finding a credit card vendor in Japan

by m. werneburg, 2010.08.03

Our business sells engagement rings on the Internet. As such, we're looking for a credit-card transaction vendor that can support us.

It's been a tricky search. Specifically, we need someone who can:

accept JCB credit cards (in addition to Visa and Mastercard, with American Express as a nice-to-have)
offer a Japanese-language front-end on (e.g. on our website and in error messaging and emails)
offer seamless integration with our website
settle payments in Japanese yen
settle payments to a Japanese bank
spell out the terms of service so that we'll have no surprises

Naturally, this list is going to change for any given business. And the resulting short-list of vendors will vary depending on the answers to these questions. Rather than attempt to give an answer to the question of "which Japanese credit card transaction provider is best" I thought I'd run through the important questions that come up and point the reader toward finding their own solution.

1. what's your tolerance for risk?

If you're unafraid of sudden and arbitrary decisions to be cut off by your supplier look no further than PayPal Japan. They are not a bank and as such are not bound by banking laws. They have anti-fraud rules that are heavily slanted against vendors and they've been known to bankrupt small vendors with sudden account freezes. We've decided that they're too risky, but you can get off the ground in a hurry using them while you find a permanent vendor.

2. how quickly do you need your cash once the customer has paid?

Japanese gateways/processors pay at the end of the *next* month. Though some will take a premium to pay you by the 10th of the next month.

3. what's your budget?

Can you absorb a hundred thousand yen monthly minimum charge? Or do you need the fees to come out of purchases with no monthly payments? There are many more fees for opening and maintaining credit card transaction services than one might guess.

4. what's your technical need?

Do you need to have seamless integration with your website, or can you refer buyers to another site?

5. do you hold stock, or is it like our business where build to order?

Many of the providers (especially in the US) will either not do business with you, will "investigate" each purchase (good luck with Japanese buyers) or will withhold a portion of your invoices on a rolling basis (e.g. they'll always have something withheld).

6. what are you selling?

The vendors typically have rules about products that they'll support, and will often ding retailers with higher rates if there's anything they don't like about your business. For instance, our diamond jewelry business was deemed too risky for most of the American operators I contacted (for instance Durango, who otherwise looked quite credible).

Some vendors have great rates and so on but only deal in software products (or their licenses). Avangate and Share-It being two examples.

7. will you be handling credit card data yourself?

My advice is: don't even think about it. In Japan, the personal information protection laws have real teeth. The laws are open to interpretation, but you don't want to leave it to the courts to decided whether you're going to prison if you leak client credit card details. As such, I recommend a vendor that is PCI DSS complaint. Happily, this thins the crowd significantly.

8. do you need service in English?

Amazingly, this isn't the issue that I thought it might be. J-payment, for instance, was happy to support us on the phone in English.

9. who invoices your clients in what language?

It's important to verify whether your credit card gateway/processing company will invoice your clients in your name or theirs. In our case we couldn't accept any vendor that couldn't invoice our clients in our name. Naturally, we needed the Japanese clients to see our name in Japanese.

In summary....

We're still looking, though we've found a few vendors that meet our needs.

You'll note that I've mentioned vendors outside of Japan. The early discouraging element with the Japanese vendors was the way that the local vendors withhold payment for as long as eight weeks. That would introduce a cash-flow problem for us when we've promised four-week delivery. So we're focusing on vendors in far-flung places.