Japan's contactless cash system goes nationwide

The Edy electronic money system devised by BitWallet, a 25-member consortium headed by Sony and NTT DoCoMo, has received a major...

The Edy electronic money system devised by BitWallet, a 25-member consortium headed by Sony and NTT DoCoMo, has received a major boost with over a thousand AM/PM convenience stores across Japan agreeing to accept Edy contactless integrated circuit cards.

The convenience store launch represents a significant expansion of the electronic money system, which at present is accepted in around 100 shops mainly located around major Sony buildings in Tokyo. BitWallet sees this as the first major step towards creating an electronic money system with 23,000 retailers online and 8.5 million cards in circulation by the end of March 2004.

AM/PM stores now accept Edy and issue the cards, for a small deposit, and act as charging points. Edy is a stored-value card, which means it must be charged with money before it can be used.

Based on Sony's Felica contactless integrated circuit card, users need only place the card within 10 centimetres of an Edy sensor to have money debited from the card in a process that takes 0.2 seconds to complete, according to Sony. Because the money is stored on the card, a check to a bank computer or database does not need to take place. The in-store terminal communicates with the Edy centre once or twice a day to reconcile transactions and check for fraud.

It is this fast payment time, as opposed to the extra time taken to swipe a card or insert a chip card into a special reader, that makes Edy an ideal replacement for cash, Makoto Yamada, a senior manager of business planning at BitWallet, said.

"Our idea is to focus on the shops that handle coins, not credit cards," he said. "Places like parking lots, fast food and convenience stores. If you pay more than 3,000 yen, it is a more suitable [application] for a credit card."

Edy started as a Sony trial service in 1999 with BitWallet subsequently taking over the system in late 2000 and preparing for a commercial launch late last year. The consortium currently consists of 25 members including Sony, NTT DoCoMo, KDDI., Sumitomo Mitsui Banking, Bank of Tokyo-Mitsubishi, Toyota Motor, vending machine manufacturer Sanden, Fujitsu and Mitsubishi Electric.

Today, around 200,000 Edy cards have been issued. At least one quarter of these double as corporate ID cards for Sony, Bank of Tokyo Mitsubishi and Sanden workers while around half have been bundled with Sony's Vaio W desktop personal computer.

Transaction volumes are small. Each of the 100 stores currently online handles an average of around 1,000 Edy transactions per month but Yamada is confident the system will see around a 100-fold increase in transaction volume now AM/PM has begun accepting the cards.

With the AM/PM launch behind it, BitWallet will soon start working out plans to deploy Edy with other retail chains, such as convenience stores, coffee shops and drug stores, and in other applications, such as parking lots and taxis.

"We have spoken with many big stores, coffee chains, drug store chains and parking operators," Kazumasa Miyazawa, vice-president of business planning at BitWallet, said. "We have contacted maybe more than 400 companies. At this moment I cannot speak officially but many stores and chains have agreed to join Edy."

In addition to going after large retail chains, BitWallet is also looking to court independent retailers in single locations to create Edy hot spots where a large number of retailers accept the card, Yamada said.

This is the strategy the company has used to date. The two largest Edy hot spots are in Osaki and Shinagawa, both areas with a large number of Sony offices where each and every staff member has the Edy function loaded on to their ID card. The company is also looking to expand in the Marunouchi business district around Tokyo station and has several retailers already online.

BitWallet is wasting no time in its campaign to replace cash and has already managed to infiltrate one of the organisations at the centre of Japan's financial world - it fitted out the AM/PM store in the basement of the Ministry of Finance with Edy terminals well before Friday's launch.

"It was a strategic decision," he said. "And the people in the Ministry of Finance are very keen Edy users."

Read more on IT risk management