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  1. Analysis
August 3, 2010

20m m-payments users ‘active’ in Japan

Japan and South Korea are often held up as exemplars of the potential the cards and payments industry can achieve with mobile and contactless payments worldwide Japan is one of the worlds only countries (aside from South Korea) where mobile contactless payments have made their way beyond the pilot stage.

By Verdict Staff

Japan and South Korea are often held up as exemplars of the potential the cards and payments industry can achieve with mobile and contactless payments worldwide. Louise Naughton looks at the lessons which can be learned from Japan, which has 20m active mobile contactless users.


Japan is one of the world’s only countries (aside from South Korea) where mobile contactless payments have made their way beyond the pilot stage.

The standard term for the Japanese mobile wallet is osaifu keitai, which encompasses the radio frequency identification (RFID) contactless chip, software applications, and user interfaces.

According to the Celent report Lessons from the mobile payment leader: What the world can learn from the Japanese market, Japan has the right ecosystem in place for mobile contactless payment technology to flourish. This includes widespread acceptance of contactless payments, a high number of mobile subscribers, a population that is accustomed to making mobile contactless payments, and a high circulation of mobile phones which support mobile wallet capability.

Out of the 117m mobile contactless payment accounts in Japan, Celent estimates that 28m are registered and 20m are active users. As industry players define active use by different frequencies, and none of the companies Celent interviewed were willing to reveal their number of self-defined active users, Celent acknowledged that it had to take “quite a bit” of analytical license in order to determine figures.

Using the most common responses from industry players who said “more than half” or “most” of their registered mobile payments users were active, Celent calculated the active rate as 72.5% – the average between the high-end rate (90%) and the low-end rate (55%).

Japan: Mobile payment incentives

‘Cool’ is not enough

According to the Celent report, one of the major lessons overseas markets can learn from Japan is that simply positioning mobile contactless payments as a newer, faster, and ‘cooler’ way to pay will not be enough to convince consumers or merchants to adopt the technology.

“Players should not place the main focus on payments in order to obtain widespread adoption,” said the report. “Rather, the Japanese market has shown that financial institutions and payment brands will have to strengthen efforts to play non-traditional roles in support of mobile incentives, including merchant aggregation, promotional engine technology and consumer facing rewards/points program management portals.”

In other words, payment functionality is assumed and incentive schemes are seen to have been the driving force in pushing mobile payments into the mainstream, not the traditionally-viewed benefits of increased speed and decreased cash handling.

One of the other major lessons was that mobile payments are inherently more complicated than plastic card-based payments. Consumers have to download and use various applications and go through lengthy registration processes on small screens which may slow down the adoption process. The fact that contactless card use far outstrips mobile contactless use in Japan is cited as proof of this claim.

Celent found no evidence that non-Japanese consumers will have an easier time enrolling in mobile contactless payment technology.


Different markets

According to the Celent report there are clear differences between the Japanese market and markets overseas. The main one being the historical dominance of single mobile carrier NTT Docomo which accounts for half of the market share and was the driving force behind osaifu keitai.

In Japan, none of the top contactless payments solutions are offered by traditional payments players, including banks and payment brands. Visa has essentially been irrelevant in Japan in terms of contactless payments. Celent sees no reason why this would not carry over into other markets as there is no shortage of potential usurpers. Limiting this idea only to the US, it is noted that both PayPal and Apple have expressed a desire to cross over into the physical/bricks-and-mortar space of payments.

Celent also reports that the number of osaifu keitai-enabled mobile phones is 55%, compared to the US where it is essentially zero.

Where there are differences between markets, there are also similarities. Celent reports that user experience is the same all over the world. Consumers would rather purchase a contactless enabled handset than add a sticker or tag to their existing mobile phones.

The fact that Japan had a lack of a ubiquitous, incumbent card-acceptance infrastructure prior to the launch of card and mobile based contactless payments can be cited as a reason why Japan is seen as the leading market in contactless payments.

Nevertheless, Celent claims there are multiple lessons that other markets can learn from the Japanese as they go forward and encourage mobile contactless payments for the masses.


Japan: Mobile contactless payment market – main players

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