic of travelers, especially in April. Toward the end of summer, it started to stabilize. We can expect that to continue next year.

What is the image of Visa in Japan?

I think people know the brand itself but many people may not realize that we do not issue cards ourselves. We provide the network to the card-issuing companies in Japan like Mitsui Sumitomo Card, Mitsubishi UFJ-NICOS, Credit Saison. They issue cards and have merchant agreements with businesses. We are a B2B company and we don’t issue a single card, nor do we have contracts with merchants. We only have a client relationship with card issuing or merchant acquiring companies.

What are your strengths?

What we are trying to communicate in our marketing is the reliability of the brand and the reach of the network. If you have a VISA card, you can shop or use an ATM with extreme ease and very low stress as our reach is very wide and we have top security.

How does one go about applying for a VISA card?

You can come to our website where we have links to the card-issuing companies or contact number. You can just click the link or contact the issuers for application.

In the past, some foreigners have had their applications rejected? Why was that?

For non-residents, there is no credit history in Japan and that could be one reason for credit card application rejection. As to the requirement for application, you should contact financial institutions and card-issuing companies.

Recently, some Japanese banks, like Resona, Suruga and Rakuten, have started to issue debit cards, which are easy to get as long as you have a bank account. After you have lived in Japan for a little while, you’ll be able to apply for a credit card.

How does credit card usage differ in Japan?

In countries like the U.S. and Australia, for example, people are more used to personal checks. One of the things that banks had to go through for rationalizing their work process was to reduce the amount of paper checks. That was one of the motivations for banks to go from checks to debit cards. The difference in Japan is that there are no personal checks. People are used to doing transactions through bank accounts – direct debits, transfers. Japanese consumers use a credit card as deferred debit. This partly comes from the Japanese consumers’ perception of credit as debt and they prefer to avoid revolving payments. But the Japanese payment way partly comes from the system.

The system in Japan has evolved so that your bank account is debited weeks after the monthly cut-off date. That goes back to other countries having checks. Every individual has different cut-off dates, so you might have your card payment set for the 15th of the month, while someone else might have it at the 20th and so on. Whereas in Japan, by and large, all credit card payments are debited on the 10th of the month. So all the card companies close their books on the 25th and they send the direct debit tape to the banks by a certain date. Whatever is spent from the 26th to the next month’s 25th will be debited the following month.

How does the average credit card transaction in Japan compare with overseas?

In Japan, the average amount of a monthly credit card transaction, I would say, is two-thirds of what it is in Australia or the U.S. It depends on what type of card you have. The premium types of cards have larger spending limits and that, in turn, drives higher spending.

What is Visa’s penetration rate in Japan?

Visa has wide card acceptance across many different merchants segments. Of course, there are still many merchants and institutions where we would like to expand card acceptance. Many of the supermarkets have started to accept credit cards. The smaller ones are yet to do that. One of the benefits for those stores that have already started to accept credit cards is that it moves them closer to a cashless society and the process itself is faster than paying by cash. You’re stuck with bills and coins. Paying and receiving change takes time. It’s more convenient and secure.

How about convenience stores?

FamilyMart started card acceptance in November 2011 and by the end of 2012, close to 95% of convenience stores will be card usable.

How high is the credit card penetration rate in Japan?

It’s only about 12% of all consumption a year, which is about 300 trillion yen. In other developed economies, it’s 30-40%. I see no reason why we can’t triple our volume easily. Our competition is cash and doesn’t fight back. It is an easy fight and is there for us to take. Payment cards can save a lot of money for an economy – if you use cash, you have to mine to get the metal, make the coins, get paper for bills and then move it.

Is credit card fraud a problem in Japan?

Credit card fraud in Japan has been consistently downward to the record low level for last several years through the various actions driven by Visa, our B2B clients, law enforcement agencies and industry body JCA. Credit card fraud is a very interesting business – and I say business because that’s what it is. They are very organized and move to where the weakest point of card acceptance is. Where a country accepts more secure cards like EMV chips (Europay, MasterCard and VISA), you don’t see as much of a problem as you do in countries that have mag stripe cards, such as the U.S. That’s why the U.S. is seeing an increase in fraud. However, Visa in the U.S. has announced it will be converting to EMV. When that happens, the fraudsters will be looking for the next weakest link.

In Japan, most cards are EMV, so there is less fraud. In the early 1990s, the law did not punish possession of a fraudulently produced card. Unless you used it, you could not be punished. The law was changed about 10 years ago, so now it is a crime to hold a fraudulent card.

What if someone gets one of those suspicious emails saying there is a problem with their credit card transaction?

Don’t open the email or any attachments. Those emails are trying to link your card number against your email address so they can get you over the web. Don’t ever tell/type your card number if you feel suspicious.

If you think you have been the victim of a credit card scam, call the card-issuing company and tell them about the transaction. They will immediately investigate. If it is proven that you were defrauded, they will not debit you. VISA cardholders are fully protected from any type of fraud under Visa Zero Liability Policy. Skimming can only be done with mag stripe cards. If you have a chip card, they can’t read your chip.

What do you focus your efforts on?

What I consider to be quite important is to not lose the focus on what we are trying to achieve. Our asset is the network itself. Our key competence is providing the connections for our B2B clients and this is what we call VisaNet. VISA is a brand that sits on top of the network to show that. To maintain the integrity and quality of the VisaNet is very important. The more transactions we have on our network, the more services we can provide. I see my role as like an ambassador. I am really passionate about what we do. I think we bring a lot of good for the society and the economy.

What CSR activities is Visa involved in?

Worldwide, we sponsor the World Cup soccer, the Olympics and Paralympics. In many parts of the globe, there are many people who have no access to any kind of financial services, such as in Africa, parts of Asia and the Middle east. They don’t have bank accounts but they do have mobile phones. What Visa has done is provide that kind of service, the capability for people to access the financial system so they can better their life.

On a local basis here in Japan, we participate with NPOs in volunteer work.

How do you like to relax when you are not working?

I am a golfer but I also enjoy playing with my two dogs. If I have a few days off, I also enjoy going to onsen (hot springs).

© Japan Today