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The major Japanese and South Korean mobile operators in separate announcements today revealed details for planned cross-border NFC services­–signaling the move by the telcos away from domestic contactless-mobile technology to standard NFC.

Among other things, a move by the dominant telcos in Japan and South Korea–the two most advanced markets worldwide for contactless-mobile payment and ticketing–would open up important new markets for global NFC handset and terminal makers.

The announcements include details of tests that began earlier this month by South Korea’s largest mobile operator, SK Telecom, and Japan’s second and third largest telcos, KDDI and Softbank Mobile, respectively, of interoperable payment services, including contactless mobile credit using a MasterCard Worldwide PayPass application. SK Telecom also revealed it had introduced its first NFC phone Feb. 1 and said it would roll out NFC smartphones this year.

But perhaps even more significant was today’s announcement by Japan’s biggest mobile operator, NTT DoCoMo, of an agreement with Korea’s No. 2 telco, KT Corp., to develop cross-border payment, ticketing and other services using standard NFC. In the announcement, DoCoMo said that the telcos planned to launch the cross-border NFC services in their respective markets from around the end of 2012.

That would fit the time frame of rumors of DoCoMo’s move to standard NFC, which sources had speculated would begin around 2013. DoCoMo, since 2004, has led the massive rollout of contactless-mobile phones and contactless point-of-sale terminals in Japan based on FeliCa technology from Japan’s Sony Corp. While NFC supports FeliCa, the Japanese contactless wallet phones cannot be used elsewhere in the world at standard contactless POS terminals and users could not tap standard NFC phones to pay at FeliCa terminals in Japan.

"To prepare for the (roaming) services, DoCoMo and KT will accelerate development of their existing infrastructures, as well as solicit the participation of NFC-based service providers in various industries," DoCoMo said in a statement.

For the cross-border payment and other services, DoCoMo said it had formed tie-ups with Visa Inc., handset and NFC chip maker Samsung Electronics and SIM vendor Gemalto, as well as large Japanese credit card company Sumitomo Mitsui Card Co., and electronic-purse provider bitWallet. DoCoMo owns a stake in Sumitomo Mitsui Card and also had a stake in bitWallet, both of which have rolled out FeliCa-based payment in Japan.

Customers traveling between Japan and South Korea will be able to access the services using Android handsets "embedded with contactless IC chips," DoCoMo said in the announcement.

"We welcome this project and see great value in extending the security, convenience and global interoperability of NFC-based mobile payments to consumers in Japan and Korea," Bill Gajda, head of mobile at Visa Inc., said in a statement.

In South Korea, KT last October launched NFC services, though the project was largely intended to give the operator bragging rights as the mobile carrier that launched what could be considered the world’s first commercial NFC service. The telco, however, only ordered something over 50,000 units of a single NFC phone, the Samsung SHW-A170K–a feature phone usable only in South Korea. That may be the phone SK Telecom has introduced Feb. 1, as well. KT has earlier told NFC Times it plans to order an NFC-enabled Android smartphone from South Korea-based handset maker LG Electronics for next month.

Like Japan, South Korea uses proprietary contactless-mobile technology, with dual-interface or “combi”-SIM cards, which hook into antennas built into specially equipped mobile phones. The SIMs carry the popular T-money transit stored-value application in the capital Seoul, along with little-used mobile-credit card applications supporting Visa payWave and MasterCard PayPass. They also store a membership-loyalty program and mobile-banking services that enable subscribers to make contactless withdrawals from ATMs and to trade stock. SK Telecom has led the rollout of the combi-SIM cards and phones starting in 2007, which followed other contactless-mobile technology promoted by the telco.

SK Telecom Ordering NFC Smartphones
Both DoCoMo and SK Telecom own about half of the mobile market in their respective countries and both had clung to proprietary contactless technology, in the face of growing pressure from their smaller competitors, service providers and international trade organizations to move to standard NFC.

So despite the tens of millions of dollars worth of investment that DoCoMo and SK Telecom each have sunk into the proprietary technologies, both appear to be resigned to the move to NFC.

In fact, in its announcement today, SK Telecom said it "aims to continue promoting mobile payment by launching a diverse line-up of NFC–enabled smartphones throughout the year." Those phones will be backward compatible with the large number of combi-card readers in use in South Korea, said the telco.

SK Telecom added that it would "further cooperate with mobile carriers in other global markets," including those in Europe and the United States. The telco today also confirmed it had begun meetings last month with KT, MasterCard and two large credit card companies, Shinhan Card and Samsung Card, to promote mobile payment domestically.

Like DoCoMo, SK Telecom sees a business case in earning revenue from transaction fees from merchants when subscribers tap their phones to pay. Last year it bought a 49% stake in the credit card unit of the Hana Financial Group for more than US$340 million. In 2005, DoCoMo paid about US$1 billion for a one-third stake in Sumitomo Mitsui Card, the No. 2 credit card company at the time. DoCoMo launched its own payment brand, iD, and payment service, DCMX, later that year. KT has said it will buy a one-third stake in credit card processor BC Card, but reportedly is not entering the credit card business directly.

SK Telecom’s pilot with the two smaller Japanese operators will enable Korean and Japanese users with NFC phones to tap to pay transit fares on some trains, as well as buses, taxis and at about 30,000 merchant locations, such as convenience stores, that accept SK Telecom's T-Cash prepaid payment service in South Korea.

Pilot users would also be able to tap with a mobile MasterCard PayPass application in about 25,000 shops, including convenience stores in the South Korean capital, Seoul, as well as Pusan and other cities, according to a release from KDDI.

There are only about 300 stores that accept PayPass in Japan, in shopping areas in Chiba and Kanagawa prefectures, near Tokyo, which would be part of the trial, as well. And the pilot will include 110 smart posters in Tokyo and 150 in Seoul, at restaurants, shops and tourist venues, at which users could tap their phones to receive information. The telcos did not mention the number of users participating in the cross-border trial.

"The aim of the trial test is to establish mutual compatibility between countries using NFC as a common international standard instead of existing local Korean or Japanese mobile financial service methods," said SK Telecom in its announcement.

The telco said it expected NFC-based mobile payment to be available in both countries this year.

That is an optimistic projection, however, especially in Japan, where hundreds of thousands of proprietary FeliCa point-of-sale terminals will have to be upgraded to accept standard NFC payment.

But it seems clear that mobile operators and other players in the two countries that have rolled out contactless-mobile services have begun laying the groundwork for the move to NFC.