Market Insight

Apple and Google localise mobile payment services for launch in Japan

December 19, 2016

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Google has followed Apple by launching its Android Pay mobile payments service in Japan after Apple Pay’s debut in October 2016. To launch in Japan, Apple had to make sure its devices are compatible with FeliCa – the local contactless technology developed by Sony. Apple has designed its iPhone 7, iPhone 7 Plus and Apple Watch Series 2 sold in Japan to support FeliCa Type-F NFC contactless technology. This will allow Apple Pay users to pay for in-store shopping and public transportation with Suica - the prepaid card.

Apple has also partnered with 176 major global and domestic card issuers in Japan, including AEON, Credit Saison, JCB, Mitsubishi UFJ Nicos, Orient Corporation, Sumitomo Mitsui Card, Toyota Finance, UC Cards, View Card, KDDI, NTT Docomo, Softbank, American Express, Mastercard, JCB, iD and QUICPay.

Android Pay launched in Japan in December 2016. Google has partnered with local e-commerce leader Rakuten, whose Edy payments system is supported in over 400,000 stores in Japan. Android Pay is compatible with Android 4.4 and above. Google plans to extend support by working closely with FeliCa to add more widespread support from financial services and card issuer partners in 2017.

Our analysis:

Japan is already a mature mobile payments market

Mobile payments services have been widely accepted in Japan since the late 1990s, when major telecoms operators such as NTT Docomo and SoftBank launched mobile payments services based on FeliCa technology. In 2004, NTT Docomo and au in Japan also launched Mobile Suica, a widely used prepaid card for commuting and shopping.

In addition to its high rates of smartphone penetration and established mobile payments infrastructure, Japan is one of the top countries in terms of app store revenues – Japan is the number one country for mobile content spend per capita and is a leader in mobile commerce. Both Apple and Google will also hope to drive adoption of in-app and supported mobile web payments as well as in store.

Unlike in other markets, Apple and Google won’t need to sell users on the benefits of mobile payments in general – but they will need to work to drive adoption of their own services through partnerships, targeted promotions and incentives.

Localised strategies highlight the importance of understanding the local market

Although Japan has a relatively long history of mobile payments development, its FeliCa technology is different from the NFC standard for contactless payments used in most other countries. This increases the entry barriers for other international mobile payments services rolling out in Japan. At launch, Apple Pay has focussed on mobile payments for public transit. As such, Apple Pay users are able to register Suica – the widely used prepaid card for transportation – with the service. Also aimed at commuters, Apple has improved its Maps in iOS 10 to assist users with ride details, including Suica pricing and alerts if the balance is insufficient for the route. Apple is deepening the integration of its payments service within its own mobile apps, services, and devices ecosystem.

Japan’s history of mobile payments development also means that there will be more competition for Apple Pay and Android Pay. One of which, Mobile Suica, was launched by NTT DoCoMo in 2006 and it is compatible with both Android and iOS. Apple Pay and Android Pay may face resistance in converting customers from the local mobile payments services. This resistance could be reduced by expanding partnerships with more local retailers and financial institutions.

Apple Pay was originally developed for iPhone 6 and above. However, in Japan the payments service is not available in models before iPhone 7 (and iPhone 7 Plus), due to the extra requirement of integrating with FeliCa. Therefore, Apple Pay has a smaller addressable user base because of the lack of support for iPhone 6, iPhone 6s, iPhone 6 Plus, iPhone 6s Plus and iPhone SE. This could present benefits for Apple’s smartphone and smartwatch businesses when customers are considering upgrading their current devices. Alternatively, the limited addressable user base indicates challenges to increasing user adoption.

Android Pay has more limited financial services partner support at launch and Google will need to quickly add more partners if it is to gain widespread adoption.

FeliCa technology has been adopted by other Asia-pacific countries for public transportation, including India, Indonesia, Vietnam, Sri Lanka, and Bangladesh. This means that Apple’s development of FeliCa Type-F NFC enabled devices will have a long term benefits when expanding to these countries. 

The launch of Apple Pay and Android Pay shows how mobile payments services must adapt to local financial infrastructure when entering a new market. In the long term, mobile payments services should also focus on service innovation and deeper integration with wider mobile commerce systems to increase customer acquisition and retention.


Apple Inc. Google Inc.
Research by Market
Mobile & Telecom
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