Forty ways to pay for coffee in Japan

**Patrick McKenzie** (0:02)
Welcome to Complex Systems, where we discuss the technical, organizational and human factors underpinning why the world works the way it does.
Hi to you, everybody. My name is Patrick McKenzie, better known as patio11 on the Internet. I'm recording this episode from Chicago shortly before my family's annual trip to Japan, where I previously lived for about 20 years. And I'm looking at an essay that I wrote back in 2021 called Payments in Japan. This is a topic of somewhat narrow specialized interest compared to many things that we discussed on this podcast. But it's intellectually interesting to me. I think payments in other countries helps provide a bit of a lens on how we approach payments in, for example, the United States or Europe. And some of the claims in this essay have aged in a manner that I feel like patting myself on the back. So I thought I would do a read of the essay, interspersed with some live commentary on what has changed since it was originally written.
And with that, the essay, Payments in Japan, originally published in Bits About Money on November 19th, 2021 One of the advantages of living spiritually, if not physically, in two countries is you get to see the future arriving early in both directions. In the almost 20 years I've lived in Japan, the linguistic and geographic barriers to understanding daily life here have lessened, a topic which is worth an essay in itself. They're still formidable. This makes an international mindset a surprisingly durable source of alpha, even in professional fields, even ones which are intensely globalized.
As an aside, 2021 is before LLMs reinvented the world. I do wonder whether LLMs won't quite durably decrease the amount of wall of competence that's required linguistically to do trade and ideas between nations. But neither here nor there. Take money, for example. I have a degree in East Asian studies and while money was implicated, economy, business, work culture, etc., and I was taught how to count it, the culture that is money came up precisely once. Quote, Japan is a cash-based society. If you read the same textbook or if you've read no textbook at all, here are some updates to the state of the world. Payments in Japan have changed enormously in the last 20 years. The rate of change is accelerating. You will see some echoes of these trends where you live, sooner rather than later. I have to reiterate my usual disclaimer. I worked at Stripe, but the following are my own opinions. Also, you can reasonably assume that I'm personally and professionally exposed to almost every company in the Japanese payment space. In addition to it being my literal job to keep on top of it, I also find it convenient to be able to, for example, buy coffee.
As an aside, of course, I no longer work full time at Stripe, but I'm still an advisor there and they still do not necessarily endorse things that I say in my personal spaces.
Credit cards. The overall business of credit cards and debit cards is similar in Japan to the United States. Feel free to read my previous essays and bits about money on those topics if you need a refresher on the overall model.
There are some differences in underlying infrastructure. For example, Japan has a national switch, CAFES, sitting in the middle of several global payment rails. But these would only interest payments geeks. More interesting are some of the changes in the fundamental user experience of cards.
In Japan, cards are payments instrument first, and loan origin landers along second. You have to opt in to the provision of credit and announce your intention to do so to the store clerk. For Japanese readers, in the United States, when you get your statement, you can pay in full, in which case you will not be caused in a charged interest, or you can pay any amount less than full, but more than a specified minimum payment, in which case you will be charged interest on a revolving basis, starting on the day you made the transaction, but being assessed in the statement cycle following the one you didn't pay in full. You are correct. This system is virtually incomprehensible to people not professionally involved in it, and it is the cause of much angst for users and regulators of the financial industry. It is probably because of America's inscrutable culture.
Since our humor does not always travel well, I'll make it explicit. Japan is widely considered, both domestically and abroad, to have a culture which is somehow extremely distinctive and explains almost any imaginable difference between Japan and the rest of the world. The story is much more complicated than is popularly believed. If you only read one book about it, Sugimoto's Introduction to Japanese Society may be among the best available. Anyhow, back to Payments. Because understanding Payments' material reality is much more useful to predict the world than reasoning from first principles about capital C culture.