In recent months, several organizations have been introducing what is being called "e-money" into the Japanese marketplace. Touted as the beginning of the end of paper money and coins, several trial systems are currently being tested, and among them Visa's VisaCash card is being put through its paces in Tokyo's Shibuya district.

CJ recently sent Thomas Caldwell shopping to see how easy - or difficult - it is to use this new form of legal tender. Here is his report and analysis.

Off to the market we go

It took me a couple of weeks to find someone who was actually using Visa's e-money scheme. The lady I was finally able to recruit to assist me in my experiment was a long-time user of the VisaCash system who worked in Shibuya. At our initial meeting, she told me of her experiences with electronic money. Most places, I was told, did not seem very enthusiastic. Some merchants had accidentally charged her credit account instead of her e-money account (e-cash was initially incorporated into the existing Visa credit card). A few places were also hostile to the use of the card. We planned a shopping trip so I could see for myself.

Our first stop was a basement supermarket, part of a large, well-known chain. Instead of buying one or several days worth of groceries, we decided to make a purchase that was in line with the purported purpose of the VisaCash card: a small, relatively inexpensive item. In this case, a block of cheddar cheese imported from New Zealand. It was late morning, so the crowd in the store was relatively small. We arrived at the checkout counter with our dairy product and requested that the purchase be made using VisaCash.

The clerk turned to one side and removed a stack of papers from atop a small terminal unit that apparently had seen little use of late. She inserted the card into a slot and proceeded to fiddle with the machine's controls. Nothing happened. After several minutes of attempting to get the device to work, she gave up and took another one off the shelf behind her. She then placed a sign on the counter indicating that the register was closed.

First feeding the paper tape through the terminal unit, the clerk again entered my co-shopper's card, asked her to verify the amount, and then proceeded to put the cheese in a bag. Total time in line: 12 minutes.

Fortunately, the other shoppers wanting to make purchases were quickly served in other lines. If it had been the late afternoon crush, when many folks pick up dinner on their way home, our experiment might have been the source of dozens of "rude foreigner" stories told over Tokyo dinner tables.

While our teenage clerk politely struggled with our choice of currency, we were told that, from what she saw, only about two to three people a day were using VisaCash in her store. We were also told the main problem was with the terminals breaking down often, not with any difficulty in using them.

The next establishment we visited was a discount drug store near Shibuya crossing. Our simple purchase this time was a toothbrush. After picking an appropriate type and color (I needed a new one anyway), we got into line. When my colleague pulled out her card and asked to use VisaCash, we were directed to use the register upstairs - a bit of an annoyance since we had been waiting in line and there was no sign visible indicating that those using electronic money should proceed to the second floor.

Trudging upstairs with our toothbrush, we again waited in a relatively long line. When the use of VisaCash was requested, the clerk immediately, as if by instinct, closed her register and opened up another one further down the counter. This electronic transaction went smoothly. The lady knew how to use the equipment. But as soon as the CLOSED sign appeared on the register, a collective gasp rose from the people behind us in line. An over made-up lady who was standing next to us was so obviously angry her knuckles turned white as they clutched the single, red lipstick she intended to buy.

Since we didn't want to incite a riot among the lunch hour shoppers, there was little time for questions. However, we did learn that the use of VisaCash at the store was not common. The cashier did tell us that she liked the system since she no longer had to worry about counting change.

Our next stop was a large stationery store to buy a pen refill. There the transaction went smoothly and there was even a smile, although some lack of familiarity with the equipment was evident on the part of the clerk.

The final stop in our electronic pocket change shopping spree was a CD shop. Again, there was no problem with the transaction. The clerk knew how everything worked. We were also able to talk in-depth with him. He reported to us that only about one person a day used electronic money and that that number had remained pretty much the same since Visa set up the pilot program in Shibuya. There were relatively few users of the system, but those who did use it used it consistently.

Technology before purpose?

After my shopping spree, I checked with some industry people to get their views. The single biggest criticism of the current e-cash systems being tested is that there is no real business justification for them. Sure, cards are cleaner than a pocketful of copper and steel coins, but what incentive has been presented to consumers and merchants for switching over from coins and paper? Is e-cash just another case of technology looking for an application?

Some have talked about using the existing customer point systems and other loyalty schemes as a way of promoting the use of e-cash. You would think that such systems, which usually offer discounts for regular customers and valuable marketing data for retailers, would be a natural application of smart card technology. Yet, to date, those pushing the systems in their present forms are still parroting the line that "e-cash is more convenient." Something, that in its present form, it is clearly not.

To be fair, it took the credit card companies many years to get the bugs out of the system much of the world's economy now depends on. However, credit cards offered a real incentive to customers and merchants in that they offered a convenient way to make purchases and keep track of them. There was also the advantage of being able to spend money you didn't have.

If civilization is to continue to progress, e-money will be the next logical evolutionary step. Yet currently it costs more to use than traditional money and adds more complications to an already complicated world. So why should one use it? Until the people pushing the idea can come up with a real good answer, and some real good incentives, the folks working at the mint shouldn't be too worried about losing their jobs.? Had experience with e-cash?

Tell us about it, at editors@cjmag.co.jp.