Oyster Bay, NY–Japan and South Korea lead the world in adopting contactless payment solutions. Both countries have implemented nationwide services on a commercial scale.

Mobile operators and issuers address a varied range of market opportunities in the region. According to Senior ABI Research analyst Andy Bae, “Small payment transactions are a major goal for Japanese and South Korean credit card companies. To spot new opportunities and increase revenue, mobile operators and card issuers must continually assess their positions in the value chain.”

In Japan, FeliCa has created innovative businesses such as Suica (East Japan Railways’ transit card) and Edy (BitWallet’s e-money service), through which credit card and financial services, transportation and mobile service companies have aggressively adopted FeliCa-based smartcard payment solutions.

Furthermore, FeliCa has been installed in mobile handsets, so called ‘Osaifu-Keitai’ and ‘Mobile FeliCa’, allowing them to be used in a wide variety of contexts: as credit card, pre-paid e-money, transit card, and as identification for entrance management.

For users, the major incentive to adopt a contactless payment service is easy, convenient transactions. Merchants can expect to enhance the customer relationship by offering “point” and “coupon” benefits, and by delivering product item information over the air.

The maturity of contactless payment solutions in Japan is closely related to the activities of East Japan Railways. The company has a nationwide infrastructure, and there are stations within which users can access entire facilities simply by waving the card. Using East Japan Railways’ resources, Suica has enlarged the range of services beyond simple transit, to involve the merchant communities in the station and its vicinity.

In South Korea, mobile operators SK Telecom and KTF will introduce USIM (Universal Subscriber Identification Module) to offer an integrated mobile card solution that includes banking, transit, stock transaction, and contactless payment via 13.56 MHz. Andy Bae notes, “With a high adoption rate in the mobile handset, South Korean users will have an integrated smartcard solution in their mobile devices.”

In addition, contactless payment solutions from Visa Wave and MasterCard PayPass have operated successfully in South Korean retail environments since 1Q 2006.

Contactless Payment Markets in Japan and South Korea examines business models, tracks merchant uptakes, and gauges card issuers’ and consumers’ expectations in both markets. The report includes forecasts of shipments and revenues for chip, reader, and contactless payment solution-enabled devices to 2012. It forms part of ABI Research’s subscription Contactless Commerce Research Service, which includes research reports, regular market updates, forecast and industry databases, ABI Insights, and analyst inquiry time.

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