According to the Frost & Sullivan reort, the Japanese smart card market has achieved a highly developed stage, recording a growth rate of 30.5% in 2006, largely contributed by the implementation of various contactless programs in transit and payment applications. There are several rail companies that have issued contactless cards and the Japanese Government is also encouraging the use of contactless smart cards to pay road tolls through their Electronic Toll Collection (ETC) system. More than 50% of vehicles in the country have already been fitted with an ETC smart card as of the beginning of 2006. Companies are now trying to make payment cards and transit cards interoperable throughout the country as well as push the use of “wallet phones.”
Mobile Contactless Payment Holds Huge Potential for Japanese Smart Card Market
Singapore, Singapore, 08/09/2007–The Japanese smart card market has achieved a highly developed stage, recording a growth rate of 30.5 per cent in 2006, largely contributed by the implementation of various contactless programs in transit and payment applications.
Constant efforts being made to introduce higher capacity cards and faster processing speeds indicate the vibrancy of this market in a country that has always been known for its rapid adoption of cutting-edge technology.
“Contactless smart cards have been highly successful in Japan’s transportation sector, notably in its railway system that forms the backbone of this sector,” says Frost & Sullivan Research Analyst Navin Rajendra. “With a high volume of traffic – more than 2 million commuters – passing through Japan’s major railway stations everyday, contactless smart cards have proved to be extremely effective in improving processing speeds.”
The rail companies that have issued contactless cards are continually refining and adding new applications on to these cards. Some rail companies offer concessions to commuters that pay with a smart card rather than with cash, while some others allow loyalty points to be added onto the card every time it is used, which can be redeemed later for a ticket fare.
The Japanese Government is also encouraging the use of contactless smart cards to ease worsening congestion. The Electronic Toll Collection (ETC) system is one such initiative that has been well received, and more than 50 per cent of vehicles in the country have already been fitted with an ETC smart card as of the beginning of 2006. The transport ministry has announced its intention to increase this percent share as they feel it is an important tool for convenience of pay, especially with traffic congestion increasing by the year.
“With contactless smart cards widespread in Japan, the next stage is the integration of a smart card with a phone for payment, fare collection, and access control applications,” notes Rajendra. “The future of smart cards in Japan lies in integrating various key applications on to a single form factor, namely the mobile phone.”
Implementing smart card functions on an easy-to-use and virtually ubiquitous device such as the mobile phone will allow users to perform a variety of tasks such as making reservations or cancellations, viewing the news, and browsing the Internet. This will be possible due to the widespread adoption of 3G services in Japan, which account for more than 70.0 percent of the mobile subscription base.
Transit applications are already being integrated on wallet phones, called Osaifu Keitai in Japan. The phone basically functions as the commuter’s ticket but also allows him/her to make grocery or small-value purchases at designated stores. Plans are underway to make the wallet phone act as an ID card for private companies. With more than 30 million such phones already in circulation, further applications are expected to be added in the near future.
The practice of making small-value payments through such phones is gradually gaining popularity in Japan, which has traditionally been a cash- and not credit-oriented society. However, the Japanese are becoming more comfortable using small-value payment cards because of the convenience offered by the contactless interface, and this is reflected in the number of transactions – more than 1.8 million a month – registered on cards such as the Edy card.
Companies are now trying to make payment cards and transit cards interoperable throughout the country. Currently, many transit and payment cards in the country are not interoperable, restricting the use of a card to one particular region. This is a key issue that needs to be resolved to convince the user to do away with cash payments.
“In such a highly developed market, it is important for companies to make their respective cards interoperable throughout the country to generate new revenues from different regions and increase their market share,” explains Rajendra. “There are already plans of interoperability of transit cards between certain regions.”
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Japan Smart Card Market, part of the Smart Cards Growth Partnership Service, and provides an in-depth analysis of smart card trends and technology in key applications in Japan. It also provides an analysis of major drivers and restraints impacting the Japanese smart card market. Interviews with the press are available.
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