DoCoMo Announces Fund to Support Spread of FeliCa
By Eric Lin, Fri Jul 30 22:45:00 GMT 2004

NTT DoCoMo has started a fund of 10 billion yen available to small business and shops that want to add FeliCa payments systems.

NTT DoCoMo's i-mode division has launched a 10 billion yen fund to cover the expenses for small businesses that want to install FeliCa reader/writer hardware. DoCoMo want to help out small businesses that may want to support FeliCa and by extension Edy and other IC cards, but can't justify the investment in the equipment. GEO - a chain of music - video - video game retailers also announced that DoCoMo is helping it to install FeliCa readers in 600 shops around Japan as part of the same initiative.

There is nothing altruistic about this fund, of course. DoCoMo expects to make this money back and then some through at least two channels. In exchange for the FeliCa-branded hardware, DoCoMo will retain a small commission from each transaction, similar to banks that lease credit card machines to businesses. Although the shops will receive the equipment for free, they will still pay DoCoMo in the end. More importantly, by helping to make FeliCa compatible payment systems available in more places, DoCoMo hopes to increase demand for its FeliCa enabled handset. Once the number of popular businesses that offer FeliCa has reached a critical mass, it will become standard payment option. Every retailer will have to offer it and most every subscriber will want a handset with it.

Sony and DoCoMo have taken care to assure that their IC cards and the reader/writer hardware are compatible with Edy, the other IC payment system in use in Japan. DoCoMo has also partnered with JCB, Japan's primary source for credit cards, to connect FeliCa chips to a JCB account instead of a debit account as they currently are. DoCoMo wants to make sure its IC network(or at least networks compatible with FeliCa) becomes the de facto standard as soon as possible.

Both KDDI and Vodafone have announced they will offer similar technology in the future -- main competitor KDDI plans to launch next year. If FeliCa has not reached critical mass by then, KDDI could choose to use an incompatible system, starting yet another standards war between the carriers and preventing DoCoMo from collecting commissions on many IC based transactions. If DoCoMo's efforts to get FeliCa into a critical number of retailers is successful, other carriers and other credit agencies will most likely choose to offer compatible technology. This is best scenario for DoCoMo's subscribers as well as for DoCoMo.