Citigroup Tests Wireless Services in Japan

BOSTON (06/08/2000) - New York-based Citigroup Inc. has begun a test of mobile telephones for e-commerce in Japan as a prelude to a global rollout of the technology.

The Japanese test began late last month and is scheduled to run through the end of the year.

In the pilot project, customers will use Chicago-based Diners Club International's cards to make purchases over their cellular phones. Citigroup recently bought the Japanese Diners Club card franchise.

The underlying software for the project was developed by Citigroup and expanded by online banking software developer 724 Solutions Inc. in Toronto.

Citigroup officials said they chose the Japan model because of the country's high penetration of Internet-connected digital telephones. More than 4 million of Japan's 49 million mobile phones are connected to the Internet, compared with only 500,000 of the 77 million mobile phones in the U.S., according to International Data Corp. in Framingham, Massachusetts.

Electronics maker Fujitsu Ltd. and Japanese telecommunications companies DDI Corp. and J-Phone are partnering with Citigroup on the project, with DDI providing some of the customers.

Citigroup's wireless service will allow consumers to purchase products by typing unique product codes from advertisements into the Internet-enabled cell phones.

The consumer will have a choice of shipping and payment options, Citigroup said.

Wireless vs. Internet

The Japanese test project will be useful to Citigroup because of what the company can learn about the technology, and it will help expand Citigroup's international presence, analysts said. But it may not be a useful model for the U.S.

"They believe the wireless channel is a way to penetrate into Japan," said George Barto, an analyst at Gartner Group Inc. in Stamford, Connecticut. "It's Citigroup's strategy to become a worldwide bank."

Barto said Citigroup already has an international presence with its Web site but that wireless services may be more appealing in places like Japan or Europe - where Web-enabled phones are more popular than in the U.S.

"We have a much higher Internet penetration over PCs connected to the Internet," Barto said. "So wireless services are not such a big deal and will grow slower than in other countries."

The U.S. wireless industry is also much more fragmented. "We have no unified cell phone standards and no unified cell phone Internet standards," said Richard Bell, an analyst at Needham, Massachusetts-based TowerGroup. "Japan is not like that; Europe is not like that. They have a more unified, more advanced environment."

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