Cell phone shopping makes wallets redundant in Japan

By Sachi Izumi

TOKYO (Reuters) - Japanese office worker Satoshi Tada pays for shopping, wins free food and gets store discounts all by waving his cellphone.

"I use it pretty much every day," the 25-year-old said. "You can charge money on it right there if needed, and you don't have to run around trying to find an ATM. You can even get points because it's linked to credit cards."

The world's top firms such as Visa Inc and Nokia are still mostly testing phone use for payments, but in Japan, more than 50 million, or about half of all cellphone users, already carry phones capable of serving as wallets.

Japan has pioneered not just the technology but also the business models that will pave the way for wallet phones to become a standard payment method in the future. Some 700 million people worldwide are expected to own such phones by 2013.

"You can't deny that having such applications on a phone is convenient, and that will likely be the way that mobile phones are going worldwide," said JPMorgan Securities analyst Hironobu Sawake in Tokyo.

"People always carry cellphones on them, and they would find it useful to have a financial function there."

Success in Japan and in trials abroad have shown that the technology is ready for cell phones to replace credit cards, cash as well as serve as transportation and movie tickets and electronic keys for homes and offices.

But there are other hurdles; from breaking the psychological barrier for consumers sceptical about using phones as credit cards, to working out new business models as the lines blur between banks, financial institutions and cell phone companies.