Introducing these conditions will make it easier for small and midsize shops to get card readers. It is the owners of these shops who are being targeted for PayPal Here, said Hiroaki Kitano, senior vice president at Softbank Mobile Corp., who will become CEO of PayPal Japan, which is equally funded at ¥1 billion each by both parties.
Softbank said PayPal Japan will not be making much money by selling the card readers for only ¥1,200, so its main source of profit will be the 5 percent commission.
A PayPal account holder can register his or her facial image in advance on their personal profile and then settle a payment at a shop that has a PayPal Here system in operation without even physically using their card, Kitano said.
Also, by using a smartphone app, a shopper can search for a vendor who is using the PayPal Here system and notify them that they have a PayPal account.
Shop owners will be able to set up the system simply by plugging the PayPal Here reader into their smartphones' earphone jack. It also works with smartphones powered by Apple's iOS or Google's Android.
Kitano said PayPal Japan will aim to sell PayPal Here to more than 100,000 stores in three years and over 1 million in the long term.
Tatsuhisa Hosokawa, an official at Japan Consumer Credit Association, said PayPal Here is likely to help increase the number of shops where credit cards can be used and thus increase their use in the long run. But he is not sure whether the increase will be on an "explosive" scale, as Softbank desires.
In Japan, people love using cash to purchase items and use credit cards far less frequently than in other advanced countries.
This is partly the reason why Japanese in general have had a negative image about credit cards, because they tend to consider credit card payment as a form of financial debt, which has gained a negative image in light of debt hangovers and other financial crises linked to unprincipled use of credit, as well as numerous leaks of customer data.
But Hosokawa pointed out that this image has been gradually fading in Japan in recent years, saying that the use of credit cards has been rising over the past decade.
Kitano also appeared confident about the future during an interview with The Japan Times last month.
"As smartphones have been spreading widely, we think we can provide a payment service that will improve convenience for consumers and shop owners by combining this card reader (with smartphones)," he said.
Kitano also said as the PayPal Here system does not operate like a conventional credit card system, it will likely prove even more useful to consumers who already have a PayPal account, as PayPal offers online settlement services for registered credit card users over the Internet