1, 20. 2006
Mobiles are not just telephones-they can also be cameras and music players. And now they have become credit cards too. Sumitomo Mitsui Card Co., Ltd. entered the new mobile-phone credit-card business in December last year.
By forming an exclusive tie-up with NTT Docomo, Inc., which holds a nearly 60% share of the mobile business, Sumitomo Mitsui Card apparently aims to catch up with and even surpass the pioneers in this business, JCB Co., Ltd. and UFJ NICOS Co., Ltd.
By investing 50 billion yen to equip more shops with the necessary terminals for mobile-phone credit-card services, Docomo aims to garner 10 million individual subscribers over three years. Docomo is backed by vast reserves of capital, and depending on how it fares, the current balance of power among credit-card companies could be completely overturned.
Mobile-Phone Credit-Card Services Offer Ease of Use
New models of mobile phone equipped with a wallet function are increasing. on store shelves. (Picture: Head office of Laox in Akihabara, Tokyo (Oct. 6, 2005))
The service is known in Japanese as the osaifu keitai ("wallet mobile") service, using mobiles that can pay bills through contact-free built-in IC chips. Retail payments are made on a post-paid basis through the credit-card function. E-money systems using the prepaid method, such as Edy and Suica, already exist in Japan. With the mobile-phone credit-card service, however, you do not need to deposit money beforehand, and users can get back a percentage of a purchase price as credit (under the standard credit-card points system) and withdraw cash as with ordinary credit cards. These services give real meaning to the "wallet mobile" nickname.
JCB, the largest Japanese credit-card company, launched the service in April last year under the name Quick Pay. It has now some 10,000 customers. At the end of August, UFJ NICOS, the third-largest credit-card company, launched its Smart Plus service, targeting customers in retail markets where payments are usually made with small-sum bills and coins. About 60 trillion yen changes hands each year in markets with such small-sum transactions. Tapping this gigantic market are 7 million mobiles equipped with bill-payment functions, mostly operated through Docomo.
Sumitomo Mitsui Card, the second-largest Japanese credit-card firm, has started a mobile-phone credit-card service under the iD brand jointly with Docomo. Already, iD is accepted at about 3,000 shops, including outlets of Yodobashi Camera (electronics), am/pm (convenience store chain), Tsutaya (videos, DVD and other rental), Tower Records and Mitsukoshi department stores. The iD read-only terminals installed at these outlets were developed jointly with Docomo's affiliated company NTT Data Corporation. A major investment is planned for sales promotion for the terminal.
JCB and UFJ are Rattled by Docomo's Plans
Japan Post's moves draw attention, as it has as many as 25,000 post offices across the country.
Backed by its pots of money, Docomo has the potential to wield power over many retailers that use its mobile-phone credit-card service: it could offer to let shops use the terminals free of charge, and if it advertised that those are dedicated terminals for its "wallet mobile" service, retailers would flock to the Docomo networks.
So the idea of Docomo installing terminals at retail outlets for its mobile-phone credit-card service poses a real threat to JCB and UFJ NICOS. In fact, the two companies in October last year established an "association for the promotion of bill payment using mobile phones" with 39 other firms in the industry to promote terminal compatibility, so they can be used for mobile-phone credit-card services of different companies. KDDI and Vodafone Japan, Docomo's rivals in the mobile business, are also members of this group. They aim to cooperate in promoting their business by unifying standards for their credit-card services, which are currently divided into three groups. The association is calling on Sumitomo Mitsui Card and Docomo to join, but these two companies are taking a wait-and-see stance at present.
A new specter is looming, however, that could send shockwaves through the current mobile-phone credit-card universe. Japan Post, the state postal company that is set to be privatized, is now working for unification of standards, including those for Edy and Suica, with an eye to dominating the mail-order market. Japan Post's integrated terminals, to be installed at about 25,000 post offices throughout Japan, are certain to become the standard for mobile-phone credit-card services. It is likely to be Japan Post and its choice of standard that settles the power struggle among credit-card companies and dictates the fortunes of mobile-phone companies.
