🇯🇵 Payments in Japan and Korea

Two markets that could hardly be more different

Japan and South Korea are two separate payment markets, with no shared currency, regulator, or infrastructure. They are East Asia's two most advanced economies, and their payment markets are the most different in the region, because their acceptance systems were built on opposite principles. Korea industrialized the credit card to the point where accepting it is a legal obligation and the card itself is a tax policy tool. Japan spent 30 years with a cashless payment ratio that was low for a country so wealthy. It only shifted from 2018 onward, driven by a government subsidy and a private cashback war. The two markets share one trait that shapes any foreign company's entry. Their domestic rails are closed and old, and there is no way around them. No international acquiring contract, on its own, gives access to local acceptance.

The two markets differ in what it costs to enter them. In Japan, cards are the dominant payment method but acceptance is fragmented across two switches, two proprietary NFC rails, about ten e-money brands, and four QR wallets. The integration cost there is a cost of coverage. In Korea, acceptance is unified but the intermediary layer is mandatory: a VAN for in-person payments, a PG (payment gateway) online, and regulation that sets the price. Korea's integration cost is a cost of compliance and local contracting.

Japan's interbank rails: Zengin, BOJ-NET, and the rest

The Zengin System (全銀システム) clears retail credit transfers in Japan. It went live in 1973 and was crediting payees in near real time 40 years before the term instant payment caught on. It is operated by the Japanese Banks' Payment Clearing Network, Zengin-Net (全国銀行資金決済ネットワーク), licensed under the Payment Services Act since September 2010. The system handles about 6.5 million transactions a day, worth nearly ¥12 trillion (Zengin-Net, official “Clearing of Funds” page, accessed in 2026). Two later changes extended it, one in time and one in membership. The Zengin More Time System, launched in 2018, made it available 24 hours a day, seven days a week. Access for nonbank payment providers (資金移動業者, funds transfer service providers) has been opening up gradually since 2022, and the first actual membership was approved in an announcement dated October 17, 2024.

Three projects documented in Zengin-Net announcements will shape the coming years. The first is the go-live schedule for the next-generation system (“次期全銀システムの稼動予定時期について,” October 17, 2024). The second is the launch of an API gateway (“APIゲートウェイの稼動について,” November 25, 2025). The third is the planned closure of the 電子交換所 (electronic clearing house) in April 2027, which will complete the disappearance of paper bills and checks in Japan. That deadline caps a shift whose previous stage is already done. Japan's 179 local clearing houses (手形交換所), in operation since 1879, shut down on November 2, 2022, and clearing moved to the 電子交換所 on November 4, 2022. With the 電子交換所 now closing too, companies whose B2B settlements still rely on paper bills face a hard deadline to migrate.

The Zengin format: 120 bytes, katakana, and no names in kanji or Latin script

The Zengin format (全銀フォーマット) governs the credit transfer and direct debit files a company exchanges with its bank in Japan. It uses fixed-length, 120-byte records, a legacy of the magnetic tape era, and has no native XML version. It has four record types, identified by their first character: 1 header (ヘッダーレコード), 2 data (データレコード), 8 trailer (トレーラーレコード), and 9 end of file (エンドレコード). Reconciliation data travels separately. ZEDI (全銀EDIシステム), live since December 2018, attaches an XML payload to the transfer that carries data such as the invoice number and the purchase order reference.

HEADER record (120 bytes)
  1        record code                    "1"
  21       transaction type code          e.g. bulk transfer (総合振込)
  0        media code                     0 = online transmission
  ......   originator code                number assigned by the bank
  ......   originator name                HALF-WIDTH KATAKANA (半角カナ), 40 chars
  MMDD     requested execution date
  ....     bank code (4) + branch code (3) of the account to debit
  .        account type                   1 = ordinary (普通), 2 = checking (当座)
  .......  account number                 7 digits, right-aligned, zero-padded on the left

DATA record (120 bytes), one per payee
  2        record code                    "2"
  ....     payee bank code                4 digits
  ......   bank name in katakana          15 half-width chars
  ...      payee branch code              3 digits
  ......   branch name in katakana        15 half-width chars
  .        account type                   1 = 普通, 2 = 当座
  .......  payee account number           7 digits
  ......   PAYEE NAME                     30 chars, HALF-WIDTH KATAKANA ONLY
  ......   amount                         10 digits, WHOLE YEN, no decimals
  ......   customer code / free-form reference

TRAILER record "8": total record count + total amount
END record     "9": end of file

Two mechanisms complete the picture, and neither has a direct equivalent elsewhere. The first is payee name verification before a transfer, provided since 2005 by NTT Data's 統合ATMスイッチングサービス (integrated ATM switching service) and extended in 2014 to batch processing for payroll files. The check compares the name entered by the payer with the name the payee's bank holds for that account, and Japan has run it for 20 years. The second is 口座振替 (bank account debit), the rail for recurring bills such as rent, utilities, subscriptions, and credit card bills. It relies on a mandate signed with the debtor's bank, whereas a European direct debit relies on a mandate held by the creditor.

Cards in Japan: JCB, two switches, and surprisingly high interchange

JCB (Japan Credit Bureau), founded in 1961, is the only international card scheme born in East Asia other than UnionPay. JCB Co., Ltd. reports more than 175 million cardholders and about 71 million merchants in 195 countries and territories (JCB, 2025 communications). Its acceptance outside Asia relies largely on its reciprocal acceptance alliance with Discover Global Network, which turned 20 in 2025. In practice, a JCB card used in the US is accepted over the Discover network, and a Discover card used in Japan is accepted over the JCB network. JCB also runs QUICPay, one of Japan's two proprietary contactless rails.

The Japanese market has one distinctive structural feature: card switching has never been in the hands of the banks. CAFIS (Credit And Finance Information System), run by NTT Data since 1984, is the long-standing, dominant authorization network. Every card integration in Japan touches it, because authorization requests pass through it between the merchant and the issuer. Its competitor, CARDNET (日本カードネットワーク), was incorporated on March 16, 1995, not in the 1980s as many sources claim. As of June 30, 2025, this industry joint venture listed JCB, NTT Data, Mitsubishi UFJ Nicos, TIS, and Sumitomo Mitsui Card among its shareholders. They are joined by AEON Financial Service, Orient Corporation, Credit Saison, Sumitomo Mitsui Trust Club, Jaccs, UCS, Life Card, and two merchant federations. It has ¥480 million in capital and 380 employees as of March 31, 2025. NTT Data, which runs CAFIS, is therefore a shareholder in its own competitor.

Two sets of rules govern card acceptance in Japan. The 割賦販売法 (Installment Sales Act), amended in 2018, requires member merchants to protect card data, either by not storing it or by complying with PCI DSS, and to take measures against fraudulent use. That law drove the rollout of chip terminals. The クレジットカード・セキュリティガイドライン (credit card security guidelines) issued by the 日本クレジット協会 (Japan Consumer Credit Association) set the industry's operating framework, and they required online merchants to deploy EMV 3-D Secure by the end of March 2025. Since then, 3-D Secure has been a condition of card acceptance in Japanese e-commerce: a merchant that has not deployed it cannot take card payments online.

With J-Debit (日本デビットカードシステム), launched in 1999 by the Japan Electronic Payment Promotion Organization (日本電子決済推進機構, JEPPO), cardholders pay in store directly with their bank ATM card. The system is still technically live. Internationally branded debit cards and QR codes have replaced it. Its volumes are now marginal, yet it is still running after 25 years and still appears in the acceptance matrices of integration documentation.

FeliCa, Suica, and the prepaid empire

Contactless payments in Japan run on FeliCa, a technology developed by Sony, standardized as JIS X 6319-4, and known in the NFC world as NFC-F, or Type F. Type F is distinct from Types A and B, which EMV contactless cards use. FeliCa transmits at 212 or 424 kbit/s, while Types A and B top out much lower. That speed lets it meet the transaction times required at Tokyo's subway fare gates, the constraint the whole ecosystem was built around. A typical Japanese terminal must therefore support three radio families, A, B, and F, plus QR codes.

PayPay, JPQR, konbini, and deferred payment

Japan's code payment wallets fought it out between 2018 and 2025, and this Japanese barcode war ended with one player on top. PayPay was launched in late 2018 by PayPay Corporation (part of the SoftBank / LY Corporation group) with a cashback campaign more aggressive than anything seen before. It reports 70 million registered users as of July 15, 2025, close to 55% of Japan's population, and 2025 industry analyses credit it with about two-thirds of the code payment market. Consolidation happened within the group. LINE Pay Japan shut down on April 30, 2025. Its balances were transferred to PayPay between January 27 and April 23, 2025, with limits of ¥20,000 a day and ¥100,000 in total. The remainder was refunded under the 資金決済法 (Payment Services Act).

JPQR is Japan's unified payment code standard, defined in 2019 by the Payments Japan Association (キャッシュレス推進協議会) at METI's urging. A single code replaces the 10 codes a merchant would otherwise display, one per accepted provider. Its international extension, JPQR Global, launched on July 5, 2025, at the Expo 2025 Osaka, Kansai site. It links JPQR with foreign QR standards, starting with KHQR (Cambodia), then QRIS (Indonesia) from August 17, 2025. Tourists from Southeast Asia have since been able to pay in Japan with their home-country wallets without going through a private gateway, something no arrangement allowed before JPQR Global.

Two more mechanisms complete the picture. Carrier billing (キャリア決済) is still a payment method in its own right for digital content, games, and subscriptions, even though it has nearly disappeared in Europe. It takes the form of d払い/ドコモ払い at NTT Docomo, auかんたん決済 at KDDI, and まとめて支払い at SoftBank. The 資金決済法 (Payment Services Act) then sorts providers into several license types. Prepaid issuers fall under 前払式支払手段 (prepaid payment instruments), and money transfer providers under 資金移動業 (funds transfer business), which has been split into three categories since 2021. The second and most common is capped at ¥1 million per transaction. A Japanese wallet is therefore not a payment account, and the cap tied to its license determines which use cases it can cover.

Korea's interbank rails: KFTC, BOK-Wire+, and open banking

Korea's payment infrastructure rests on two pillars. The first is a central bank RTGS, BOK-Wire+ (한은금융망), run by the Bank of Korea since 1994 on a hybrid model: gross settlement, plus netting mechanisms that save liquidity. The second is a single shared operator for everything else: the Korea Financial Telecommunications & Clearings Institute (금융결제원, KFTC), a nonprofit owned by its member banks. The KFTC runs interbank transfers, the shared ATM network, giro, bulk direct debits, and open banking. This concentration sets Korea apart from markets where several clearing houses and competing switches coexist.

The Bank of Korea sets out its 2026–2027 agenda in its annual payment systems report (지급결제보고서) for 2025, which lists four projects. BOK-Wire+ operating hours were extended on March 30, 2026. Next comes raising the collateral ratio for net settlement from 90% to 100%. ISO 20022 adoption is scheduled for the second quarter of 2026. An offshore won settlement system (역외 원화결제시스템) is being built for launch in 2027. That last project matters most for a foreign company. The won is not freely tradable outside Korea, and the planned system targets exactly that constraint.

On digital currency, the Bank of Korea ran the first live-transaction pilot of 프로젝트 한강 (Project Hangang) in June 2025. It used deposit tokens issued by commercial banks, not a retail central bank digital currency in the strict sense (Bank of Korea, 지급결제보고서 2025). Japan is moving on a deliberately slower timeline. Since April 2023, the Bank of Japan has run a Pilot Program for a digital yen (デジタル円) that brings in the private sector through a CBDC Forum, following two proof-of-concept phases from 2021 to 2023. It explicitly makes any issuance conditional on legislation and public debate. Neither country has decided to issue.

Credit cards rule: VANs, PGs, and regulated fees

Korea is the world's most card-intensive market, and that intensity is the product of public policy. After the Asian financial crisis, the government promoted card payments to broaden the tax base, through two measures that are still in force. The first is an income tax deduction for card spending, with debit cards and the 현금영수증 (cash receipt) getting more favorable treatment than credit cards. The second is the obligation, under the 여신전문금융업법 (Specialized Credit Finance Business Act), for member merchants not to refuse card payments. Merchants are also barred from setting a minimum amount and from passing the fee on to the cardholder.

Issuing is concentrated among nine licensed card companies (여신전문금융회사): Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Hana, Woori, NH Nonghyup, and BC. BC Card (비씨카드, 1982, KT group) holds a unique position as the only domestic card scheme and processor. It issues and processes cards for about 10 banks that have no card subsidiary of their own. It is also the country's largest acquirer, with an estimated 42.6% acquiring market share in 2023 (industry sources, not verified against an FSS report). By purchase volume, Shinhan Card is put at 24.8% and Lotte Card at 14.3%, with 18.7 million cards in 2023 (same source caveats).

Kakao Pay, Naver Pay, Toss, and what it takes to accept payments

Korean simplified payment (간편지급) means paying with a payment method already stored in an app, without re-entering card details. It has gone from a convenience to the main rail of online commerce. In 2025, it averaged ₩1,105.3 billion a day, up 14.6% year over year. It also accounted for 51.9% of all card-not-present card payments (Bank of Korea, March 20 and 30, 2026). The split by type of provider shows how the market is balanced. The 전자금융업자, meaning fintechs, hold 54.9% of the value, up 4.4 percentage points, against 23.7% for financial institutions and 21.5% for phone makers. Within simplified card payments, the Bank of Korea measures 72.5% for fintechs vs. 27.5% for card companies. Nonbanks therefore own most of the cardholder relationship.