/

Apple a decade behind Japan’s mobile payment curve

AFP-JIJI

Apple Inc.’s proud announcement that its new iPhone could be used to buy goods in a single swipe left customers nonplussed in Japan, where mobile payments have been normal fare for a decade.

A type of Near Field Communication chip, known in Japan as FeliCa, was introduced to the Japanese mobile market in June 2004 and has been implanted in almost all phones sold here since.

The iPhone has been one of the few chipless exceptions, something that will change when the latest models hit Japanese shelves on Friday.

Ten years ago, the charismatic Takeshi Natsuno, who was then multimedia services director of mobile phone operator NTT Docomo, extolled the benefits of swapping cash for cellphones.”When I leave my house in the morning all I take with me is my phone, which lets me do everything — pay, take public transport — simply by swiping a special reader in shops, stations or airports,” he said at the time.

FeliCa was conceived by Sony way back in 1989 and first used in the Hong Kong underground railway system in 1997, in a card known as Octopus, inspiring cities around the world to use similar technology in their own contactless transport cards.

Japan adopted an electronic payment system for trains in 2001, starting with the network of East Japan Railway (JR East), which serves the Tokyo region.

The success of the cards led to the integration of contactless chips with Japanese mobile phones and lifestyles with the creation of a group of apps known as the “mobile wallet” by NTT Docomo in 2004. Thousands of readers are can be seen in convenience stores, vending machines, office buildings and stations and airports across the nation.

Contactless payments are a normal part of everyday life for many Japanese, said Michael Au, president of the South Asia and Japan branch of digital security firm Gemalto.

“Japan has the most developed contactless infrastructure in the world and customers are already familiar with using their mobiles for contactless services,” he said.

Sony Corp., which said it has delivered more than 530 million FeliCa chips for cards and 245 million for mobile phones, is now responsible for making around 100 various services based on the technology compatible with each other.

NFC was approved as a standard in 2003, as the fruit of cooperation between Sony and Dutch company Philips Semiconductors, now known as NXP Semiconductors.

“NFC has not reached the level of popularity or integration into current systems that FeliCa has in Japan. FeliCa paints a picture of NFC’s goal and how to get there,” says a site providing information about NFC.

That the huge success at home hasn’t translated into sales abroad is a common theme in Japan, where companies tend to focus on the large home market and its particularly fussy consumers.

This has led to a phenomenon dubbed the Galapagos syndrome. Like the distinct evolution Charles Darwin cataloged on the remote Galapagos Islands, technology in Japan has a tendency to develop independently from the rest of the planet and is thus incompatible with foreign standards.

The most well-known example of this is the mobile phone, where Japan was initially far ahead and had full-color flip-top models in the late 1990s. These units were Internet-capable as far back as 1999. But the technology ossified as the market saturated, turning Japan into a relative latecomer to the smartphone market.

This “Galapagos-ization” has also been witnessed in the video game, car and audio markets, with products such as the MiniDisc, compact cars and manga-inspired games all failing to make the same headway overseas as in Japan.

Natsuno, now a professor at Keio University in Tokyo, says Japan should have looked into overseas expansion of its cutting-edge contactless payments system much sooner. The fact that “we didn’t extend this concept to the rest of the world” means that now Japan “can’t do anything” about Apple’s bragging over their innovative iPhone 6 with an NFC chip, he said.

  • Earl Kinmonth

    “Contactless payments are a normal part of everyday life for many
    Japanese, said Michael Au, president of the South Asia and Japan branch
    of digital security firm Gemalto.” Only if you count SUICA/PASMO and similar usages. I very rarely see anyone using these electronic payment schemes at convenience stores, supermarkets, or with the vending machines that have readers. I have polled students about their use of o-saifu-keitai. Roughly one in twenty say they make some casual use of this payment method. Compared to the use of debit cards in Britain, this system might as well not exist in Japan.

  • Steve Jackman

    As always, Japan Inc. fails to see the forest for the trees. The Apple Pay announcement by Apple is not important because of the technology behind it, since its been around for a long time and other players like Google already tried earlier to promote its use in the U.S.

    Rather, the Apple announcement is important because of its integration with the Apple ecosystem and because Apple already has 800 million credit cards on file for its iTunes customers. It’s this convenience and user experience, not the technology that counts.

    Unfortunately, Japan is so focused on “technology” that it misses this point everytime. Hence, its fall from grace in consumer electronics, telecommunications, financial services and other areas. This Jiji news article may make the Japanese feel good, but that’s about all.

    • Akio Morita

      Once again William Pesek your racist and anti japanese sentiment sicken
      me. Only a twisted nutjob like you would turn this article into an anti Japan bashing. Are you ashamed and embarrassed that Apple is 10 years behind Japan? For someone that claimed he’s living in Japan for 15 years or so you definitely are full of hate for Japanese people. So what’s stopping for leaving and NEVER COME BACK?

      That fact that Japan spend billions on this tech before the original iPod was even out show the innovation and insight Japanese have. Go to New York City and tell me you can pay for the subway ride with your celphone today? You can’t.

      If the technology isn’t important that how did Japan Inc fails to see the forest from the tree? In your racist and anti-Japanese sentiment you are also contradicting yourself at the same time. The user experiences is very simple for Japanese users in Japan in fact, it’s SWIPE AND GO, or CLICK AND GO. So what user experiences is Apple Pay offering? You obviously never used it so how would you even fking know?

      We Japanese definitely feels good about that Toyota being the world largest automakers, and Government Motors was given $65 billion to bait it out, and we’re definitely happy that the entire US banking/financial services went to the shxthole was given $700 billion to bail out half the the banks on Wall St.

      You feel better about yourself making lies and insulting Japanese men
      and Japan in general Pesekster? Tell me when you walk down the street
      of Tokyo do you insult Japanese men or shake theirs hands at the same
      time? I’m sure you and a lot of Americans feels better after reading your racist and sicken insults, is the your defensive tactic to defend Apple for stealing someone else ideas?

      Yes, Apple, Square and Google steal this tech from Japan.

      • Steve Jackman

        Calm down, Akio Morita.

    • midnightbrewer

      The system is not enhanced by Apple having any previous credit card data on file. It requires the user register their card locally on the device, never sharing it with Apple’s servers.

      • Steve Jackman

        You are correct and I should have been clearer earlier, in that Apple has customer information on all those iTunes customers, not that it will use existing credit card details for the new payment service.

    • Millan Choi

      Your statistic about 800 Million credit cards has been refuted below so I won’t get into it, however you do mention convenience and user experience which is far far from the truth.

      Firstly, since this tech is only usable by the newer iphone6 and iphone6+, we are talking 4-20 million users at best….Worldwide. Secondly, we are talking about purchases at retailers that are part of apple pay, which until further notice is restricted to the US only. Until International retailers join Apple pay, it is merely hearsay. So having retailers put in tech for such a small group of users, doesn’t really make sense.

      In HK, there are more Octopus cards then there are residents in HK. The Octopus cards do not require a smartphone for use. Octopus cards are used for practically all small payments such as transportation, vending machines, convenience stores, parking, as well as being an access card. There is no way that Apple pay could ever come close to this level of convenience or user experience.

  • neal o’brian

    if it can’t keep pictures safe, might not be the best to leaves credits/account numbers/etc… on it.

    • Steve Jackman

      According to Apple, its payment transactions will not go through the Cloud, so there is no risk of what happened to the celeb pictures.

    • midnightbrewer

      One problem is not the other, and the recent photo controversy was not actually related to iCloud at all (nor was it exclusive to Apple). Beware the pitfalls of popular wisdom.

      Apple has an excellent track record for keeping payment information safe. In addition, the new payment system doesn’t actually use the card number directly, but a unique device identification code stored on an encrypted chip within the phone. This is paired with a dynamic, per-transaction code upon payment (authorized by your fingertip). Your credit card number never leaves the device. No iCloud involvement.

  • uopjo6

    Thing is Japan is isolated with their own stuff so it is easy to expand in certain areas (mobile payment…..Sci-Fi Toilets..). You can’t use their system globally.
    With Apple Pay you can.

  • patrick

    Even BlackBerry had it as early as 2010 here in North America

  • Riley Lynch

    I can’t say I think that this Galapagos effect is quite so widespread. After all, two of the examples mentioned (video games and compact cars) were quite successful in the US, a very different market with different needs in the technology sector. Nintendo games especially have had worldwide success in the past, although their sales are dwindling now. Anime also deserves a mention; shows like Naruto, which contain many archetypal characters commonly found in Japanese stories, still resonate well with foreign audiences.
    That being said, the effect is definitely true in other areas, such as music. J-pop, the most profitable part of the domestic music business, is targeted at specific demographics, and makes lots of money off of them. However, this demographical targeting (like aiming at single men in their 20s and 30s) isn’t necessarily relevant to other cultures, and so yes, it won’t sell as well in foreign markets.
    Overall, if Japanese technology brands are trying to sell mainly to foreign markets, then they’re not doing such a great job. After all, who outside of Japan uses a Japanese smartphone? However, if they’re trying to sell mainly to the domestic market, then they’re doing a great job. I think this article is working off the assumption that Japan desperately wants to globalize its technology sector and is simply not capable of entertaining the mindset necessary in order to do so. To me, I think the evidence indicates that they’re not so interested in that, though of course I’m sure they’re considering joining the globalization trend. Whether or not their current stance is wise remains to be seen.

    • Joel

      I’m guessing the term “compact cars” in this article actually refers to kei cars (i.e., yellow plate cars), which are designed solely for the Japanese market and vehicle tax regime.