Enabling Technologies

How consumer adoption of contactless payments has gone through the roof in South Korea and Japan

Research from Informa reveals that more than 90% of the total global value of transactions from mobile NFC payments, i.e. US$ 2.4 billion in 2011, was generated in the Asia Pacific region, particularly in Japan and South Korea. Although Europe, Canada have also significantly scaled up in terms of NFC payments but Japan and South Korea are outstanding examples. This article reflects how Japan and Korea have become hotspots in the world when it comes to contactless payments.

JAPAN

Japanese people have readily welcomes the notion of ‘convenience’ that contactless payment brings. Japan witnessed the first rollout of contactless wallets, based on Sony’s FeliCa, back in 2004. Can you beat that? Japan has largest number of NFC enabled POS (>1 Million) in the world. There are more than 70 million NFC-enabled devices in Japan, according to Wireless Watch, compared with around 3 million in the U.S. In Japan, NFC itself finds wide use right from micropayments to branding of products.FeliCa is the most popular contactless payment system in Japan. Developed by Sony, it is a type of RFID system but quite similar to NFC in nature and compatible with NFC devices as well. Speaking of terminals, FeliCa based terminals have been placed at over 1 million while MasterCard has announced deployment of 400,000 PayPass based terminals over the years.

ComScore research indicates that in December 2010 alone, 9.8 million Japanese consumers used their mobile wallet to make a purchase; 7.6 million made a purchase in a retail/convenience store; 3.2 million purchased from a vending machine; 2.7 million paid for public transport; 2.6 million purchased in a grocery stores; and 1.5 million paid a restaurant bill all using their mobile phone. 47 million Japanese have adopted tap-and-go phones in three years which is one of the fastest roll outs in human history. Japan is king of m-commerce, where mobile Web shopping exceeded US$10 billion in 2009 as per ABI Research. In March 2010, the m-coupon service of McDonald’s Japan reached 4.5 million users, according to Infinita.

Suica:

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Suica is a popular electronic and mobile ticketing and e-cash system in Japan. As per estimates in a report by Eurotechnology Japan, over 30 million suica cards have been issued used for around $10 billion worth of annual transactions. What is amazing about Suica cards?

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Suica cards find wide use for transportation fare as well as for general purchases. These cards are supported across vending machines, kiosks and retail chain stores as well. The technology on these cards does not require direct contact with sensors thus providing ready-to-go solution.

SOUTH KOREA

In January 2011, research house Celent had deduced that South Korea’s mobile contactless payments market will grow at CAGR of around 50%. The country has indeed maintained the reputation thanks to the Grand Korea Alliance. Growth of the mobile contactless market in South Korea can also be attributed to the spread of mobile contactless payment processing terminals and synergies through interoperability. In May 2012, there were as many as 200,000 terminals in the country capable of accepting MasterCard PayPass and Visa payWave. In June 2013, Korea Times reported that SK Telekom's Smart Wallet reached 10 million users.

NFC holds a spotlight in the country’s contactless payment market. In a quarter of 2011, the three main MNOs took delivery of 5 million NFC-enabled SIMs. The Grand Korea Alliance runs an NFC shopping mall in one of the commercial districts of Seoul. It enables shoppers to make NFC-based payments at 200 merchants, order drinks, and download coupons and transit information from smart posters. NFC continues to make big leaps in the transport ticketing sector as well. For example, KT, one of the three main MNOs, NFC prepaid transit services were used by its subscribers 30 million times during 2011.

T-Money:

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At the heart of South Korea’s contactless payment market lays the t-money services. It was first implemented back in 2004 as a card to ease traffic flow at ticketing gates. It later transformed into a rechargeable smart card used in all public transit fares in major cities of the nation. The prepaid RF smartcard embedded with a CPU can also be used to make purchases.

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Thanks to the wide network of sensors, the card finds wide usage in subway, taxi, bus travel; gain mileage points and purchases at many amusement parks, vending machines, palaces and museums as well. T-Money 'cards' come in different shapes and sizes as well which has also been a key aspect behind its wide adoption by the public.It comes in forms like standard credit card, key chains, cell phone charms, watches, rings, stuffed animals, and embedded into cell phones as well.

Ray

Ray has keen interest in the area of devices, OS and wireless technologies. He is a Mobile Technology enthusiast and believes that Mobility is going to completely change the way we do Payments and Commerce. He wishes to share this belief with the world by providing such content through LetsTalkPayments. Ray has done his engineering as well as MBA.

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