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  • Electronic Settlements Become Customer-Oriented Services
  • December 14, 1998 (TOKYO) -- Japan's major credit card companies are ready to start electronic settlements as customer-oriented services.
    Such electronic services of financial institutions in Japan, led by leading banks such as Sanwa Bank Ltd. and Fuji Bank Ltd., are now in full swing.

    The need to review the Secure Electronic Transaction (SET), an international standard for electronic settlements, has surfaced.

    Calls for reviewing SET have spurred an objective to provide easy-to-use systems for electronic shops and users rather than ones that place priority on security and thus are unmanageable and hard to use.

    More Financial Institutions Offer Electronic Services

    In October 1998, credit card companies such as Nippon Shinpan Co., Ltd., DC Card Co., Ltd. and Million Card Service Co., Ltd. all launched commercial electronic settlements services.

    Sumitomo Credit Service Co., Ltd., JCB Co., Ltd. and UC Card have already been deploying similar services. Major credit card companies already have entered the market. (See table.)

    Sanwa Bank and Fuji Bank were the first to launch realtime settlement services through customers' bank accounts. Both banks started to offer the settlements as a value-added service aimed at their Internet banking users.

    All such services are based on the SET standards, and consumers are allowed to safely settle their accounts using wallet software.

    Each credit company is stepping up its efforts to spread the service among consumers. For example, Sumitomo Credit has distributed wallet software to its 140,000 card members and JCB to 35,000.

    Sumitomo Bank Ltd., Tokai Bank Ltd. and Asahi Bank Ltd. are also implementing Internet banking. Although they are not offering electronic settlement services for the purpose of electronic commerce, the services allow electronic stores to use Internet banking for bank transfers (payments) received from consumers. This can be said to be a simplified version of electronic settlement services.

    Other camps of electronic settlement services providers are trying to distinguish their existing services by developing user-friendly systems for both consumers and shops.

    The "acosis" is leading consumer loan company Acom Co., Ltd.'s proprietary settlement service. Acom has set its surcharge at 3 percent of a billing amount, which is lower than normal surcharges billed by credit card companies. The acosis has won support from retail stores and consumers, because it guarantees problem-solving measures to troubles between the member shops and consumers regarding payments.

    In two years since the inception, the acosis attracted nearly 500 shops. As of August 1998, there are over 10,000 consumers participating, 20 percent of which use the service every month.

    "Smash" is offered by Sony Communication Network Corp. (So-net), an Internet service provider of the Sony Group. It is a settlement service offered by means of credit cards.

    A total of approximately 300,000 users, including members of So-net's Internet access service, are eligible for the service. Currently, it has secured 150 member shops.

    In April 1999, Japan's online service giants, Nifty Corp. and Nippon Telegraph and Telephone Corp., are also expected to open similar services. The impact of Nifty's service, in particular, appears to be significant when launched. Nifty's online service dubbed as "NIFTY SERVE" holds 1.7 million credit card members, and they will be entitled to use the settlement service the company plans to offer.

    SET Expected for Review to Trim Startup Burden on Customers

    Amid debuts of numerous commercial electronic settlement services, moves to review the SET started to gain momentum.

    Market penetration of the SET-compliant electronic settlement services has not been as notable as expected due to its complicated handling procedures for consumers and heavy costs for electronic shops. In October 1998, Sumitomo Credit distributed SET-based wallet software to its 140,000 card members. However, until now, only 10 percent of the members obtained their digital certificate.

    Nippon Shinpan plans to provide an electronic settlement service based on a system other than the SET. Although details of the service have not yet been disclosed, Nippon Shinpan is most likely to launch a service that does not require card holders to enter credit card numbers on the Internet. Instead, it is expected to issue passwords to its card members.

    Credit card companies offering services based on the SET are stepping up their efforts to improve user friendliness in their service. Nippon Shinpan plans to handle various unique payment methods unique in Japan by introducing the Japan Payment Option Extension (JPO), SET specifications modified to Japanese systems.

    JCB and Sumitomo Credit plan to secure interoperability with SET by, for example, enabling users to shop at the Cyber Mall operated by Sumitomo Credit using the JCB's wallet software. UC Card will simplify upgrade procedures of wallet software.

    A "server wallet" is catching attention as a system that dramatically improves user friendliness while maintaining the mechanism of the SET. Server wallet products of GlobeSet Inc., an affiliate of Compaq Computer Corp. of the United States, are expected to ship to Japan in early 1999. Credit companies in Japan, such as JCB, have shown keen interest.

    In April 1999, CyberCash KK, which deploys an electronic settlement service using credit cards, expects to launch a new one called "InstaBuy."

    InstaBuy allows users to use the proprietary server wallet. CyberCash hopes to be SET-enabled some time in 1999, and when that happens, the InstaBuy will allow users to utilize SET-based services on InstaBuy's server wallet.

    On the shoppers' side, "merchant software" has progressed in terms of systems building.

    Sanwa Bank has built a system, so that electronic shops are not required to build their own merchant software in the "EC Direct," a cyber mall operated by Sanwa Bank. The EC Direct is more like a link site rather than a mall because member shops own their server to operate in the EC Direct. Such shops are to give settlement information to Sanwa such as credit card numbers by directly accessing to Sanwa's settlement server by means of either a leased line or ISDN.

    Credit card companies are also trying to spread the SET use by assembling electronic shops either in their cyber mall or their partners' mall. There'll be a possibility that credit card companies will provide services similar to the "link" type offered by Sanwa Bank.

    Internet Banking is Dark Horse

    While profits from electronic settlement services are razor thin for the time being, Internet banking services could pose a streak of hope.

    Sumitomo Bank is concentrating on Internet banking. In the year 2000, Japan's Post Office plan to introduce a kind of Internet banking service for postal savings. The Post Office has already submitted a request of 700 million yen (US$5.97 million) for the 1999 budget. If it is approved, it hopes to launch a trial involving about a half of 100,000 people on the Internet.

    Internet banking services are expected to bring a significant benefit to electronic shops that cannot afford to use an electronic settlement service on account of profitability. This is so because it allows such shops to use a bank transfer as a simplified electronic settlement only by setting up a link. They don't need to make additional investments on systems or pay settlement handling fees.

    Electronic settlement services are about to become a household item not only for PCs but also information terminals for the home.

    "Web Money," ASCII Something Good Corp.'s small amount settlement service, can be used with "Dreamcast," Sega Enterprises Ltd.'s next-generation video game machine.

    NTT Mobile Communications Network Inc. plans to offer banking services from December through mobile phones it markets.

    Table: SET-based electronic settlement services by credit card companies






    In addition to its own payment gateway, it will provide an electronic settlement service in 1999 using NTT Data's payment gateway.

    under consideration


    Credit Saison

    Plans to provide an electronic settlement service in spring 1999 using NTT Data's payment gateway.

    under consideration



    In addition to its own payment gateway, it plans to utilize NTT Data's payment gateway. Interoperatibility tests with Sumitomo Credit are underway.



    Sumitomo Credit Service

    In addition to operating its own payment gateway, it utilizes NTT Data's payment gateway. Interoperability tests with JCB are underway.



    DC Card

    Provides an electronic settlement service for "Shop Fiesta," a cyber mall, using NTT Data's gateway.



    Nippon Shinpan

    In addition to its own payment gateway, it also utilizes NTT Data's payment gateway. The service can also be used for installment payments that are JPO-compliant.

    NICOS City


    Million Card Service

    In addition to its own payment gateway, it is also providing an electronic settlement service for "Media Port Japan," a cyber mall, using NTT Data's payment gateway.



    UC Card

    Plans to operate its own payment gateway and also NTT Data's payment gateway.

    UC Cyber Mall


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    (Manabu Nagai, Staff Editor, Nikkei Multimedia)

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    Updated: Sun Dec 13 01:44:20 1998 PDT