WW-114 -- Mobile Payment Killer Apps from DoCoMo and KDDI

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J@pan Inc presents the Wireless Watch Newsletter:

W I R E L E S S W A T C H

Commentary on Japan's Wireless World
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Wireless Watch Newsletter
Issue No. 114
Wednesday, December 3, 2003
TOKYO

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CONTENTS

@@ Viewpoint: Mobile Payment Killer Apps from DoCoMo and KDDI

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@@ Viewpoint: Mobile Payment Killer Apps from DoCoMo and KDDI

Mobile payments are believed to be the next killer application for
the mobile Internet. KDDI and DoCoMo will roll out their new services
next year. Both companies are currently evaluating customer responses
and their newest technologies to see how best to convey and receive
cash.

In cooperation with large Japanese credit card companies -- JCB-VISA,
Mitsui-Sumitomo Card, UC Card and Toyota Finance -- KDDI has tested
its technology over a period of five months. Approximately 2,300 users
received a Hitachi-made handset with a UIM-card (a next generation
SIM-card) containing each individual's credit card information.

Two different methods were used for shopping. Through KDDI’s mobile
portal EZweb, users could enter virtual shops to select and purchase
goods. It was also possible for users to pay at the cashier's counter
in conventional bricks and mortar shops. About 400 real shops and 23
virtuals participated.

For online shopping, the PKI (Public Key Infrastructure) method was
applied to guarantee confidential transactions, authenticate the user
and the shop, verify data integrity and authorize the transaction
via digital signature.

Here's how it works:

After selecting the product(s), the user selects his credit card
company and sends the information to the shop. The user then accepts
the transaction by entering a PIN code and a digital signature.
Finally, the signed transaction is sent to the credit card
company for payment authorization.

The other method employed IR-communication to exchange credit card and
user information between the phone and the cashier in a real shop.
The user inputs a PIN code for accepting the transaction and the credit
card details are sent to the cashier, who then contacts the credit card
company for authorization.

During the 5-month trial, 2,300 participants made 1,900 mobile payments
totalling 9 million yen.

Not terribly impressive figures.

Those who made mobile payments in real shops did so more frequently and
paid larger sums. CDs, DVDs, magazines and books were the most popular
online shopping items, while most real shop payments were made in
restaurants, food and fashion stores.

DoCoMo has set up a joint venture with Sony to promote a contact-less
IC card based on the Suica debit card that was introduced by Japan Rail-
ways (JR) East. The IC card will be integrated into your mobile phone and
will function as a debit card that can be charged on the mobile network.
Payments can be made even when your phone is switched off.

The competing IR method requires that the phone be switched on with
an application running to process payments.

A trial run with 6,000 customers will start later this month to prove
if this concept is indeed as easy to use as DoCoMo claims -- and as
secure.

-- Arjen van Blokland

**FOR MORE:
"Phones as Tickets and Money" from J@pan Inc magazine,
August 2002:
http://www.japaninc.com/article.php?articleID=874

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STAFF
Written by Arjen van Blokland; Edited by Roland Kelts
(editors@japaninc.com)

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