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 dCARD and help run the iD payment network. Up until 2016 VISA dCARD 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 dCARD not a VISA dCARD. 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 dCARD. 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 dCARD 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.

Docomo has gone all in with Mastercard branding

Docomo has gone all in with Mastercard branding

What a difference a year of Apple Pay Japan makes.

I went to the local Docomo shop yesterday to help a friend move his au iPhone 6 to a Docomo iPhone 7. It took about an hour because he had to download au points to his au Wallet Prepaid card before switching the phone number to the Docomo SIM but all in all it was a smooth process.

The real eye-opener for me was that when he signed up for the Docomo dCard Mastercard appeared to be the only option. 2 years ago VISA and Mastercard dCards existed side by side. Not anymore. Docomo has gone all in with Mastercard branding. VISA is still available if you want it but is ‘not recommended’. The reason is Apple Pay.

It’s very simple. Docomo wants dCard to ‘just work’ on Apple Pay and on Docomo branded Android ‘Osaifu Keitai’ without limits both in Japan and abroad. VISA does not allow this. Mastercard does. I guess VISA thinks Docomo is dispensable even though Docomo pioneered feature phone contactless payments.

JCB has already seen healthy subscriber growth since Apple Pay launched in Japan simply because JCB, along with Mastercard is doing a better job taking care of Japanese customers. Instead of taking care of customers VISA seems more interested in playing market politics to sideline FeliCa payment networks in favor of EMV contactless.

Good luck with that.