NTT DoCoMo to offer credit-card payments by handset

DoCoMo embeds contactless smart card technology in its latest cellphones

NTT DoCoMo will launch a service in December that allows its customers to make credit card purchases using the contactless smart card technology embedded in its latest cellphone handsets, it said Tuesday.

The service will be branded "ID" and will launch Dec. 1 on cards issued by Sumitomo Mitsui Card Co., a major Japanese credit card issuer, said Manabu Moriya, director of the credit brand business at NTT DoCoMo's multimedia services department, at a Tokyo news conference. The system will be open to other card issuers and NTT DoCoMo hopes to get all major issuers on board as soon as possible, he said.

ID will become a credit card brand for contactless cards in the same way that Visa and MasterCard are for magnetic stripe cards, according to Moriya. NTT DoCoMo will receive a commission for payments made through the ID infrastructure. The amount will vary depending on terms agreed with card issuers and retailers, but for conventional cards it is about 0.2 percent for the card brand on an average contract, said NTT DoCoMo.

The system will work with handsets based on Sony's Felica contactless smart card technology, which is fast becoming common in Japan. Felica works over a distance of a few centimeters and means handsets have only to be brought near a reader in order to communicate with it.

NTT DoCoMo launched its first cell phone handset with support for the Felica system in July 2004, and there are currently 7 million users with one of 12 handset models on sale. NTT DoCoMo expects this to reach 10 million by the end of March 2006, said Moriya.

At present those phones can be used with applications such as the Edy e-money service, building access, airline e-ticketing and store loyalty programs. These applications will soon be joined by East Japan Railway Co.'s Suica contactless travel ticket system, which is based on the same Felica technology but available currently only with smart cards issued by the railway operator.

The addition of Suica will make it possible to travel to work, buy a coffee while walking to the office and gain access to the building all by swiping a cell phone near to the appropriate readers. The launch of ID will add the ability to make higher-value purchases.

Retailers must install suitable card readers in their stores in order to start accepting payments with the ID system. Sumitomo Mitsui Card hopes to have compatible readers in 100,000 shops across Japan within a year from the launch of the service, it said.

Despite its name, no ID number will need to be entered for payments less than ¥10,000 ($85), only for those over that amount.

Getting people to use the service will require more than just getting compatible phones into their hands. Credit card purchases by Japanese consumers account for about 9 percent of consumer spending, according to figures presented by NTT DoCoMo. That compares with about 14 percent in Taiwan, 21 percent in Hong Kong, 24 percent in the U.S. and 27 percent in Australia.

People often use cash to make purchases in Japan, said Moriya.

NTT DoCoMo will soon delve further into the credit payment market. The company is planning to launch its own credit card some time between now and March next year.

Copyright © 2005 IDG Communications, Inc.