Japanese wallet phones

(c) 2014 Eurotechnology Japan KK www.eurotechnology.com Japanese wallet phones (version 16) May 18, 20141

JAPANESE WALLET PHONESby Gerhard Fasol PhD, Eurotechnology Japan KK

May 18, 2014, 16th edition free trial version with a few selected pages.

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EXECUTIVE SUMMARY: JAPANESE WALLET PHONES

• Wallet phones are mobile phones (or smartphones) which include a multi-application IC which is both linked to the applications of the phone and which can communicate securely to external readers/writers via a Near-Field Communication antenna system

• Wallet phones enable a great variety of functions: • Applications requiring high security: electronic money, tickets, mobile electronic credit card payments, ATM-cards, building

access cards, employee ID cards etc • Low security applications: club membership, customer fidelity point cards etc

• Wallet phones enable mobile operators to enter the credit card business via mobile phone based credit cards, and therefore enable mobile operators to open new business areas

• The world’s first wallet phone was the P506iC, which was commercially introduced by NTT-Docomo on July 10th, 2004 with a suite of applications linked to the wallet.

• In the 10 years since 2004, wallet phones have developed and expanded greatly. While traditional Japanese wallet phones are still widely in use in Japan, Apple iOS and Android based smartphones are rapidly growing in marketshare and are expanding the universe of wallet phone applications in Japan and globally.

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VERSION HISTORY - WALLET PHONES

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VERSION HISTORY - WALLET PHONES

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LICENSE

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AGENDA - WALLET PHONES

• Executive summary: wallet phones • The Concept: What are wallet phone and why • Hard ware, software platform and systems

• Hardware etc • Security and Privacy • Mifare, Oyster, FeliCa-Mifare interoperability

• The Eco-System, and applications • FeliCa Networks Inc - The Company • Applications • Mobile Credit: DoCoMo’s entry into credits and consumer loans • Mobile credit platform iD, and DCMX • QuicPay • Electronic Cash and electronic/mobile payments in Japan • Edy and BitWallet • Tokyo Mitsubishi UFJ mobile banking and Edy • Jibun Bank • ToruCa, Town Pocket, i-Touch and related services • Initial core applications and the wallet phone roll-out

• Competitive market place • KDDI • Vodafone wireless IC card phone • Mopass

• Summary

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THE CONCEPT -

WHAT ARE WALLET PHONES AND WHY

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WALLET PHONES

• Wallet Phones are mobile phones with built-in multi-application IC-chips, plus the near field communication (NFC) systems which enables the on-board chip to interact with a reader/writer terminal

• In addition, for a complete wallet phone eco-system, JAVA applications and network infrastructure and specially developed reader/writer units at point of use (e.g. railway stations, store cash registers, POS, etc), and back-office systems and servers for transaction processing are required.

• DoCoMo conducted public tests between December 2003 and June 2004 for 5000 users and introduced wallet phones commercially from July 2004.

• We estimate that in mid-2007 about 30 million wallet phones are in use in Japan, while we estimate that about 50 million wallet phones will be in used by 2010 and we expect growth to continue without drastic changes

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IMPLICATIONS FOR THE MOBILE CARRIER

• Wallet phones will form part of the essential daily life infrastructure - unlike multimedia and music maybe addictive but are non-essential

• Thus wallet functionality takes the carrier’s services from the periphery into the center of the customer’s lives

• Carriers will move to a different business model: from charging for minutes and kilobytes, to management fees for authentication platforms, transaction platforms, identity management fees etc.

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HARDWARE, SOFTWARE PLATFORM AND SYSTEMS

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WALLET PHONE SYSTEM OVERVIEW

• The figure on the left hand side shows an overview of the complete wallet phone system implemented by DoCoMo.

• DoCoMo’s wallet phone system is a platform for a wide range of applications ranging from

• high-security applications including electronic money, electronic banking, travel tickets, workplace access cards etc down to

• relatively low-security applications such as sports-club membership cards, or customer fidelity point cards.

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FELICA AND MIFARE

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Card FeliCa Mifare

Developer/ owner SONY

Developed by Mikron in Austria Acquired by PHILIPS

Major Deployment

SUICA & Icoca/Japan DoCoMo wallet phone Octopus/Hong Kong Edy/Japan

Oyster/London Credit cards

Cards sold Felica IC 170 million (incl 30 million mobile) 1.2 billion

Readers 7 million



SECURITY AND PRIVACY

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THE ECO-SYSTEM

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FELICA NETWORKS INC.

THE COMPANY

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APPLICATIONS

• This section gives a short overview of some applications of wallet phones. For a more complete description of mobile payments and m-commerce in Japan and for many more applications of wallet phones see:

• http://www.eurotechnology.com/store/mobilepay/ • http://www.eurotechnology.com/store/suica/ • http://www.eurotechnology.com/store/cmode/

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http://www.eurotechnology.com/store/mobilepay/

http://www.eurotechnology.com/store/cm/

http://www.eurotechnology.com/store/momj/


MOBILE CREDIT:DOCOMO’S ENTRY INTO THE CREDIT AND CONSUMER LOANS BUSINESS

• This section gives a short overview. Read in detail in our “Mobile payment and keitai credit report”:

• http://www.eurotechnology.com/store/mobilepay/

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DOCOMO’S STRATEGIC INVESTMENTS

• DoCoMo’s controlling investment in Mitsui Sumitomo Credit Card Corporation is part of several strategic investments during 2005

• The overall purpose of these investments is to develop income streams which are independent of data or voice traffic

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ID – DOCOMO’S MOBILE CREDIT PLATFORM



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POS TERMINAL FOR “ID” - USED ONCE/MONTH?

• On December 1, 2005 Mitsui-Sumitomo Cards launched the iD branded keitai credit service • Picture on the left hand side show reader/writer terminal for iD compatible cards • The staff of an excellent restaurant/bar in Tokyo with a similar iD read/write payment terminal recently told us that this iD terminal is

used about once per month, so clearly it will be a long process to bring iD to mainstream customer acceptance (asked why the restaurant installs and keeps a payment system which is only used once per month, we were told this was because the investment company owning the building is related to the NTT-DoCoMo group, and requires installation of DoCoMo’s payment system for all tenants including this restaurant. Clearly, commercial power helps…)

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PROMOTING DOCOMO’S MOBILE CREDIT PLATFORM ID

• This section gives a short overview. Read in detail in our “Mobile payment and keitai credit report”:http://www.eurotechnology.com/store/mobilepay/

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PAYING TAXI FARES WITH MOBILE CREDIT ID

• DoCoMo created arrangements with a number of taxi operators in the Tokyo region to accept iD mobile phone payments based on DoCoMo’s iD mobile credit payment

• Mobile credit payment is linked with DoCoMo’s ToruCa system: when paying the taxi fare, the mobile phone picks up an information message/advertisement from the Taxi company

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DCMX – DOCOMO’S MOBILE AND CARD CREDIT BRAND



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ELECTRONIC CASH ANDELECTRONIC/MOBILE PAYMENTS IN

JAPAN

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EDY ELECTRONIC CASH(PRE-INSTALLED IN ALL I-MODE-FELICA PHONES)

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BITWALLET KK (NOW RAKUTEN EDY KK)

• Business: • Planning and management of prepaid electronic money business (Edy) • Development of companies issuing prepaid electronic money, and of shops

accepting it • Management of the “Edy” brand

• Company Foundation: • January 18, 2001

• Paid in capital: • YEN 21,453.5 Million (US$ 214 Million)

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EDY IN FELICA WALLET PHONES

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I-MODE-FELICA: P506IC “WALLET PHONE” SCREEN IMAGES EDY ELECTRONIC CASH

• Menu showing remaining balance (here: YEN 100) for “Edy” electronic cash

• Screen shows the display from the Edy JAVA application

• The JAVA application reads the remaining balance from the FeliCa card built-into the mobile phone

• Note that the electronic cash is stored directly and securely in the FeliCa chip onboard the phone - access to a remote server is not necessary to display the balance or to make payments or charging/refilling

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EDY GIFT

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TOKYO-MITSUBISHI-UFC MOBILE BANKING

AND EDY

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JIBUN-BANKBY KDDI AND TOKYO-MITSUBISHI UFJ BANK

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JIBUN (=“SELF”) BANK

• Responding to DoCoMo’s move into credit card and payment services, KDDI responded by creating “Jibun Ginkou” (= Self-Bank) in cooperation with Tokyo-Mitsubishi UFJ.

• Jibun-Bank created a full banking interface for mobile phones and allows account management, including payments, transfers, bill payments etc from the mobile phone.

• As part of the Jibun-Ginkou Bank service, KDDI also offers Credit Cards. The former “KDDI-The-Card” has been merged into a new AU-Jibun-Bank Card during 2008.

• KDDI offers Jibun-Bank not only to KDDI/AU subscribers, but also to subscribers of competing mobile operators.

• For details on Jibun Bank see our report: • http://www.eurotechnology.com/store/kddi/

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http://www.eurotechnology.com/store/kddi/


DOCOMO’S TORUCA SERVICE

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“TOWNPOCKET”, “I-TOUCH” AND OTHER “TOUCH TO ACTIVATE” SERVICES

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TOWNPOCKET

• The “Town-pocket” service is typical for class of services, where the user touches a terminal with his mobile Felica wallet phone to trigger a determined action

• The action can be to register a bookmark in his/her phone, to receive an email with information etc.

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“I-MODE-FELICA PREVIEW SERVICE”(JANUARY - JUNE 2004)

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“I-MODE-FELICA PREVIEW SERVICE”(JANUARY - JUNE 2004)

• As usual in Japan, before introducing wallet phones to the general public, DoCoMo tested wallet phones with 5000 “monitors” during a 6 months long testing period from January to June 2004.

• The following section describes this testing phase of wallet phones. • Note that the transaction partners during the testing phase are not all exactly the same as

those during the introduction phase to consumers from July 2004. Although we are not aware of an announcement by DoCoMo, we assume that some transaction partners either dropped out during testing, or postponed participation, while other new partners joined during the testing phase.

• The following description of the testing phase gives a good indication of the likely development of wallet phones in the initial period of introduction.

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I-MODE-FELICA WALLET-PHONE SERVICES

AFTER INTRODUCTION ON JULY 10, 2004

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INITIAL ELEVEN (11) I-MODE-FELICA WALLET-PHONE SERVICES

FROM JULY 10, 2004

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TWENTY THREE (23) I-MODE-FELICA WALLET-PHONE SERVICES

AFTER AUGUST 2004 AND BEYOND

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“I-MODE-FELICA” SERVICES AFTER AUGUST 2004 (4)

• Matsumoto Kyoshi (Chemists, toiletry stores) from August 2004 • Edy ecash • Point card • Softbank mobile (mobile internet services, ASP) from August 2004 • Membership card (point card) • e-Tickets, e-Coupons • YaMaYa (Food and wine stores) from August 2004 • Edy payment • Membership card (point card) • UFJ Card (consumer finance, credit cards) • Credit payments • UC Card (consumer finance, credit cards) • Electronic payment • Company employee card

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BIC CAMERA CUSTOMER CARD

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BIC CAMERA MEMBERSHIP CARD

• BIC camera stores membership point card can be stored in FeliCa wallet phones.

• When the customer purchases at BIC-Camera, he/she places the FeliCa wallet phone on a FeliCa reader/writer at the cash register, and the points corresponding to the purchase are registered on his/her customer fidelity account

• The FeliCa wallet phone serves as the customer club card

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BIC CAMERA MEMBER REGISTRATION

• To register for membership for his/her FeliCa wallet phone the customer fills in a form, and a QR-code contains the memberships number in encoded form, as well as providing access to the URL to download the membership JAVA application, which has access to the FeliCa chip

• More about QR-codes: http://www.eurotechnology.com/store/qr/

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http://www.eurotechnology.com/store/qr/


YODOBASHI CAMERA CUSTOMER CARD

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“I-MODE-FELICA” EXAMPLE:

KARAOKE MEMBERSHIP CARD

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“I-MODE-FELICA” EXAMPLE: ELECTRONIC DOOR KEY

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COCA-COLA’S C-MODE (NOW COCA-COLA PARK)

• In the meantime, Coca-Cola has transformed C-mode into “Coca Cola Park” • More about mobile payments for vending machines:

• http://www.eurotechnology.com/store/cmode/ • http://www.eurotechnology.com/store/suica/

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http://www.eurotechnology.com/store/su/

http://www.eurotechnology.com/store/cmode/



FOR XEROX COPY MACHINES

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SEGA GAME PARLORS

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TICKET-PIA

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AM/PM CONVENIENCE STORES

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EXAMPLE: AM/PM CONVENIENCE STORES

• Electronic cash payments at point of sale (POS) terminals • offers and new content for “club-ap”

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ALL NIPPON AIRWAYS ANA

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PHONES AS TRAIN TICKETS

FROM 2005/2006 “MOBILE SUICA” CONVERTS I-MODE/FELICA PHONES INTO TRAIN TICKETS

READ MORE ABOUT SUICA:HTTP://WWW.EUROTECHNOLOGY.COM/STORE/SUICA/

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http://www.eurotechnology.com/store/suica/


SUICA FOR FIRST-CLASS E-TICKETS

• From 2005/2006 SUICA functions will be integrated into mobile FeliCa wallet phones. Train tickets, season tickets, 1st Class (Green) tickets, SUICA eCash will be integrated into mobile phones

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THE COMPETITIVE PICTURE:DOCOMO, KDDI/AU AND VODAFONE /

SOFTBANK… FELICA AS A COMPETITIVE TOOL

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EZ-FELICAKDDI’S WALLET PHONE

FOR MORE ABOUT KDDI:HTTP://WWW.EUROTECHNOLOGY.COM/STORE/KDDI/

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KDDI’S WALLET PHONE: EZFELICA

EZ FeliCa in the game parlor

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VODAFONE KK’S WALLET PHONE CONCEPT (VODAFONE SOLD JAPAN

OPERATIONS TO SOFTBANK AND TERMINATED BUSINESS IN JAPAN)

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VODAFONE WIRELESS IC-CARD PHONE

• In response to DoCoMo’s development of I-mode/FeliCa wallet phones Vodafone (Japan’s third largest mobile carrier, now SoftBank, see: http://www.eurotechnology.com/store/softbank/ ) initially announced the development of an alternative wireless card system.

• Vodafone (now: SoftBank) seemed initially not to join DoCoMo’s “mobile FeliCa” system, but to develop an independent approach.

• Vodafone (now: SoftBank) announced it’s own contactless IC-Card on May 6, 2004, about 6 months after DoCoMo started the field trials described elsewhere in the present report. Vodafone clearly still has to create the industry alliances, which DoCoMo already has achieved in Japan.

• While Vodafone (at that time under the name J-Phone) was the leader in Camera phones, Vodafone is now clearly the follower. However, that is not necessarily a bad thing, especially since Vodafone is much stronger outside Japan than DoCoMo. It is quite likely that Vodafone will introduce these smartcard systems in Europe and elsewhere about 3-4 years down the road as Vodafone has done for Camera Phones, Vodafone-Live! and other services and technologies.

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http://www.eurotechnology.com/store/softbank/


VODAFONE WIRELESS IC-CARD PHONE

• In 2004, Vodafone tested the J-SH53X mobile phone (by SHARP) with wireless smartcard functions with the following properties: • Card interface and antenna are built into the J-SH53X body • Smartcards, including flash memory are not built into the phone body but are pushed

into a separate card slot. Smartcards can therefore be exchanged. • IC cards can have contact and no-contact interfacing

• Two different card types have been tested/developed in cooperation with Hitachi: • For traffic applications and other business fields: JICSAP2.0, EEPROM: 32 KByte, Flash

memory: 64 MByte • For finance, public administration and other business fields: ISO14443 Type B,

EEPROM: 32 KByte, Flash memory: 64 MByte

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VODAFONE WIRELESS IC-CARD PHONE J-SH53X ANNOUNCED MARCH 6, 2004

• Vodafone’s J-SH53X phone with wireless smartcard.

• We expect that this system enables similar technical functions and applications to DoCoMo’s I-mode/FeliCa system.

• However, we have not yet seen the wide network of partners which DoCoMo has signed up in order to achieve market penetration.

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VODAFONE’S WALLET PHONE STRATEGY

• On March 6, 2004 Vodafone announced it’s own contactless smart-card based wallet phone system, and exhibited the J-SH53X prototype wallet phone. This system appeared to be independently developed from DoCoMo/SONY mobile FeliCa, most likely based on Europe’s PHILIPS Mifare system

• On February 24, 2005 Vodafone announced to follow KDDI/AU in licensing the mobile FeliCa system from FeliCa Networks.

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MOBILE FELICA ANDMOPASS

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SUMMARY

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SUMMARY: WALLET PHONES

• Wallet phones are mobile phones which include a multi-application IC which is both linked to the applications of the phone and which can communicate securely to external readers/writers via a Near-Field Communication antenna system

• Wallet phones enable a great variety of functions: • Applications requiring high security: electronic money, tickets, mobile electronic credit card payments, ATM-cards, building access

cards, employee ID cards etc • Low security applications: club membership, customer fidelity point cards etc

• Wallet phones enable mobile operators to enter the credit card business via mobile phone based credit cards, and therefore enable mobile operators to open new business areas

• Wallet phones can in principle store many if not all functions of wallets: cash, credit cards, ATM cards, train tickets, room keys, building access, membership cards etc. Today the memory or wallet phones is still limited, so that in reality not all these items can be stored at the same time in today’s wallet phones. Futher development of wallet phones is necessary until wallet phones can fulfill all the functions of our wallets

• The world’s first wallet phone was the P506iC, which was commercially introduced by NTT-Docomo on July 10th, 2004 with a suite of applications linked to the wallet.

• In the 10 years since 2004, wallet phones have developed and expanded greatly. While traditional Japanese wallet phones are still widely in use in Japan, Apple iOS and Android based smartphones are rapidly growing in marketshare and are expanding the universe of wallet phone applications in Japan and globally.

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MORE INFORMATION:

• Blogs: • http://fasol.com/blog/ • http://eurotechnology.com/blog/

• Reports: • http://www.eurotechnology.com/store/

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CONTACT AND FURTHER INFORMATION

• Eurotechnology Japan KK • http://www.eurotechnology.com/ !

• reports:http://www.eurotechnology.com/store/ • twitter : http://twitter.com/gfasol/ • website: http://www.eurotechnology.com/

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