Square is rolling out its Square Register product to small businesses in Japan. As the mobile commerce space increasingly picks up, Square likely has a big opportunity to take payments mobile in a new market.

“Japan has a healthy, growing economy and continued adoption of mobile devices and credit card use,” said Lindsay Wiese, spokeswoman at Square, San Francisco.

“We also see many shared values with Japan – design, attention to detail and the creation of innovative technology,” she said. “We are excited to join Japanese businesses in growing local entrepreneurship and the local economies across the nation.”

Moving into new markets
This is Square’s first expansion outside of North America. Last year the company expanded into Canada.

Square claims that more than four million consumers and businesses can accept credit cards via Square in the United States. The company is also processing more than $15 billion in annualized payments.

Square is teaming up with credit card company Sumitomo Mitsui Card Corporation to roll out the mobile payment options for businesses.

Merchants in Japan will be able to accept credit card payments via the Square Reader for a swipe fee of 3.25 percent, which is slightly higher than the 2.75 percent U.S. fee.

One of the biggest challenges for Square in Japan will be around convincing merchants and consumers to switch over to mobile payments since the company has a cash-heavy economy.

“Japan is a hard market to crack and I believe to this day cash is still the primary use of payment,” said Arun Ramdeane, senior account executive at Atimi Software, Vancouver.

“This means there is a large opportunity for Square to increase its business,” he said.

“It’s a market that is mature with tons of small to medium-sized businesses. If they can crack the culture they will win.”

Much of Japan’s economy is driven by small mom-and-pop stores, which gives Square plenty of opportunities with local merchants.

Consumer interest
Even though Japan does present Square with some big opportunities, there is also a chance that mobile payments will get some push back from consumers that are not comfortable with using their mobile device as a digital wallet.

However, smartphone and tablet ownership is growing quickly in Japan, which aligns with other worldwide trends.

Up until last year, Japan was the largest market for mobile advertising, according to eMarketer, which points to consumers feeling comfortable with being marketed to via their devices (see story).

The market for mobile and small merchants is continuing to get bigger with PayPal, PayAnywhere and Intuit as examples of Square’s competition.

However, what might make Square stand out is its focus on strong partnerships, such as the one that the company has with Starbucks.

“Square has partnerships that are powerful,” said Scott Michaels, executive vice president at Atimi Software.

“That plus the overall non complicated pricing structure is what sets Square apart,” he said.

Final Take
Lauren Johnson is associate reporter on Mobile Commerce Daily, New York