It’s very strange that the JCB QUICPay network has gained the most benefit from the Apple Pay makeover of the Japanese contactless payments market instead of the Docomo iD network. Docomo invented the Osaifu-Keitai standard with Sony in 2004 and was the natural favorite, but iD has only treaded water while JCB has seen steady gains in QUICPay issue cards, customers and transactions.
Docomo iD problems boil down to bad blood between Docomo and Sumitomo Mitsui Banking Corporation (SMBC) who issue and manage Docomo d-CARDs and help run the iD payment network. Up until 2016 VISA d-CARD was king. Then something happened. Things got so bad between the 2 companies that Docomo removed all VISA branding from their website and Docomo stores strongly urge new customers to create a Mastercard d-CARD not a VISA d-CARD. VISA might seem like the target here but SMBC, the first Japanese bank to issue VISA back in 1968, are the real power behind the VISA throne in Japan, and the real target for Docomo ire.
VISA refusing to sign on directly with Apple Pay Japan or offer NFC switching that Mastercard, JCB and AMEX do is undoubtably a big friction point because it diminishes the iD brand and VISA d-CARD. VISA also half-heartedly pushing VISA Pay Wave again, with SMBC pulling, doesn’t help. Which makes the NTT Docomo/SMBC detente ‘let’s build a new future together’ announcement so interesting. Here are the 3 announcement points <with comments>
- First of all Docomo and SMBC agree to start all over again to rebuild the d-CARD business and develop new services. <Nice boilerplate stuff with no promises and no deadline for delivering anything>.
- Sumitomo Mitsui Financial Group will buy back all outstanding shares of Sumitomo Mitsui Card Co. (34% of the company) from NTT Docomo by April 1, 2019. <Why does Docomo want out of the credit card business? Do they think that credit card industry pricing and fee structures are unsustainable in the face of ubiquitous contactless payments of all flavors, online banking and ever more competition? Do they think the credit card industry is going to have to live on far less and have to aggressively restructure? Or is it something else like getting out of the 2 year contract subsidizing business? Inquiring minds want to know.>
- Docomo NTT and SMBC will work together to develop and deliver more cashless solutions and expand the iD network. <That sounds nice but what does it really mean? Is VISA finally joining the Apple Pay Japan party? Is Google Pay support coming on iD?>
Like all cold war detente agreements, the proof will be in the pudding.