Paidy Uses Vonage APIs to Let Retailers Accept Cardless Payments
Japan-based finance company Paidy uses Vonage SMS API with 2FA and Voice API with TTS to allow merchants to offer customers the ability to purchase goods and services online by using their mobile phone numbers and email addresses.
ChallengeSince around 80% of Japan’s retail sales are made via cash purchases, a system was needed for consumers who wanted to make online purchases, but without using credit cards
SolutionVonage SMS API with 2FA and Voice API with TTS
ResultsBy implementing the Vonage SMS API, Paidy-enabled merchants can offer customers the ability to purchase goods and services online by using their mobile phone numbers and email addresses.
Innovating Purchases Made Via Cash in Japan
For decades, the Japanese have been on the front lines of innovation. From their work on the Super-Kamiokande neutrino detector, to the introduction of futuristic, intelligent toilets, Japan has been a driving force in electronics, computer science, global health, and more. That is why—given the country’s history of envisioning and embracing new technologies—it is rather perplexing that a vast majority of Japanese citizens claim that they are uncomfortable using credit cards to shop online!
Approximately 80 percent of Japanese retail sales are made via cash purchases. According to an October 2018 Wired.com article, Why Japan is a Rare Holdout in Asia’s Cash-Free Future, it is a cultural thing. Cash has great traditional and sentimental value. It plays a ceremonial role that is central to Japanese life and customs. So, although other Asian countries are moving ahead without hesitation toward cashless economies, Japan has remained resistant to this change. Because of this resistance to a cash-free economy, new methods of enabling online transactions were needed.
Adding Security and Efficiency to Cash Transactions
One company that is leading the way in “cardless payments” is a Tokyo-based business called Paidy. Since its launch about four years ago, Paidy has grown rapidly, and currently its user accounts have reached 2.5 million. The company offers a payment system that requires only a customer’s email address and phone number to make the transaction. Over the past few years, Paidy has established a large network of 700,000+ merchants in Japan who use the system for online purchases. “It’s kind of a B-2-B-2-C model,” according to Houston Ross, Chief Technology Officer at Paidy. “We sign up merchants, and then through those merchants we acquire consumers."
Using Paidy-enabled merchants, customers can purchase goods and services by simply providing their mobile phone numbers and email addresses. Paidy then verifies who they are with a four-digit code sent through SMS or voice technology. Customers settle their bills once a month at a convenience store. They can also pay their balance due through bank transfers or via auto-debits (installment and subscription plans are also available).
Because of this aversion to credit cards, a “Cash on Delivery” method of payment has been very popular in Japan. However, as Ross pointed out, it is not the most cost-efficient method. “If you make a number of transactions, you end up paying COD fees for every transaction. With Paidy, multiple transactions are consolidated into one balance, and a customer only needs to pay one time. What we do is we aggregate all of the charges. Then we will invoice the customer on the 10th of each month. And what Japanese typically do is either auto-debit from their bank account or they go to a convenience store to pay the bill.”
The Vonage SMS API: Making It Work
According to Ross, the technology behind Paidy transactions is key to making the system run smoothly. “Secure by design is an absolute must. But the second most important part of this process is the ease of experience we offer. The Japanese word for troublesome is ‘mendokusai.’ So what we say is that we want to remove the mendokusai from the experience.”
With the Paidy method, a customer’s credit is determined and given at the point of sale. Paidy validates transactions and consumer data “in real time” with current information using AI. The company has its own risk-engine logic that is applied to the process so that validation can be granted when a customer makes a purchase.
“Once we have identified consumers through the purchases they make from our merchants, our ability to communicate to those consumers through SMS is extremely important,” said Ross. “That’s where Vonage is making all the difference. First, we use the Vonage SMS API to acknowledge that the transaction was made. A code is sent out to authenticate the customer. Second, through SMS we let them know that we received payment. And third, we communicate that we have accepted the payment. Letting the customers know what is happening each step along the way is central to this process.”
The Benefits of Choosing Vonage
What Houston Ross has found by working in Japan for almost 15 years is that it can be difficult to find technology partners when a company is developing and implementing technology-centric systems. “Typically what you will find is a partner with many sales engineers, but no help from the engineers who develop and maintain the technology. So that can be frustrating. This is not the case with Vonage. We always receive the support that we need when we need it. Also, the documentation is clear and complete. I feel that Vonage provides the people and tools we need to be effective.
“Another benefit of using Vonage is the extent of their global reach in terms of the carriers we need. This is extremely important to Paidy. As we continue to expand, we need a partner who is able to scale with us as we grow, without any problems.”
Ross also cited Vonage’s extremely competitive pricing model as another advantage over other available options. “We needed a pricing model that we could sustain as we expanded our business. That, along with ease of integration and the high level of reliability we’ve seen with Vonage—those are key factors in why we chose Vonage and why we continue to be highly satisfied with our relationship with Vonage. We have never had any issues to speak of, and that is saying a lot.”
"Typically what you will find is a partner with many sales engineers, but no help from the engineers who develop and maintain the technology. So that can be frustrating. This is not the case with Vonage ... I feel that Vonage provides the people and tools we need to be effective."
HOUSTON ROSS, Chief Technology Officer, Paidy