Nikkei: 40 million wallet phones in Japan by spring 2008 (and what it means)

According to an article published in the Nikkei yesterday, the number of Japanese mobile users with wallet phones (Osaifu Keitai) is expected to grow by 60% and reach 40 million within the next 12 months. The enabled base almost tripled between September 2005 and October 2006 (up from 13.2% to 37.4%, Keitai White Paper 2007 by impress R&D) and, according to the Nikkei, currently stands at about 25 million. FeliCa chips, which are the underlying technology for contactless payment on mobiles, are increasingly becoming a standard feature on newly released handsets: Of the 10 handsets announced for spring by au KDDI, 8 are wallet phones, and DoCoMo announced a decent 6 out of 10 as well. This means it’s fast becoming difficult to buy a handset in Japan that doesn’t have FeliCa (unless you are on SoftBank Mobile, at least). The technology and its applications have been widely promoted, and awareness among Japanese consumers for wallet phone functionality is staggeringly high, with 98.5% of all Japanese mobile phones users (and that equals just about anyone who is not living in a cave and/or not able to operate a mobile phone yet) in the know about Osaifu Keitai. But the much more interesting question than sheer penetration is: how many people that could actually do use the feature, how much do they spend with it, and how will these numbers develop? According to the impress R&D report from October 2006, usage among Japanese consumers with enabled handsets is about 30%. The average number of transactions per month made with wallet phones is just below 4, so we should currently be in the region of somewhere around 30 million monthly transactions. At a conservative estimate based on impress R&D figures, average value per transaction is about 750 JPY today, equaling JPY 21 billion (about USD 180 million) worth of purchases being made with wallet phones every month. So…what will things look like 12 months from now? Under a very conservative scenario, let’s assume average value per transaction will not change, and the percentage of people with enabled handsets that actually use the feature will stay stable as well. We will also very cautiously assume average usage frequency among active users will only grow by 10% - but with people getting more used to their handsets being a magical device capable of transmitting digital cash, and even more places becoming enabled for IC payments (most noteable the whole subway and bus system of Tokyo, which will happen March 18) things could look very different a year down the road. So we are very conservatively looking at about 12 million active users making almost JPY 39 billion worth of purchases with their wallet phones a month, which equals a yearly market value of JPY 466 bio. (USD 4 bio.), by next spring. Granted, that’s not even 1% of the total volume of the “quick daily purchases” market in Japan (USD 500 bio.), but it’s not exactly pocket change either, especially when compared to some other areas of the industry: The domestic market for mobile content was worth JPY 315 billion in 2005, and mobile commerce was JPY 407 billion. It will be years before wallet phone use becomes mainstream even in Japan, but operators today are wisely investing heavily in an infrastructure that will pay off big time for them once voice and data ARPU don’t do the job anymore.

Posted by:Billich | Entry Date: 2007年3月 6日 15:46