Square Mobile Payment will face the difficult situation

***Updated on June 25. Information of situation in West Japan added

There are a lot of companies that are successful to open up its first overseas operation in Tokyo, such as McDonald, Starbucks, Yahoo!, you name it, despite of its odds predicted before its opening.

But this time may be different. Square's effort to go into the payment market in Japan will face difficult situation. Because so many consumers in Japan are now using NFC payment card, typically issued by railway company.

1) Suica issued by JR East

 One of the most prevailed payment card is 'SuiCa', issued by JR East. The number of the issued cards has reached to 42 millions, and you can use this Suica at more than 200,000 retail shops. (as of Jan. 2013) So, Square may beat credit card. But credit card is not so much used in Japan in the first place.





Suica once tried to become Mobile Suica about 7 years ago. But it became obvious that people love credit card sized NCF payment card, which you can put in your wallet.


2) ICOCA issued by JR West

JR West also issue the NFC cards which is called ICOCA, similar to Suica for JR East. ( ICOCA sounds 'Let's go!' in Japanese.) They have issued 7.44 million cards as of Dec 2012.
(I found this is way smaller than Suica.)



JR group used to be government owned railway company.

3) PASMO issued by private railway companies

Private railway companies also issued NCF cards, called PASMO, which also has been isseud 20 million cards as of May 2011.

Who were the winner of NFC?

iPhone 5 is allegedly going to equip NFC controllers in its hardware, and many people in the mobile phone industry are expecting that the era of wallet-phone will be coming just around the corner.


However it is well-known fact, but wallet-mobile phone is nothing new in the mobile scene in Japan.

Sony developed NFC chip in 1988, and named it Felica. Sony tried to dominate the digital money market by issuing its own digital money card called Edy.  Though you may be still able to see the logo of Edy at a cashier of major convenience store, Edy business has not expanded as expected.

At the same time back then, various mobile phones which equipped Felica IC chip were launched, but it could not dominate the market neither.




The most prevailed Felica card is not as a mobile phone, but prevailed as a card which is similar size and shape of credit card when railway companies issued the card.

Since then, this type of card expanded exponentially.

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So, the real winner of the past business of NFC was a railway company, not mobile phone companies, nor the device companies.

Sony was also a winner of this Felica business because it earned huge profit from the patent revenue. But the NFC standard that is to be equipped in the future mobile phones is new standard and Sony can no longer expect the reveue from there.


What we can see from the scene in Japan is that though new NFC standard is welcomed mostly by mobile phone companies, still other social infrastructure companies, such as railway, airlines, or taxi companies may find the business chance in  NFC and dominate the market.