Written by In Japan, where handsets featuring Felica contactless technology account for more than 60% of the total number of handsets, takeup of the technology is relatively low – reportedly around 15% of Felica handset users – and is largely confined to public transport. It is not used much to pay for goods in shops – even though leading Japanese carrier NTT DoCoMo made a huge investment in helping retailers pay for the rollout of Felica-enabled payment terminals.
[From Mobile industry too focused on NFC: part 1 | Telecom Asia]
Oh man. So mobile proximity is toast. But wait a moment. At SIBOS this year, Dr. Kiyoyuki Tsujimura of NTT DoCoMo said that
They have 120 million NTT customers and 60% are using mobile payment enabled handsets. Of those, 60% are using mobile payments at least one a week, which means that around 50 million Japanese people are making a mobile payment on a regular basis.
[From The Financial Services Club’s Blog: NFC has been strangled at birth]
He also said that people do use it in shops. A paradox? Not really. Dr. Tsujimura clearly indicates that the Japanese public do not use it in shops because of payments. Instead he confirms the general meme that non-payment identity-centric services are the things that shift consumer behaviour.
They use it for convenience and financial benefits as the merchants are issuing ecoupons at the point of sale (POS) with additional discounts if they use mobile payments. Merchants also like it, as they have no cash to deal with, and they can get 1:1 marketing benefits by having the customer’s mobile details.
NTT also provide money transfer via mobile, but it’s not competitive with banks as money transfer is limited to a maximum of 120,000 yen (about £1,000 or $1,600) in a single transaction.
[From The Financial Services Club’s Blog: NFC has been strangled at birth]
We’ve always said, in our analysis and roadmapping work for clients, that the Japanese market is a special case that may contains lessons for us but is not a template for us (i.e., US and European markets). There are obvious structural reasons for this.
When asked why mobile payments had succeeded in Japan, Tsujimura-san said that “we are the largest operator in japan with 50% market share in mobile, so we set the standard for how customers deal with mobile payments”. In a fairly typical Japanese statement of the world, he then asserted that “we are leading how customers use mobile payments”.
[From The Financial Services Club’s Blog: NFC has been strangled at birth]
Some people draw a similar conclusion from Kenya, pointing out Safaricom’s huge market share, although they forget that it was nothing like as huge before M-PESA launched. Kenya could be a template for other emerging markets, in a way that Japan could not be a template for other developed markets, but it won’t be.
Back in March 2012, Citi’s Global Perspectives & Solutions (GPS) published a report called “Upwardly Mobile: An Analysis of the Global Mobile Payments Opportunity“. The report actually highlights the two cases of Japan and Kenya and looks at them in some detail. They present one as the obvious case study for the developed world and the other as the obvious case study for the developing world and says that they are likely to “serve as prototypes the future mobile wallet initiatives” although I have to say I find this unlikely. The market conditions, and the regulatory environment, were in both cases unique. And, as Citi point out, the Japanese merchant funded mobile wallet and the Kenyan user funded mobile wallet are completely different beasts. They have almost nothing in common and frankly the 9.5 million acceptance points in Japan and the 32,000 agents in Kenyan are apples and oranges: there is no reason why both system should not exist in parallel, sitting inside the same consumer mobile wallet.
There is doubt that we can find interesting lessons from the evolution of mobile payments in Japan but I cannot see the market conditions there being replicated in other developed economies and certainly not in the US. In the case of Kenya, we’ve already seen how the regulatory environment in other emerging markets has served to hold back the development of mobile payments and the idea that another similar scheme could sneak past the regulators to achieve scale is far-fetched. It’s important to study these cases and learn the lessons from them to take into other markets but we mustn’t be too superficial in our analysis. If we going to learn any lessons that they have to be the right stop
These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers
