This Is The Year For... Mobile Payments
By Carlo Longino, Wed Feb 23 02:00:00 GMT 2005

A research firm says 2005 will be the year mobile payments catch on in a big way. Maybe, but only if providers are willing to learn from past contactless payment implementations.

Mobile Pipeline reports on a research study released this week that says contactless payment will "catch on big-time this year", now that some efforts have the support of credit card companies. While having that support is beneficial, it doesn't guarantee success. There's a lot more to the picture, and a lot more any system needs to have if it's going to succeed.

The first characteristic is ubiquity. A contactless payment system isn't particularly useful if it can't be used in very many places. While the continued existence of Speedpass, a payment system used by ExxonMobil in the US to let users pay for gas, would indicate it's working well for the company, it remains a niche service, not particularly commonplace or well-known. Opening up Speedpass to any other retailer that wanted to install the necessary equipment would enhance its usefulness instantly, and undoubtedly increase its appeal. While the goals of the system are likely just to decrease transaction time at the company's gas stations, the technology is proven, and could generate payment-process fees for the company -- if it opened the system to other retailers and could get it in a much larger number of stores.

Second, contactless payment technology can be used for much more than just payment, and these uses will enhace its takeup. There are an endless number of identification applications where the technology, integrated in a mobile handset, makes sense: public transit passes, access control and so on. All of these make a handset -- and the contactless technology services -- more compelling and more valuable to users, and ultimately more attractive. This too requires open systems that will let interested parties take advantage of installing the technology in their premises and making their applications work on it.

Some providers are catching on to these lessons, unsurprisingly in Japan, where NTT DoCoMo said today it would add the functionality of a Japanese train company's "Suica" contactless payment system into its FeliCa handsets, so users can use their handsets as train passes and tickets, as well as make purchases at vending machines and retailers. While DoCoMo already has 2 million of the FeliCa-enabled handsets in use, East Japan Railway has 11 million of its smart cards in circulation. The carrier realizes that adding additional functionality like this to its handsets will capture a broader swath of users, and if somebody gets a handset to use the train pass capability, it's a hook to get them using other applications too.

This follows DoCoMo rival KDDI's announcement last year that it would also add FeliCa to its handsets, and DoCoMo's earlier realization it needed to seed the market by subsidizing the installation of FeliCa equipment in small shops and businesses.

While DoCoMo does have an arrangement with Japan's leading credit-card company, JCB, to tie FeliCa accounts to a JCB account rather than a debit account, that's not the primary reason for its success. The company understands that the service has to be ubiquitous and useful, regardless of how people pay for it.