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Date Posted: 00:31:22 02/17/03 Mon
Author: KYC recently inked a preferred smart card supplier deal with JCB.
Subject: JCB worldwide conversion to smart cards by 2006.
In reply to: JCB--Hawaii BNP Paribus California Banks 50% 's message, "" on 06:06:34 02/16/03 Sun

pourquoi5 (ID#: 224751) KYC Big Day 17/2/03 4:49:42 PM 6045122
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KYC recently inked a preferred smart card supplier deal with JCB.Big article below details the plans for the future with JCB worldwide conversion to smart cards by 2006.
KYC has been showing some strength of late and has turned off the 150 and 200 day moving averages,so hopefully this is the start of another climb.KYC pay down of debt has no doubt helped the cause.But there is real momentum for adoption of cards in Europe and Asia at least over the next two years and early birds may catch this worm.


The Article

Japan's leading credit card issuer, JCB, has high hopes of expanding into new markets by leveraging the smart card expertise it is gaining at home. Taiwan and South Korea are its initial targets, then the rest of Asia and the world.

With 45 million cardholders, JCB Co. Ltd. is No. 4 among credit card brands worldwide. But 42 million of those customers are in JCB's home base of Japan. Elsewhere, JCB is a niche player compared to Visa International, MasterCard International and American Express Co.

But JCB plans to grow outside of Japan, in large part by bringing to new markets the smart card technology it is testing out in Japan.

"There are a lot of areas where we need to expand our business," says Masahiro Omoto, senior vice president and head of IC card strategy at JCB. "Having talked to our management, we have come to the conclusion that the smart card deployment is a good opportunity to expand our business."

To that end, JCB has thrown itself into a variety of projects in Japan involving smart cards, or IC cards as they are known in Asia. These include dual-interface cards that consumers use in contact mode at retail locations and in contactless mode for paying transit fares, corporate credit cards with contactless capability for building access, a nationwide smart card-based loyalty scheme and a mobile payments trial with miniature chip cards that fit into cell phones. JCB also is setting up a financial clearinghouse for transit operators in western Japan, a service that will be in demand as more transit agencies worldwide introduce chip cards for fare payment.

These chip card features being tested in Japan are likely to start showing up on JCB-branded cards elsewhere in Asia, and eventually, JCB officials hope, in the United States and Europe.

For now, Asia is the focus, particularly South Korea and Taiwan. In one small sign of success for JCB's strategy, a Taiwan bank last fall issued chip-based JCB credit cards that also function as a contactless building access card for employees of a major Taiwanese computer manufacturer.

North America and Europe are longer-term projects. For now, JCB is taking steps to upgrade JCB-accepting merchant terminals in those regions to accept JCB smart cards. And the company hopes to boost its issuing, as well, especially in the United States, where Omoto, and many others, say it will not be fraud that drives smart card adoption, but attractive new card features.

JCB officials in Europe have similar hopes. "We expect the number of cardholders and number of licensed issuers to grow in the coming years by exporting to Europe our knowledge and experience of issuing multiapplication cards in Japan and other Asian countries," says Junya Tanaka, the London-based manager of new business development for JCB International (Europe) Ltd.

JCB has a long way to go in Europe, where the company issues cards on its own in the United Kingdom, Spain, Germany, Switzerland and the Netherlands. Only one European bank, Spain's La Caixa, issues JCB cards, Tanaka says. All told, there are only 10,000 JCB cards issued in Europe, and 50,000 outside of Asia, Tanaka says.

Even in Asia JCB faces stiff competition from the competing international credit card brands and local banks, says Tokyo-based analyst Neil Katkov of Celent Communications, a U.S.-headquartered research and consulting firm. "I think they will have success, but I think it's going to be hard for them to grow into a major player in those markets due to the competitive factors," Katkov says. "Not that they're going to be weak. I'm just not sure they're going to become a powerhouse."

Wooing Issuers

Japan is a different story, Katkov says. "JCB is definitely the market leader in credit cards in Japan."

Although there are more Visa-branded cards than JCB cards in Japan, Katkov considers JCB the domestic market leader because it is far ahead of such companies as UC Card and DC Card, which promote their own brands for use within Japan. And with JCB's varied smart card initiatives, Katkov adds, "they're showing they're going to be able to retain the market leadership, including in IC cards."

If it is to expand beyond Japan, however, JCB will have to convince issuers that JCB credit cards will be more attractive to consumers than those from Visa, MasterCard or American Express. Like American Express, JCB issues credit cards on its own-about 20 million cards-and also signs up other financial institutions to issue JCB-branded cards.

And, like AmEx, JCB must sign up merchants to accept its cards. JCB, which began expanding outside of Japan in 1981, now has 10.4 million merchant locations worldwide, 5.3 million of them outside of Japan.

In a joint effort to boost the number of locations where their cards are accepted, AmEx and JCB entered into an agreement two years ago that commits JCB to opening up its Japanese merchant base to AmEx, while AmEx provides similar acquiring services for JCB in Australia, New Zealand, Canada, Mexico and India.

In terms of IC card issuance, Omoto says JCB is focusing initially on the two Asian countries where it already has a significant presence: South Korea, where 1.6 million JCB cards have been issued, and Taiwan, where 1.2 million JCB cards circulate. Thailand, Malaysia, Hong Kong and Singapore are next on JCB's list.

JCB is by no means relying just on its smart card technology to woo issuers. It also offers financial incentives to banks to issue JCB cards, says Omoto, who would not elaborate on those incentives.

And, he says, JCB develops innovative marketing concepts that make its cards appealing. For instance, he says JCB developed a "ladies" card more than 15 years ago that offers promotions targeted at women in their 20s, a concept JCB exported successfully to South Korea.

But with competing brands offering similar cards, JCB must find new ways to differentiate itself. And that has led the company to become increasingly aggressive in its smart card initiatives. Nearly 100 JCB employees are directly involved in work on smart cards, Omoto says.

Some of them are working to make sure JCB issuers can offer J/Smart, JCB's credit application that conforms to the international EMV standard, on the two major smart card platforms available from multiple vendors. To that end, JCB has announced deals to make J/Smart available on chip cards from Japan's Dai Nippon and Keycorp of Australia, the two major suppliers of the Multos operating system. A version of the JCB application for Java Card, the major rival to Multos, should be available in the first half of this year.

And while Asia is the focus, JCB is taking steps to upgrade its merchant terminals to accept smart cards in the United States and Europe, so that traveling JCB cardholders will be able to take advantage of smart card-based offers in the future.

One step in that direction is a pilot due to begin this month in Hawaii, a favorite destination for Japanese tourists, where about a dozen JCB merchants will be equipped with point-of-sale terminals from U.S.-based Hypercom Corp. to accept JCB smart cards. First Hawaiian Bank, which signs up merchants for JCB, is participating in the test along with its transaction processor, Vital Processing Services.

Chip Cards Only

That test is designed to work out any bugs in processing JCB chip cards, and not to test out any attention-grabbing new features. But in Japan, JCB is engaged in several smart card projects that it hopes will set itself apart from competitors, at home and abroad.

For starters, JCB was among the first Japanese credit card issuers to commit itself to a total conversion to smart cards. Since the beginning of last year, all JCB cards in Japan carry a chip. Today, 3 million of the 15 million cards issued by JCB itself were smart cards. Omoto says JCB expects to have all of its own cards converted to chip by 2006.

Along with a payment application on the chip, these JCB smart cards-and 2 million more issued by other Japanese JCB issuers-carry a loyalty program called Plets, which allows JCB cardholders to accumulate points from many merchants.

Launched last April, the program is ramping up gradually, Omoto says, with 2,000 merchant outlets now participating. JCB will step up promotions as more consumers receive JCB smart cards, he says.

JCB's smart team has also turned its attention to two technologies that are especially hot in Asia, contactless smart cards and mobile phones.

JCB's contactless initiatives include deals with mass transit companies and contracts to issue corporate ID cards that allow employees to enter buildings with a wave of their cards and that also operate as contact smart cards in POS terminals.

Last May, JCB won a contract to issue dual-interface smart cards that commuters will use to pay fares on buses, subways and trains operated by 39 operators in Kansai, Japan's second-largest metropolitan area encompassing Kyoto, Osaka and Kobe. The cards, to be issued beginning in March, will also have JCB's credit card application. Commuters will load value with cash for now, but may ultimately reload with a charge to their JCB credit card.

JCB anticipates issuing 5 million Kansai Thru Pass cards in the next five years, and plans to sign up 10,000 retail locations to accept the cards along the transit routes. Those merchants' terminals will be able to accept the JCB credit card in contact mode and the transit stored value purse in contactless mode.

JCB also will handle customer service and operate a clearinghouse for distributing revenue among the transit operators, in a partnership with Japanese electronics giant Hitachi Ltd. The project is gaining attention because transit chip cards offer "promising" opportunities for an organization like JCB to offer settlement services to transportation operators, says Mikio Aoshima, research director for the Electronic Commerce Promotion Council of Japan, an industry consortium. "If JCB successfully puts these card systems into orbit, that will also bring about success to JCB's IC card project," he says.

JCB also has announced a deal with Japan Railway East, the major commuter line serving the Tokyo area, for the railway company to issue dual-interface cards that carry the JCB credit application and JR East's transit payment feature. JR East already has issued 3 million standalone contactless chip cards to commuters for paying train fares.

JCB is extending the concept of contact/contactless cards to the corporate arena, and has issued some 150,000 chip cards to the employees of some 10 Japanese companies, including 100,000 cards carried by Hitachi workers. Each card is a JCB credit card and a corporate ID with a contactless access control feature.

This is one chip card concept JCB already has been able to export. Taipei Bank, one of 30 JCB issuers in Taiwan, last fall issued 3,000 employees of Taiwanese computer maker First International Computers Inc. cards they can use to enter the company's headquarters building and car park, to pay with stored value at the company canteen and as a JCB credit card. "We hang JCB cards from the neck and use it everyday," says an FIC spokesperson.

Mobile Payment

On the mobile phone front, JCB and three other Japanese credit card companies are scheduled to begin a test in March with mobile phone operator KDDI Corp. of credit card payments through high-speed, so-called 3G mobile phones. Consumers participating in the test will be able to make purchases at Web-based merchants with a credit card application residing on a miniature User Identity Module smart card in the mobile phone.

Omoto says it will be such innovations that will attract issuers in other Asian countries to choose JCB over competing brands. "Those technologies, especially the contactless and mobile technologies which are more available in the Japanese market, that's why we are confident our technology will be able to compete with the technology of Visa and MasterCard very well."

A Competitor's View

But Paul Jung, product marketing and emerging technology director for Visa Korea, says JCB has seen little return for its considerable investments in South Korea.

He says issuers in that country have to consider brand very carefully because many credit card issuers are offering cards with a contactless interface, so that cardholders can use the cards to pay on the many South Korean transit systems that accept contactless chip cards. More than 14 million contactless chip cards have been issued for paying transit fares in the Seoul area alone.

Those contactless, or RF cards, are expensive, costing $2 to $3, versus 24 cents for a magnetic-stripe card, Jung says. "Since these RF cards are more costly to issuers, they want to make certain that the consumers are happy with the brand on the card." He contends South Korean consumers prefer the internationally known Visa and MasterCard brands to JCB or local credit card brands.

Omoto concedes that JCB, which only began issuing cards in South Korea in 1993, may be less well-known than competing brands. But he notes that JCB has increased its South Korean cardbase nearly two and a half times since 1999 to 1.6 million cards. He says this shows that issuers judge a brand as much by the products it offers as by brand recognition.

Nonetheless, JCB has considerable ground to make up. In South Korea, for instance, there are 42 million Visa cards and 23 million with the MasterCard brand, putting both well ahead of JCB.

JCB will have to come up with some nifty ideas if it is to overcome such well-established competitors. Whether it succeeds or not, JCB is likely to develop innovative offerings that could spur competing credit card companies to work harder at enhancing their own smart cards.



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