Virtual payments catching on in Japan
TOKYO: Takeo Ogura walks through the crowded railway station in central Tokyo ignoring the people waiting at the ticket machines and heads straight for the ticket barrier, where he whips out his mobile phone and waves it over a card reader, which beeps as he passes through.
Mobile Suica, as it is known, is part of a growing e-money revolution in Japan that is making life easier for consumers by allowing them to conduct an array of transactions rapidly with their mobile phones, instead of fumbling for bills or small change at the cash register. For small retailers, Mobile Suica offers information that can improve their marketing.
“Its really convenient,” said Ogura, who works in accounting. “I dont need small coins, dont have to look at the fares, and best of all I dont have to line up.”
Mobile Suica was introduced in January 2006 by NTT DoCoMo and East Japan Railway. It is a mobile phone based smartcard that can be used for buying rail tickets or for access to buildings.
Smart cards have been in circulation for some time, but with many it is necessary to bring the card into direct contact with the reader. Contactless interfaces allow the user to pass close by a reader without touching it, which means the card or phone can be left in a pocket or bag.
The system is based on the RFID - or radio frequency identification - Integrated Circuit chip card developed by Sony, which was first used in the Octopus card system for virtually all public transport in Hong Kong in 1997.
Other programs that make money obsolete are in place in Europe. In France, Sociйtй Gйnйrale, in partnership with Visa Europe and Gemalto, piloted a project from July 2007, using a Visa Premier “contactless” bank card to make small purchases; the whole transaction takes less than one second. In London, The Evening Standard newspaper is sold at specially equipped kiosks that require contract between a card and a scanner.
The Bank of Japan, which issues nationwide money supply figures each month, does not release a figure for e-money, but some analysts say e-money makes up about 20 percent of the 300 trillion, or $2.8 trillion, in Japanese consumer spending. The approximately 60 trillion is more than twice the estimate of 28 trillion made by a team of analysts at Nomura Securities in 2003.
“Mobile phone based e-money is becoming more widely accepted in Japan,” said Tetsuhiro Nanbu, research director with the Hakuhodo Institute of Life and Living, which is affiliated with one of the largest advertising in Japan. “More people will use this form of payment as they become more comfortable with it.”
The Telecommunications Carriers Association says that the number of mobile phones in Japan topped the 100 million mark in January 2007, and stood at 100.9 million as of January 2008, suggesting that more than 80 percent of the 127 million people in the country own a mobile phone.
The leading Japanese mobile phone provider, NTT DoCoMo, started its own e-money service, “Osaifu Keitai” - literally “wallet mobile” - in July 2004, and by Jan. 31, 2008, it had signed up approximately 27 million users.
Philip Sugai, associate professor of marketing at the International University of Japan, said it was the contactless technology which was pushing the spread of e-money.
“With contactless Mobile Suica on your mobile phone, you can check your balance, and upload more money into your account at any time, and from anywhere,” he said.
It is now possible to check in for flights with All Nippon Airlines using a mobile phone, and some people pre-program songs at their local karaoke pub.
There are causes for concern, most specifically security. “If I lose my phone then it would be like losing my money,” said Kenji Kato, who works with computers.
To address these concerns, several mobile phone providers have introduced biometric security measures including finger print, facial and voice recognition, which are needed to activate the phone.
Among those most likely to benefit from the spread of e-money are small retail and convenience stores, said Nahoko Mitsuyama, a principal research analyst at Gartner Japan.
“Catering for e-money will allow smaller stores to record transactions on their readers, opening the way to micro-marketing,” she said.
The benefit to larger stores is limited. They issue their own credit cards, or have loyalty clubs, which double as sources of information on purchasing history and market research.
Wider acceptance of the technology should lead to increased use by consumers.
“With multiple functions on a single mobile phone - your Suica train card, your ANA membership card, and your karaoke card - then life is going to be really interesting,” Sugai said, referring to All Nippon Airways.
