i-modes and Octopi

If you want to see the future of payment cards, look East, according to Andrei Hagiu, an Assistant Professor at Harvard Business School, in "i-modes and Octopi: Will Asia Reshape the World's Payment Industry?"

Professor Hagiu's findings are the result of spending the last 18 months in Asia working with some of the region's leading players, including NTT DoCoMo, Sony and KDDI. His work has reinforced his sense that what's happening in Asia could easily find its way into the United States and the European Union in just five to ten years. His insights, published in a paper distributed by Market Platform Dynamics, reveal the movements of the major players in emerging payments in Japan and China. His observations include that a combination of cooperation and competition has both helped and hindered the growth of emerging payments, particularly in Japan.

A single technology, the Felica chip, has given birth to four payment platforms that both cooperate and compete. They allow consumers to transact using mobile phones, stored value cards, smart cards and credit cards.

The common denominator of all of these payment systems--whether Hong Kong's Octopus Card or Japan's iD and QUICPay--is that they must get merchants and consumers on board in order for the system to have any value for either party. The paper chronicles this "chicken and egg" problem in Asian markets--where payments systems are beginning to emerge--and provides insight into the decisions made by members of the Japanese payments ecosystem, in particular, the decisions that drive both consumer and merchant acceptance.