OSAKA -- Integrated circuit (IC) cards have been in use in Japan for 23 years, replacing magnetic cards as the main form of cashless payment for public transportation. But has the technology's run neared its end? The Mainichi Shimbun looked into a growing trend among regional transportation systems to abandon the cards.

$8.1 million to replace devices

In southwest Japan's Kumamoto Prefecture, five public transportation companies including Kumamoto Electric Railway Co. and Kumamoto Bus Co. will, from Nov. 16, stop accepting payments using 10 types of IC cards including West Japan Railway Co. (JR West)'s Icoca and East Japan Railway Co. (JR East)'s Suica. Such a move is unprecedented among companies that have been a part of the national IC card system.

According to an integrated management promotion office formed by the five companies, the Kumamoto Prefectural Government and the Kumamoto Municipal Government, the companies introduced the IC card cashless payment system in 2016. When the maintenance contract expires at the end of March 2025, they will reportedly be required to replace some 800 devices. The contract renewal expenses are expected to reach roughly 1.21 billion yen (approx. $8.1 million).

The five companies are facing challenges due to a drop in ridership during the coronavirus pandemic. In fiscal 2023, local bus services they operate went some 3.6 billion yen (roughly $24 million) into the red. With the costs of renewing the administrative contract looming large, the group reportedly had no choice but to discontinue use of the cashless payments.

The same fiscal year, 5.65 million riders paid for trips using the cashless system, or approximately 24% of the total. While this was no small number, a representative said, "With business declining, 1.2 billion yen is hardly an investment we can afford."

To replace the national IC card system, other forms of cashless payment such as by credit cards and QR codes are being brought in. The cost of payment processing machines for these systems and other expenses are reportedly lower than the IC card system, reducing overall expenses to 670 million yen (about $4.49 million).

The use of Hiroshima Prefecture's IC card Paspy will also end on streetcars and buses in the prefecture at the end of next March. According to Hiroshima Electric Railway Co., one of the companies that have been accepting payment by Paspy, it has spent around 4 billion yen (approx. $26.8 million) every seven to eight years to keep the system going. It will continue to accept national IC cards such as Suica and Icoca, but a representative noted that by cutting out one of the two systems, costs could be lowered.

Some companies are electing to skip the IC cards altogether, adopting other forms of cashless payment first.

In November 2020, Kyoto Tango Railway, or Tantetsu, which operates trains in northern Kyoto Prefecture, introduced the country's first contactless Visa credit card payment system, adding to JCB and others to bring the total number of credit card companies accepted to five.

A Tantetsu official said, "The initial cost of introducing touch payment is a fraction of the cost of IC cards, making it easy to introduce it, even for a local railway with few passengers. Users can also avoid the hassle of making deposits, and foreign customers who are unfamiliar with ticket purchase methods can use the system with peace of mind."

Large-city specs

Since the introduction of Suica cards in 2001, the national government has promoted the spread of IC card systems to improve passenger convenience and create better conditions for inbound foreign tourists.

According to Tokyo-based JR East Mechatronics Co., which manufactures IC cards, over 200 million cards had been issued by sometime in 2021. JR West said that July 2024 marked the first time that IC cards had been used for trips and payments at stores over 300 million times in one month, showing the technology has permeated people's everyday lives.

However, railway journalist Jun Umehara predicted, "The trend toward discontinuing IC card payment operations, especially by regional railroad companies, will likely grow."

Representative IC payment systems can reportedly process payment for as many as 45 people a minute at ticket gates. But Umehara pointed out, "For rural transit systems with few users, this system geared toward large cities is excessive. It is out of step with the realities rural areas face, including costs."

Umehara cautioned, "The central government subsidizes the initial cost of introducing IC cards, but the cost of updating them is left to the businesses. This year, new banknotes have also been introduced, and businesses are being forced to deal with them. The government should take proper action to address this situation."

(Japanese original by Minhyang Hong, Osaka City News Department)