Lessons from the Mobile Payments Leader: What the World Can Learn from the Japanese Market

by Bart Narter, June 11, 2010
Case Studies
Asia-Pacific

Abstract

The Japanese mobile payments experience is not easy to characterize or to export. However, using the Japanese model, Celent identifies ways for the US and other countries to learn how to lay the groundwork for faster, more successful implementations of mobile NFC payment solutions.

Within industry pundits' persistent predictions about the imminent advent of mobile near-field communication (NFC) contactless payments, the Japanese market is frequently cited as proof that such payments have a future. However, Japanese market reality is not as much of a straightforward success as many believe. Based on primary research with leading mobile carriers, banks, payment services/brands, and technology vendors, Celent estimates that there are 28 million registered mobile payments accounts in Japan. Furthermore, Celent estimates that there are about 20 million active mobile payments accounts. Respectively, these constitute 24% and 17% of all contactless payment accounts.

Japanese ecosystem differences must be considered when applying its lessons abroad. However, there are a number of lessons from Japan which transcend market ecosystems, and they are explored in a new report, Lessons from the Mobile Payments Leader: What the World Can Learn from the Japanese Market. In brief, these include the following:

  • Consumer adoption takes time, even among a tech-savvy population.
  • For consumers, the actual payment (i.e., financial settlement) component of mobile payments is irrelevant; incentives are what matter above all.
  • Merchants feel the same as consumers; financial settlement matters little, whereas the ability to leverage mobile technology for promotions and sales lift is crucial.
  • Mobile contactless payment technology opens new business opportunties and thus invites new market entrants; Japan shows that non-FI disintermediation in the payments space is a real threat.
  • Inter- and intra-industry collaboration is a key success factor. As different industries play a crucial role in mobile contactless payments, no one industry can expect to go it alone.
  • The jury is out regarding whether banks can make (incremental) money from mobile contactless payments. Debit cards as foundational sources of funds have yet to be used in Japan.

“Although Japan obviously differs from the rest of the world, its success in the mobile contactless payments space merits examination,” says Red Gillen, Senior Analyst with Celent’s Banking Group and author of the report. “If one puts aside the technical and infrastructure differences of the Japanese market, there are a number of empirical, strategic business lessons that are relevant to other countries.”

This report is of special interest to the US and other markets, where dominant mobile payments players have yet to emerge, and alliances are still formulating. In Japan, the largest mobile payment services are the domain of non-FIs, such as mobile carriers, merchants, and third party payment solutions; banks and international payment brands play distant if barely existent roles. The Japanese experience has shown that non-FIs with US analogs such as PayPal, Apple, Verizon, AT&T, and even merchants including Starbucks or Wal-Mart have the potential to usurp the traditional financial services industry.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

3

Introduction

5

Japan Mobile Contactless Market Taxonomy

7

 

What Is an Osaifu Keitai?

7

 

Market Player Types

10

 

Revenue Models

13

Is the Japanese Ecosystem Even Relevant?

15

 

First, the Differences

15

 

Then, the Similarities

17

 

What Remains Unclear

19

Performance

22

Lessons Learned

27

 

Consumer Adoption Is Neither Fast Nor Easy

27

 

For Consumers, Incentives Matter, Payments Do Not

30

 

For Merchants, Sales Lift and Customer Loyalty Matter, Not Better Payment Tools

33

 

New Technology Opens the Door for Disintermediation

35

 

Inter- and Intra-Industry Alliances Increase Stakeholders, Chances for Success

37

 

It Is Not Clear That Banks Are Making Money

39

Conclusion

42

Leveraging Celent’s Expertise

44

 

Support for Financial Institutions

44

 

Support for Vendors

44

Related Celent Research

45

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