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Japan and the US are special cases for mobile payments

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The US shouldn’t look at Japan as a model for mobile payments, and Europe shouldn’t look at the US.

An interesting discussion about the relationship between age and payment mechanisms in a meeting this week reminded me to look again at Japan to see how the combination of money, technology and an ageing population come together to shape retail payment trends.

The number of prepaid electronic money cards in circulation hit 182.17 million in June, or triple what it was five years ago, a recent Bank of Japan survey said… growing at an annual pace of 15 percent to 20 percent in recent years… The BOJ credited the surge to people in their 30s who were the first to use the technology when it debuted and have since shed their privacy concerns to adopt it.

[From Use of prepaid e-money cards soars | The Japan Times Online]

Edy is by far the most commonly-used e-money service, predominantly on cards although an increasing number of consumers are using it on their phones as well. It remains a fact though — as Dean Bubley observed in a Twitter conversation on such — that most consumers with contactless phones still use their cards rather than the phones. That’s not to say that the use of contactless phones isn’t growing for other purposes. I guess it just means that payments are not as much fun as rice cooking…

Appliance makers in Japan are jumping on the smartphone bandwagon with new appliances that can communicate with smartphones. Panasonic will launch a steam microwave oven and two induction heating rice cookers on 1 June that can communicate with Android-based smartphones. The appliances also use the FeliCa contactless technology.

[From Japan sees rise in smartphone-connected appliances – Telecompaper]

Another little window into the future is the use of NFC to provide a convenient and simple interface between healthcare devices, a crucial segment of the internet of everyone else’s things in an environment evolving to support the elderly.

…healthcare equipment maker Omron has launched the Wellness Link service which allows users with Android and FeliCa-equipped handsets to track their health online with data obtained from the equipment, which includes scales, thermometers and blood pressure gauges…

[From Japan sees rise in smartphone-connected appliances – Telecompaper]

All very interesting. But back to payments. I thought that the most interesting quote in that Japan Times article came at the end.

Yasuhide Yajima, chief economist of NLI Research Institute, said the use of e-money cards will continue to spread because elderly people feel safe using them and they can be handled like cash.

[From Use of prepaid e-money cards soars | The Japan Times Online]

In the UK, we seem to think that the elderly must be supported using cash and cheques because they are incapable of adapting to modern technologies. I suppose that’s just one of the ways that Japanese payments are evolving differently from ours. Another is the central role of the mobile operators in driving interoperability and new services.

Japan’s leading mobile operator and provider of integrated services centered on mobility, and KT Corporation, South Korea’s leading telecom operator, have agreed to develop a cross-border e-money service that would enable DOCOMO customers with compatible smartphones purchased in Japan to use a prepaid e-money service called “Cashbee” in South Korea… Cashbee is available at some 52,000 locations in LOTTE Group department stores, convenience stores and mass transportation facilities such as subways and buses. The service currently has 5 million users.

[From New DoCoMo Fact Book – NFC Deal with KT | Wireless Watch Japan]

DoCoMo are also building interoperability in other directions to make it easy for Japanese consumers to use their phones to pay elsewhere. Telcos in the Europe and the US have not gone down this route because they have adopted the EMV standard that provides interoperability for them, but the DoCoMo route does show how you could use NFC terminals to run non-EMV payment systems.

The collaboration will connect DOCOMO’s domestic payment network to the world, enabling customers using iD mobile credit payments with compatible DOCOMO smartphones to make contactless payments outside of Japan, anywhere MasterCard® PayPass™ is accepted.

[From MasterCard Connects NTT DOCOMO’s Domestic Payment Network to the World | MasterCard Social Media Newsroom]

Now, no-one should imagine that US or European markets are going to evolve mobile contactless like, say, Japanese or Korean markets have done. These are markets with entirely different structures and entirely different market dynamics. As Consult Hyperion has long advised clients, we should look to these markets for inspiration and ideas but not for templates.

So, I think it’s a mistake for anyone really in the U.S. or developed countries to be looking at Japan as a model for mobile payments.

[From The Future of Mobile Payments]

David is right about this. But I’d go even further. Not only is Japan not a model for the US, the US isn’t a model for anywhere else either. Both the US and Japan are special cases. I’m not saying this in hindsight: it’s been part of the Consult Hyperion mobile world view from the earliest days. That’s why the trick in Europe is to look and learn from those markets but not to try and copy them.

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