In Japan, convenience stores - konbini - are experiencing startling popularity. They're popping up everywhere, from street corners to sandy beaches, and are offering goods from candies to underwear to beer. But more than simply spurring the regeneration of Japan's moribund bricks-and-mortar economy, the konbini are fast becoming focal points for the dramatic appearance of true business-to-consumer e-commerce. How? By making use of their POS-based network for collecting payments for e-commerce services.

One company eyeing the expanding network of convenience stores is Digital Check, a venture company founded earlier this year. Digital Check is tied up with Sakura Finance and Mitsui Finance for accessing the convenience stores' payment collection systems, and with Compaq for the hardware and software. The result is that DC has initiated a new POS-based prepaid system for payment collection, supporting online services such as shopping, Internet access, and international and long-distance telephone services. The POS-based prepaid system - called C-Check - is now available through over 2,000 Lawson, Circle K, Mini Stop, AM-PM, Sunkus, Coco Store, Save On, Poplar, and Three F convenience store outlets. This service started in September.

"We selected konbini stores as the vehicle for our business because of their existing POS network," said Takayuki Doki, CEO of Digital Check Inc. Doki, who has some 10 years of experience in SI for the distribution industry in Japan, added, "The konbini shops are already equipped with POS systems that allow centralized control of each franchise's inventory by the parent company. Also, most chains have recently set up payment collection services for common household bills, including those for public utilities, telephone, and courier delivery services. It is, therefore, easy for them to adopt a POS-based e-commerce prepaid solution, since the existing systems can be used as is. We got offers from the major convenience store operators as soon as we presented our C-Check service concept to them."

To use C-Check, drop by your local konbini store and pick up a C-Check prepaid card - available in ¥3,000 and ¥5,000 denominations. The card has an account ID number hidden behind a peel-off seal, and you simply bring the card to the checkout counter to "load" the account with money. The ID number is a unique number that you use for all transactions on the C-Check system. (The service's availability is limited to larger urban locations for the time being.) Then when you use, say, an online shopping service (offered via in-store terminals) located at a C-Check member store's location, you need only input your ID number to complete a transaction. Your identity and the balance remaining in your C-check account are verified, and your account will be debited for the amount of the purchase. If the price exceeds the balance of your C-Check account, you can use another C-Check to complete payment. Customers can check the balance of C-Check cards either through a C-Check site or on the Net, or at the C-Check customer service center (by phone or facsimile).

For the convenience chains, this system is very easy to use and entails only minor business risk, no extra cost, and no special training for store operators, since they continue to use their existing POS system. In addition, the C-Check system enables collection of even small payments - sums of less than ¥1,000 can be handled - which is not possible with existing credit card settlement systems. This feature is particularly attractive for smaller e-businesses eager to expand market share and customer numbers by offering services through the konbini. One chain, Lawson, plans to connect their in-store Loppi kiosk terminals to the Internet by year-end, and Seven Eleven has announced a tie-up with Softbank and Tohan to offer book sales. For the Japanese consumer, using konbini shops to obtain online services is natural - many have been paying their gas or telephone bill at the stores' checkouts for several years now.

Competing services, meanwhile, are struggling to survive. Prior to C-Check's advent, two prepay systems catering to online transactions were in the Japan market: BitCash and Web Money. BitCash, started in 1997, is offered by BitCash Inc., a JV comprising 14 companies, including Aplix (an Internet venture), CTC, KDD, NEC, Marubeni, and Sumitomo Trust Bank. Web money was started in 1998 by ASCII Something Good, which has since changed its name to "i4." Both of these, however, are struggling, having failed to attract sufficient member shops. To date, some 100 merchants have signed on with each. In comparison, the younger C-Check system has already grabbed more than 2,000 konbini shops, and the cost of the C-Check paper-based card is 1/10 that of the existing plastic ones. Digital Check has reason to be confident.

"We will also offer a dedicated C-Check service targeting certain companies' e-commerce needs, for example for Net-based music and game distributors. And we expect this business will also grow quickly," says Doki. His next target is NTT DoCoMo's i-mode mobile access service, to which the company is proposing a new version of C-Check, called i-Check. Doki is also contemplating an online shopping tie-up with Sofmap for this fall. To no one's surprise, C-Check has also received inquiries from foreign players, including from a large Korean financial group and several US VC firms.

Digital Check is planning an IPO in two years, together with new moves to enhance their business in the global arena. "We know that konbini popularity is a special case in Japan, and our model may not be effective in other countries. But our scheme of allowing small payment collection for e-commerce has lots of potential in the global Internet market." This view neatly defines "Think globally, act locally," one precept that applies to netprenures worldwide.

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