In a recent CGAP Focus Note, Ignacio Mas and I wrote about six cases of e-money schemes in developing countries. Going Cashless at the Point of Sale: Hits and Misses in Developed Countries intended to draw lessons from these experiences to inform the work being done with e-money in developing countries. The last post in this series looked at the mobile operator-centric payment scheme Simpay. Now we turn to the second such scheme, Osaifu-Keitai in Japan.

DCM is Japan’s leading mobile communications operator, with 53 million subscribers as of March 2008, representing over half of Japan’s cellular market. It launched a mobile wallet service, Osaifu-Keitai (meaning: wallet-mobile phone) in July 2004.

Osaifu-Keitai is based on a FeliCa card embedded in mobile phones (the same that was used by Octopus in Hong Kong). Osaifu-Keitai is a device-based mobile payments solution, supporting both proximity payments in shops that have a FeliCa chip reader and remote (online) payments.

Osaifu-Keitai is based on a wallet application on the FeliCa chip, which supports multiple payments instruments including credit cards, operator billing, prepaid e-money, transport ticketing and postpay services.

DCM’s core belief—one that it developed based on the success of the i-mode content platform in Japan— is that use of payment services will be pulled by the presentation of a range of services to the customer. Therefore, DCM has developed a very structured approach to enticing partners onto its content and payment platforms and to promote further service innovation. The service platform now supports a variety of uses beyond e-money, including airplane tickets, membership cards, and house entry keys. Users can download multiple applications over the air onto the FeliCa card to support each of these services. DCM also recognized the challenge of convincing retail chains to accept their mobile money scheme. They were deliberate in stressing to these agents the ways in which Osaifu-Keitai would increase both customer convenience and value for their businesses though (1) process speed, (2) versatility, and (3) security (Jenkins 2008).

As of January 2006, there were over 10 million subscribers of Osaifu-Keitai with compatible handsets. As of 2008, there are more than 29 million subscribers (NTT DoCoMo 2008). The mobile wallet application is accepted at more than 640,000 stores (Contactless News 2008).

Though Osaifu-Keitai is by no means a proven success, it does show significant promise. What sets it apart from all the other initiatives we have reviewed is the sheer level of dominance DCM exerts over the mobile market (with an impressive 80 million customers) and the ecosystem around it. The sheer muscle that DCM brings is unparalleled. This approach would not be replicable in Europe, where markets are more fragmented on both the telecom and banking sides.

Read more details about the Osaifu-Keitai experiment here.