Big retailer backs NTT DoCoMo's phone payments

One of Japan's biggest retail groups is throwing its weight behind NTT DoCoMo's plans to enable touch-and-go credit card payments through cell phone handsets.

Aeon Co., which operates shopping malls, supermarkets, and general merchandise retailers, will begin installing terminals compatible with NTT DoCoMo's ID credit card payment platform from July this year, the companies announced Monday.

NTT DoCoMo is promoting ID as a brand for contactless credit cards in a similar way that Visa and MasterCard are brands for traditional credit cards. Sumitomo Mitsui Card Co., a major credit card issuer in Japan, is already working with NTT DoCoMo on ID-branded cards. Once the infrastructure is in place, its customers will be able to make credit card payments by bringing a compatible cell phone handset close to a terminal installed in Aeon Group shops.

Earlier this month NTT DoCoMo said it will buy an 18 percent stake in UC Card Co., another major Japanese credit card issuer, and work with UC Card to expand the issuance and acceptance of ID cards. Monday's announcement could also result in more ID-compatible cards in the hands of consumers, as it extends to Aeon's credit finance division.

Among retailers, convenience store chain operator Family Mart Co. plans to add ID payment to its stores within the next year, and Sumitomo Mitsui Card, in its second role as a card acquirer, will add ID compatibility to the credit card terminals it has in retailers in Japan.

Am/pm Japan Co. also said Monday that it will begin accepting ID credit payments in all 1,350 of its convenience stores across Japan by the end of this year. It began accepting payments using the system at one store in Tokyo in December 2005.

ID works with handsets based on Sony's Felica contactless smart card technology. NTT DoCoMo has sold just over 10 million of the phones in Japan to date, and Felica handsets are also available through rival operators Vodafone and KDDI's Au.

The phones can already be used for making payments through two electronic money systems gaining popularity in Japan. One of them, called Edy, is accepted in many convenience stores and retailers and is operated by a consortium including Sony and NTT DoCoMo. The other, called the Suica, can be used to make journeys on East Japan Railway Co. (JR East) and in shops in and around railway stations. Both systems require users to charge their cards with cash in advance.

Based on the success of those two systems NTT DoCoMo turned its attention to enabling credit card payments. Using the phone-based ID system rather than a magnetic card might prove easier for smaller purchases: ID won't require any identification number to be entered on purchases up to ¥10,000 ($85).

The bigger challenge might be persuading Japan's traditionally cash-friendly society to start using credit cards for small purchases.

NOTE:
Adds paragraph six with later announcement from AM-PM

REFERENCES:
NTT DoCoMo to offer credit-card payments by handset, Nov. 8, 2005