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  1. Join Date
    Aug 2004
    Posts
    1,140
    #1
    Japan's leading mobile operator believes it has found the next big thing

    IS YOUR mobile phone about to swallow your wallet? That is what NTT DoCoMo, Japan's top mobile operator, is betting--and where it leads, others often follow. In 1999, DoCoMo pioneered internet access via mobile phones through its i-mode service, and in 2001 it was one of the pioneers of third-generation (or 3G) technology. Now it believes the next big thing is using phones to pay for things, by embedding a credit card into a wireless chip built into each handset. This will mean bringing together two industries: mobile telecoms and consumer finance.

    Oddly, Japan is very advanced in the former and very backward in the latter. But that could be just the combination that is needed to make DoCoMo's plan work.

    Although it has yet to announce its plans formally, DoCoMo has been quietly putting the pieces in place in recent months. Over 4m of its 51m subscribers now carry handsets equipped with FeliCa, a technology developed by Sony that DoCoMo incorporated into some of its handsets last year. FeliCa allows a small chip to be read wirelessly by a nearby scanner. FeliCa-based cards are already used as wireless train tickets by millions of commuters, and from next year it will be possible to use a FeliCa-enabled handset instead. DoCoMo is also a partner in Edy, a FeliCa-based "micropayment" scheme that allows small purchases to be made using funds stored in the handset. Edy scanners, which let people pay for things by waving their handsets, are used in over 20,000 retail outlets in Japan, from convenience stores and cafes to pharmacies and bookshops. The average transaction, however, is still small: just over YEN600 ($5.40).

    DoCoMo has far grander ambitions for mobile payments. In April it teamed up with Sumitomo Mitsui Banking Corporation (SMBC), Japan's third-largest bank, by paying YEN98 billion for a 34% stake in the bank's credit-card division, Sumitomo Mitsui Credit Cards (SMCC), Japan's number-two credit-card issuer. DoCoMo has also held talks with Japan Credit Bureau, the top credit-card firm, with a view to buying a 10% stake. Now it is preparing to distribute scanners that can read credit-card details from FeliCa-equipped handsets to as many retail outlets as possible. The exact nature of the agreements that SMCC and DoCoMo have struck with retailers is unclear, but it seems that the cost of these scanners will be subsidised.

    Why the sideways move into consumer finance? Having withdrawn from unprofitable forays overseas, DoCoMo has plenty of capital to invest and is looking for new sources of growth at home. It also wants to differentiate itself from KDDI, the increasingly competitive number-two operator. (Vodafone is a distant third.) Credit cards are far less popular in Japan than in other rich countries: the average card is used for less than $1,000 of purchases a year, compared with more than twice that in Britain, France, Germany and America (see chart). Building cards into the handsets of Japan's mobile-phone users, who are ever eager to experiment with new tricks, seems a good way to get them to buy more on credit. DoCoMo would then benefit financially through its stake in SMCC.

    Perhaps even more important for DoCoMo is that embedded credit cards will make its handsets more attractive, just as built-in cameras and other features have done. Pricing schemes that tie handset and credit card together might also help to keep mobile subscribers loyal from next year, when they will be allowed to keep their number if they switch operators.

    For its part, SMBC, like all of Japan's megabanks, is eager to expand into consumer finance--and retail banking of all sorts. It has reduced its bad-loan mountain to a reasonable size but still desperately needs new sources of profit. It recently lost a fight with Mitsubishi Tokyo Financial Group, the second-biggest bank, for the hand of UFJ, the number four, which although weak has a decent retail business.

    Will it work? Security is one concern. If your phone is also your wallet, it is even more of a pain if it gets stolen. DoCoMo has tackled this by making it possible to disable the FeliCa chip on a stolen handset remotely. One handset even has a fingerprint scanner to prevent unauthorised use.

    Whether DoCoMo succeeds will also depend on how it treats rival credit-card issuers and mobile operators. So far it has been cagey about strategy, but it apparently plans to dominate the market by launching first and signing up the best partners, rather than by shutting out other firms technologically. So the new scanners, despite being subsidised by SMCC and DoCoMo, will probably also work with FeliCa-equipped handsets from KDDI and Vodafone, which are expected in the autumn. But if DoCoMo can get the top two credit-card issuers on its side, says Kirk Boodry, a telecoms analyst at Dresdner Kleinwort Wasserstein, its rivals will be left with less-attractive partners, and therefore less appeal to consumers.

    If the idea of mobile payments takes off in Japan, might operators in other countries follow in DoCoMo's footsteps once again? Maybe not, because Japan is such a special case. Not only are credit cards far more widely used in Europe and America; the mobile-telecoms industry is also far less vertically integrated. DoCoMo controls every aspect of its handsets and networks, whereas operators in other countries use technology built on industry standards. This means that new services require broad industry support, which can take years to organise, before they can be incorporated into handsets and networks. In the case of mobile payments, such agreement has proved elusive. Simpay, a mobile-payments initiative backed by several big European operators, recently collapsed. So even if DoCoMo's ambitious plan succeeds, operators elsewhere could find it hard to imitate. "I don't think this is a global trend," says Mr Boodry. "I think it's going to be strictly in Japan."

  2. Join Date
    Feb 2005
    Posts
    469
    #2
    Galing ng technology ng Japan, pero sa kanila lang.

  3. Join Date
    Feb 2005
    Posts
    3,299
    #3
    NTT DoCoMo has been testing these things since 2000 and has been using smart phones to pay for train fares, air-fares, grocery bills and the likes for a couple of years now. Their 3G phones hit the market in 2000. IMHO, NTT DoCoMo is in a class of their own. As for our Smart and Globe providers, they're light years behind what NTT DoCoMo has and is cooking-up.

Pay with a wave of your phone