Is Mobile Payments Market in Japan Growing Or Not?

People think that Japan is one of the countries that is an early adopter of contactless mobile payments. We can certainly agree this is true. However, whether contactless mobile payments are common in Japan is another question. The answer is in fact “No”. In other words, mobile payment-enabled phones are widespread because many mobile phones are preloaded with the mobile payment function, but the active users are far less than the penetration of mobile payment enabled phones. As of August 2012, there are approximately 126 million mobile phone contracts in Japan. Among those, 58% or roughly 73 million mobile phones are embedded with a mobile payment chip. This is equivalent to 20% of all e-money cards / devices, which total about 180 million cards. How is the transaction volume? Monthly transaction volume of e-money, including not only mobile payments but plastic e-money, recorded 260 million in July 2012. That is, monthly transaction volume per card is only 1.5 transactions. Recently, smartphone subscriptions have been rapidly increasing and mobile payment embedded smartphones have also gradually penetrated. Approximately 34% or 10 million of smartphones have mobile payment chips, and of these 3 million subscribers use the mobile payment function. Does this seem like a high number? Smartphone users usually tend to prefer new things compared to feature phones users but merely 30% of mobile payment embedded mobile phone subscribers use mobile payments. Given the low transaction volume of all e-money cards, mobile payment registered users don’t seem to use mobile payment actively at this moment. It could be because of the lack of recognition of mobile payment or simply the lack of allure and advantage of mobile payment. That is why Celent estimates that the active users of mobile payment are 10% or less of mobile payments holders. A number of overseas media believe that mobile payments are very popular in Japan. However, it is not true. Yes, the infrastructure of mobile payments has been established well but the active users are not so many yet. To increase the number of active users, mobile payments players in Japan should not only preload mobile payment functions in mobile phones but also develop a strategy for promoting mobile payment effectively.

A Recipe for Future Success?

As I mentioned in my previous blog, the South Korean smartphone market is growing steadily. In South Korea, an RFID-embedded smartphone launched in August 2010. It is expected to spur an increase in users of mobile contactless payments. In addition, the majority of smartphones sold from the fall of 2010 onward are projected to carry RF antennas. These factors will all support a relatively strong user base for mobile contactless payments moving into the future. However, the environment for the growth of mobile contactless payments market has not been readied yet. South Korea has problems to solve in order to support market growth. Celent suggests four essential points for the growth of mobile contactless payments.
  • More mobile phones equipped with RF antennas
  • More mobile contactless payment processing terminals
  • Unique mobile services
  • Synergies driven by interoperability
My new report, Mobile Contactless Payments in South Korea: A Recipe for Future Success?, provides further details about the South Korean mobile contactless payments and Celent’s strategic recommendations for the growth of this market.

Step Up, Smart Phone

Last week, I went to Seoul, South Korea to research the Korean mobile contactless payments market. The Korean smart phone market is filled with excitement. Even though iPhone 4 has not been launched yet in Korea (it will be launched at the end of July), GALAXY S by Samsung has attracted nationwide attention instead. The number of GALAXY S subscribers passed 200,000 within 10 days after launching. In mid-July, GALAXY S will be equipped with RFID capability, which will enable the popular phone for mobile contactless payments functionality (in Korea, another RFID standard, not NFC, is used for contactless payments). It is the first time for smart phones to be equipped with RFID functionality in Korea, The contactless payments players are very happy with this launch because it means the Korean mobile contactless payments market may be booming again. After the widespread adoption of smart phones in recent years, the mobile contactless payments market has been in a slump in Korea because RFID chips have not been embedded in smart phones, although traditional mobile phones are equipped with RFID. “The possibilities are infinite” said a contactless payments player. They believe that smart phones have more efficient ways than traditional mobile phones to drive penetrate mobile contactless payments among consumers because smart phones have wide-ranging functionalities which traditional mobile phones don’t have. For example, we can expect RFID embedded smart phones to be used as a tool for promotional activities for retailers. The conditions are right. The Korean mobile contactless payments market is now starting to look up again.