With the influx of international tourists visiting Japan, they are putting immense pressure on Japanese credit card companies as they shop and dine in the country. Some companies are considering charging higher fees for foreign-issued credit cards.
According to a survey by Nikkei News, seven out of eight major Japanese credit card companies reported increased losses compared to last year. Six of them are considering or have already started imposing higher fees on overseas credit cards.
When using foreign-issued credit cards in Japan, Japanese credit card companies that process transactions for merchants have to pay around 1.8% of the fee to the overseas credit card issuers, and 0.8% to the credit card brand companies such as Visa or MasterCard. These fees exceed what they collect from Japanese merchants, resulting in a loss of about 0.7%, with projected losses exceeding 30 billion yen ($2.05 billion) this year, a 50% increase from 2023.
To compete with cash and mobile payment platforms, these companies have been charging lower fees, with over 90% of transactions coming from Japanese credit card companies to achieve a balance in revenue and expenses. However, the proportion of international credit card usage has been increasing in recent years.
According to the latest data from the Japan National Tourism Organization, as of May this year, over 14.5 million people have arrived in Japan, a 70% increase from the same period last year. It is expected to surpass the record 31 million visitors in 2019, setting a new record.
Traditionally, Japan has attracted tourists with its dining, cleanliness, and traditional cultural experiences. However, nowadays, Japan feels more like a low-cost shopping paradise, where travelers can indulge in omakase dining or premium A5 wagyu beef steaks at the best value.
Prime Minister Fumio Kishida stated that Japan is expected to welcome a record 35 million tourists this year, with tourism spending anticipated to reach 8 trillion yen. As the share of foreign visitors’ transactions in Japan continues to grow, credit card companies are facing increasing losses.
The weakening yen has boosted sales of high-end products such as cameras and watches, with some tourists spending over one million yen in a single transaction.
A chain store mentioned that they have received proposals from credit card companies to raise fees for overseas-issued credit cards, and they are contemplating it. If businesses refuse to pay higher fees, they may ultimately not accept foreign-issued credit cards, potentially missing out on profitable tourist shopping opportunities.