Looking Through Suica-Colored Glasses

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5 August 2009
Taking a short break from my research into mobile contactless payments, I recently made a private trip to Japan (I tend to go 4 - 5 times a year). However, with mobile contactless heavy on my mind, I couldn't resist buying myself a prepaid Suica contactless card for use on the JR (Japan Railway) and subway lines around Tokyo. I simply inserted JPY 2,000 into the ticketing machine, entered some info, and a Suica card with my name printed on it came out (contactless card instant issuance, very nice). I thus joined the ranks of the 26,000,000+ active Suica cardholders. Armed with my Suica card, I began to casually observe the behavior of my fellow travellers. Despite Japan's reputation as being the world's most advanced country in terms of mobile payments, I can honestly say that I did not see a single commuter using a mobile phone to make a contactless payment. Japanese consumers seem perfectly content keeping their contactless cards tucked inside their wallets or card holders, which they wave at the turnstile -- surprise #1. My new toy still in hand, I began to really pay attention to the non-transit merchants that accepted Suica as a form of payment -- newstands, convenience stores, taxis and vending machines. However, it wasn't until I returned to the States that I understood the magnitude of Suica's non-transit payments. As of this year, there are > 44,000 acceptance locations in the Eastern Honshu region of Japan alone. More importantly, the number of non-transit transactions is rapidly approaching 1,000,000 per day (see figure below) -- surprise #2. What shouldn't be surprising is that JR (the Suica Issuer) understands quite well that Suica's non-transit business represents a viable, non-core business line and has designated Suica as a "pillar" of its corporate business strategy (some interesting similarities to eBay/PayPal...). JR's near-term goal for Suica is 8,000,000 non-transit transactions per day. These transactions will be MasterCard's and Visa's to lose, meaning the JR/Suica has become a true disruptor (the same is true for Octopus Card in HK). As the U.S. has multiple population centers, I don't envision such disruption occurring here. However, those countries with a dominant population center (e.g., France/Paris, UK/London, Canada/Toronto) are most likely to be chinks in the payment brands' armor.


  • Red,

    Do do you think the fact that the U.S. does not have a single dominating metropolis would limit the attraction of a new, more convenient payment method? I have seen a number of people using touch (or, touch the wallet) payments at vending machines on platforms, and at CVS's at, and well separated from, stations.

    I think the cards are merely an interim solution until cellular phones with built-in payment chips are nearly ubiquitous. As you know, they already exist in newer models of phones. I think the convenience should prove very attractive in the U.S.

    By disruptor, do you mean "something that must be attended to", or, more dangerously for incumbents, "something that gives a new entrant a substantial advantage"?

    Best Regards,


  • Hey Jud,

    In the U.S., debit/credit cards are already pretty convenient -- most people have them, most merchants accept them, and the entire authorization process takes place in less than 10 seconds. As such, contactless technology (whether card- or mobile phone-based) add little marginal convenience. In Japan, it was a much bigger marginal difference (i.e., cash to contactless) that made a difference.

Insight details

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Geographic Focus
Asia-Pacific, EMEA, LATAM, North America