Japan's DoCoMo gets ready to put your money where
your mouth is
NTT DoCoMo, Japan's largest cellphone system operator, best
known worldwide for pioneering the wireless Internet in 1999
with its hugely successful i-mode system, looks to have
another big winner on its hands. Having recast the cellular
handset as an electronic wallet—in effect a prepaid wireless
cash card—it's getting ready to make it a full-fledged
wireless credit card.
DoCoMo is working with major travel and banking
organizations to extend the reach of its e-wallet service.
Meanwhile, its two main Japanese rivals, KDDI Corp. and
Vodafone K.K., are introducing competing products. (All three
companies are based in Tokyo.)
The critical element in DoCoMo's Osaifu-Keitai, or mobile
wallet, is a wireless smart card chip, FeliCa (from the
English word "felicity"), which was developed by Sony Corp.
and Royal Philips Electronics for close proximity,
low-data-rate transactions. The wallet phones can be used to
make electronic purchases at stores or vending machines
equipped with FeliCa readers; can act as boarding passes on
certain domestic air flights; and can authorize entry through
corporate security doors—all with a wave of the handset [see
photo, "Wireless
Shopping"].
Already, a year after DoCoMo introduced its first e-wallet,
the company has shipped some 6 million of the handsets. "By
the end of March 2006 we forecast DoCoMo will have shipped
around 10 million mobile wallets," says Shohei Sakaguchi,
executive director of DoCoMo's multimedia service department.
"And by the end of 2006 we believe the figure will reach 15
million." In addition, he says, competing carriers could ship
5 million more handsets, for a total of some 20 million mobile
wallets by the end of next year.
Sony's FeliCa chip originated as the active element in its
contactless smart cards, introduced in 1995. They dominate the
market for such devices in Japan and are widely used in Asia
as commuter passes and for making e-purchases. As of June,
Sony had distributed 82 million such chips, including 53
million in Japan, 16 million in Hong Kong, 10 million in
Singapore, and 1.5 million in China.
By March, DoCoMo expects to ship around
10 million wallet phones. And by the end of 2006, it projects
a figure of 15 million
In January 2004, Sony and DoCoMo formed a joint venture to
adapt the chip for mobile phones. Besides supplying DoCoMo
with the chip, the venture is also shipping mobile FeliCa
integrated circuits to KDDI and Vodafone, which launched their
own wallet phones in September and October, respectively.
Users with FeliCa phones who have registered for the
e-wallet service can load money onto the phone's chip in two
ways. They can feed cash directly into special machines found
in convenience stores and other locations, or they can do it
by phone, keying in a personal identification number and
transferring cash from a credit-card account.
From a technical point of view, the FeliCa chip is part of
a transponder system: it receives its power from the waves
radiating from read/write devices it communicates with, so a
battery is not required. The chip, based on radio-frequency
identification (RFID) technology, operates at 13.56 megahertz
over a distance of 10 centimeters, communicating at 212
kilobits per second. The communications protocol, called Near
Field Communication, was developed by Sony and Philips and has
been standardized under ISO/IEC procedures.
A pioneering user of FeliCa technology is East Japan
Railway Co. (JR East), the country's largest rail company. Its
Suica smart card is used both for e-purchases and as a
commuter pass. Users simply flash the card as they go through
turnstiles, and instantly the reader displays the cost of the
journey and the amount of e-cash remaining on the card. JR
East plans to extend the commuter service in January to wallet
phones from DoCoMo and KDDI, and it is in discussions with
Vodafone [see photo, "Showing
Off"].
Mobile FeliCa application files and their data are managed
separately in the wallet phone, and they each take up from 0.5
to 1 kilobyte. The number of applications is limited only by
the amount of memory on the chip, which is currently 5 KB in
DoCoMo's phones.
Mutual authentication between the chip and a reader/writer
is based on a key encryption system made up of randomly
generated numbers. Information such as transaction histories
and account balances can be presented on the phone's display.
And should the phone be lost or stolen, a subscriber can block
transactions by calling the handset with a preregistered
number or calling customer support to have the phone locked.
The user can opt for a personal identification number to be
entered before transactions are made, an important feature
given that up to 50 000 yen (US $450) in e-cash can be stored.
Despite DoCoMo's impressive shipment figures, the actual
number of people using the wallet part of the phone might not
be so high. Some reports estimate that the number is as low as
550 000; DoCoMo's own figures are more optimistic.
"Some 20 to 30 percent of [the] total [number of owners]
are registered to use their phones as wallets," says
Sakaguchi, whose boss, Takeshi Natsuno, managing director of
DoCoMo's multimedia services, played a major role in creating
both i-mode and the i-mode FeliCa service.
To give subscribers more reasons to use their wallet
phones, DoCoMo has asked a Sumitomo Mitsui banking group to
help it develop its own credit-payment services. By the
spring, DoCoMo plans to launch a plastic card in partnership
with an international credit card company, and then in the
first half of fiscal 2006 it anticipates including the service
in its wallet phones.
DoCoMo hopes to help popularize the use of credit cards in
a country that still relies mostly on hard cash for conducting
everyday business. "Credit cards are usually used [in Japan]
only to make large purchases," Sakaguchi says. "But with our
service, users will be able to make purchases as small as 100
yen."
In July, DoCoMo teamed up with NTT Data and the rail
company JR East to set up a joint venture aimed at covering
the cost of installing equipment for companies and stores
wanting to implement the Suica e-cash service. They expect
their investment costs to be recouped by charging a commission
on transactions.
As for introducing the technology overseas, DoCoMo is
keeping silent on the subject. Since 2002, however, it has
been working with a dozen mobile operators in Europe, Taiwan,
and Israel to create local versions of i-mode. Vodafone,
though it refrains from commenting on plans for its
wallet-phone business, has subsidiaries and alliances in 28
countries across five continents, giving it ample opportunity
to introduce an e-wallet service when the time is right.