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%).
‘Cool’ is not
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
“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.
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
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
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.