Japanese Banks == BLAH

For a country that was once was the center of the banking world, their banking system leaves much more to be desired from the perspective of a Westerner. I am not going to pretend that I know why they do things the way they do, but I'll offer my perspectives on things here:

ATMs

ATMs in Japan close by 7:00 pm during week days. ATMs are open weekends but they charge you 100 yen (about $1) for withdraws on weekends. Why do they close them in the evenings? I haven't a clue. Considering that ATMs in Canada are open 24/7 and for even a minimalistic banking plan (I don't even know if those exist in Japan) you get 20 ATM/debit transactions for free.

Internet Banking

Internet banking does not come standard in Japan. In Canada it does. I've found that internet banking to be very handy when it comes to paying the credit card bills, university tuition and watching my pay cheques get electronically transferred into my bank account. It beats driving out to the bank all the time to use a klunky ATM to check how much cash you've got in your accounts. In Japan, most people don't neet internet banking of because how things are setup here (more on that later on). More over, you can *request* to have internet banking enabled, but they charge you 210 yen/month to use the service. My opinion is that it is cheaper to have a server running to deal with client requests 24/7 than to hire tellers that have to deal with customers all day. Also it's more conveniant for a customer to check things from home or where ever they are based at the time.

Credit Cards

The credit card system in Japan works differently compared to North America. I thought it was inconcievable that international credit companies like Visa and Mastercard had to divise different system for some countries in the world. But yet here it is, staring me in the face. There are some plusses and minuses of their credit card system. Let me give you a run down of how things work over here.

Applying for a credit card in Japan is fairly similar to the process you would go through in North America. The differences are that they require you to have a guarantor and they put a picture of you on your credit card. More about the guarantor first.

A guarantor is someone that is liable for your bills should you, in the unfortunate case, default your credit card payments. Through rain, snow, skeet or hail, they want that money they're owed whether it comes through your or your family or friend's hide. If you don't have a guarantor, that means no credit card for you. I don't know exactly when they instituted this system(or if it was always there), but I have a hunch it wasn't always built into the Japanese financial system and that it was put in place after the bad loan scandal that rocked the financial world of Japan.

From a foreigner's point of view, it feels that the banks are very closed to foreigners. Fortunately for the case of me, I'm on a Japanese government scholarship and in many cases professors are often willing to be guarantors for their students (note: guarantors are also required when you rent a place in Japan too!). I can only imagine how hard it would be for a foreigner to come to Japan with nothing and attempt to start a life... in short, I think it's close to impossible unless you have people on the inside.

I am inclined to think that people of a certain age should be responsible for their own finances instead of dragging other people into a mess should things go bad (ie: people here are probably risk adverse as a result). But knowing Japanese culture for what it is, this system is a deterrent for people from defaulting credit payments since it would bring either their friends or family into trouble. Instead of facing embarassment, I'm pretty sure they'd rather stay on the ball with their credit card payments.

"Smile!" The picture on the credit card is a security measure when it comes to using your credit card. It prevents forgery and becomes a little tougher to use a stolen credit card and complicates things a little for using counterfit credit cards in person. They also don't sign the recipt when making purchases with their credit card (ie. they verify you after looking at your picture, I assume).

Credit card payments

Credit cards are directly linked to your bank account and money is withdrawn out of your account automatically during the monthly payment date you specify on your credit card application. What this means is that credit cards are seen less as a short term loan but more of a time lagged debit transaction since you cannot carry debt on your credit card (and have interest applied) to the next month.

It also means that they have no system for you to pay in advance or even "load" your credit card with money should you decide to make large purchases. For instance, I could load my credit card with $2,500 and pay my university tuition through my credit card. As long as I pay my bills in advance or keep my debt below my credit limit, then I am OK to keep using my credit card for the month. Meaning that you could make more than $1,000 in purchases in a month even if you had a $1,000 credit limit just by paying it off before the end of the month.

To deal with this problem, the Japanese have come up with the solution that you can split bills for large ticket items into installments over several months at your request. Meaning I could split a $1,000 bill into 4 payments of $250 over 4 months so I can keep using my credit card for the current month. What this means is that you're effictively getting a loan with no interest when you split your bill into installments because the company which you made your purchase does not charge you interest. This is a nice thing compared to the "prime+rate" credit cards offer. I find that the North American system to be a little more handy since I typically pay for large ticket items up front instead of racking up debt and paying for purchase over several months (paying interest = bad).

Legal Documents

In North America we sign papers with a signature and that becomes a legal contract. In Japan they use stamps/seals (ie ink pad and stamp) to sign legal and financial documents. I feel a little insecure about the stamp system in Japan since seals can become a target for theft. Stamps offer a little less security compared to a signature since they are easier to create an exact replica of. I still don't use a stamp in Japan since I and most all other international students here got away with using signatures when opening our bank accounts.

Rob Me! I'm Loaded (not really)

Cheques in Japan are unheard of, credit cards are occasionally used and hard cash is often the way most transactions are settled. The Japanese typically carry atleast $100 bucks in their wallets if not more. I've even found myself used to the idea of walking around with $200 in my wallet without a second thought. Back in Canada, I'd carry at most $60 and typically $40 when I go out. Walk around with $50 in your wallet here and you'll feel like you're not carrying enough cash. The problem stems from that credit cards still haven't become the mode in which most people pay their bills. Rather than being caught off guard not being able to make large purchases when on the fly, it becomes standard to carry large denominations of cash. Also going to the bank machine everyday is somewhat tedious so people tend to make larger withdrawls.

Debit cards do work in Japan. I have so far used it once so far, but I find myself paying for most of my purchases in cash.

Banking Companies

The interesting thing about Banks in Japan is that, unless they're being operated by a large company, they are not very consolidated. The banking industry is quite fragmented. Sendai is served by 2 major banks, one is called "The Bank of Sendai" and the other bank is known as "The 77 bank" (it's called the 77 bank because it's the 77th bank opened in Japan). Bank accounts are granted to people living in the catchment area of "major banks." If you move, you are required to close your account and transfer your funds to the new bank within the catchment area of your new residence. Debit transactions are not unified between banks. Meaning that I can only make debit transactions from local banks within my catchment area (my area being most of the North-Eastern part of Japan).

There is a way around this however. In Japan, the post office runs a national financial system, much to my surprise. People are able to make accounts with postal offices and operate them like an ordinary bank account. Postal accounts do not offer loans or financial package; it's as bare bones as you get. The nice thing about opening a postal bank account is that post offices are found throughout all of Japan, meaning if you are in a different part of Japan, you can pop by the local post office and make a withdraw from your account from there.

Comments

I think that the Japanese financial system is in need of improvments considering how fragmented and the number of institutions needed for average banking needs and lack of certain services of which I've been used to in North America . A unified network for financial transactions is definately needed when it comes to doing business or travelling to different parts of Japan. ATM hours should definately be increased since these are automatic machines... as for their credit system. I've applied for a credit card a week ago and it's on the way over to me. I'll understand more about the intracacies of their credit system after I start using it and then I'll pass my opinion on it.