Japanese mobile payment app PayPay is embedding itself in rural areas to gain market share in a country where cash is still dominant. Indeed, cashless payments reportedly account for just 20% of transactions, compared to 50% in the U.S. 

Despite some well-heeled competitors, Japan is a largely untapped market for mobile payment providers. PayPay’s chief competitors include Rakuten Pay, launched in 2016, and Line Pay, which rolled out in 2014. PayPay is gunning for a bigger share of the market and believes it can win more customers by focusing on rural areas, adding merchants that don’t accept other mobile payment platforms.

“Other companies’ [mobile payment platforms] already have been installed in stores where credit cards can be used,” said Mamiko Nishikawa, a spokesperson for PayPay, in an email to Bank Innovation. “Because PayPay has its own network, there are many stores that can only use cash or PayPay.”

PayPay also is targeting two tourist areas in Japan: Omi-cho Ichiba and Yoron Island. According to Nishikawa, these islands only offer cash payments or PayPay.

Nishikawa said PayPay gained 7 million customers since its launch in October. According to Lexi Sydow, senior markets insights manager at analytics provider App Annie, PayPay was the most downloaded finance app in Japan as of April. She said PayPay has largely held the top spot since November.

SoftBank and Yahoo Japan partnered with India’s digital payment giant Paytm to launch PayPay in October. The app uses  barcode technology to enable mobile payments. Yuri Gorai, a Tokyo-based analyst at Euromonitor International, said long-established parent companies have helped PayPay earn the trust of conservative Japanese spenders. She also believes the Japanese government will soon incentivize cashless payments.

“Although the detail is still under discussion, many believe that 2-5% point-back (cash-back) campaign would be implemented, meaning consumers can earn points (or e-money) when they pay with cashless payments,” Gorai said.

PayPay’s growth exploded after it launched, thanks in large part to a cashback incentive program. From Dec. 4 to Dec. 13, the company offered a 20% cash back deal at participating stores, and customers even had a one in 40 chance of winning 100% cash back of up to 100,000 yen ($900). According to App Annie, the company’s weekly active users increased by 46 times in November and December.

“If you’re able to win a ton of money, you probably have a lot of that network effect taking place,” Sydow said. “They were able to partner and really increase their adoption with that cash back promotion.”