Features
Grow With The Community
The nimoca card can be used as a train or bus ticket and also as electronic money at participating retail outlets.
Nishi-Nippon Railroad develops a new business with smart card endeavor.
by Satoru Enomoto
Faced with changing customer demographics, Nishi-Nippon Railroad Co. (Nishitetsu), the largest railway company in Japan's Kyushu region, is taking a proactive, data-centric approach to expand its business. It provides passenger rail service as well as local and long-distance express bus routes. In addition to public transit options, the company offers retail, leisure and real estate services.
However, as more people drive automobiles and large numbers of older baby boomers retire, the core business—passenger railroad and bus service—experienced a decline in riders. "In a word, customers for our transportation service are both changing and decreasing—a phenomenon typical of local communities," explains Masataka Sugimoto, section manager, integrated circuit (IC) Card Business, Nishi-Nippon Railroad Co.
Determined to overcome these issues, the company explored new innovative business concepts. "Under our corporate slogan, 'Grow with the community,' we are committed to making an everyday effort to meet new challenges," says Sugimoto.
It was with this slogan in mind that the company's leaders took notice of IC card tickets, which were rapidly growing in popularity for railroad and bus service. "We thought we could take advantage of widely used IC card tickets as a step toward diversifying into new business areas," says Sugimoto.
“Teradata Japan's consulting knowledge that we highly rated is not limited to just system building.”
- Masataka Sugimoto, Nishi-Nippon Railroad Co.
First of its kind
When an IC card-based business model took shape in May 2007, Nishi-Nippon Railroad Card Co. was founded to issue the cards and solicit participating stores to accept them. The card was named "nimoca" (which is short for "nice money card") and the card company was renamed NIMOCA Co.
The cards serve not only as a ticket for trains and buses but also as electronic money for shopping at a network of stores that accept the card. "The nimoca card is the first of its kind in Japan to allow its holders to receive a common point of service for transportation and shopping," says Sugimoto.
Convenient 'local currency'
The nimoca card business has two major purposes: to promote the use of public transportation and to vitalize the community. To achieve the latter, the company aims to make the card a form of highly convenient "local currency." Accordingly, member stores are solicited from outside the business group to make the card available throughout the area.
"This ‘open to the community' stance clearly differs from those cards focusing solely on maximizing a particular business group's profit. To increase the number of card holders and member stores, we sought to enhance the convenience of the nimoca card," explains Sugimoto. "We expected this approach would help vitalize the local economy. We employed this strategy because we believed it would also help increase profits for the Nishi-Nippon Railroad Co."
The cards come in three types:
- The nimoca card is easily purchased from ticket machines at stations and in buses. Points are earned each time the card is used to pay fares. These points can be redeemed for subsequent fare payments.
- The Star nimoca card is issued only to registered customers who must apply for it. Its holders can earn points not only when they use the card for fares but also when they make purchases either with cash or the card.
- The Credit nimoca card, which offers all of the features of the Star nimoca card plus the functionality of a credit card, allows holders to also earn points when they use it as a credit card.
To use the nimoca card, a customer first loads it with cash to add value. The card can then be used as a ticket for public transportation or as electronic money for shopping at member stores. When the stored value is used for shopping, actual payment is made later by NIMOCA Co. and the member store pays a settlement fee, which is a certain percentage of the payment. This fee is a major source of revenue for NIMOCA Co.
"The broad and quick service cycle linking the three players—card holders, member stores and NIMOCA Co.—will improve the benefits each player gets and will help vitalize the economy of the community, " Sugimoto explains.
Summarize and analyze data
To keep this business cycle moving effectively and positively, it is important to create value for both card users and stores. To benefit customers and retailers alike, NIMOCA Co. provides the following services:
- Users of the Star nimoca and Credit nimoca cards can access the Web to review how many points they have earned and the value that remains on the card. They also receive magazines by mail.
- Member stores can take advantage of a customer analysis system through the Web. It utilizes detailed data on card holders' use of transportation services and commercial facilities, all of which is gathered when the nimoca card is used. The data is collected from ticket gates, machines installed in buses and electronic money terminals to NIMOCA Co.'s main system. The customer analysis the company provides enables each member store to leverage data on card usage and customer attributes related to the store. At the core of these services is the Teradata Database, which provides an information platform.
A knowledge-based decision
Nishi-Nippon Railroad Co. chose Teradata largely because of its expertise and reputation. "We targeted department store chains as potential member stores," Sugimoto explains. "The Teradata solution is used by many department stores as their data warehouse system and shows an excellent track record of performance. We highly rated Teradata because we knew we could expect to build an excellent system based on a wealth of analytical know-how that Teradata had accumulated.
"Of course, we could not afford to fail in this project," he adds. "Teradata Japan's consulting knowledge that we highly rated is not limited to just system building. We consulted them about not only system building but also business model development and point giving. They did not speak in system terminology but talked to us by translating it into business terms. That greatly helped us."
More accurate marketing
Staff members at a participating store can access the retailer's page at the nimoca Web site by entering a user ID and password. They then select one of the analysis menus to analyze data to better understand their customers' behavior. The daily report menu can display the number of shoppers who bought something at a store on a particular day, the amount each person spent and what payment method was used.
In addition, customer data can be checked by card type, timeframe, day of the week, address, and departure and arrival station. Among the many types of analysis the system enables, member stores can examine shopper attributes such as age and gender, the trade area of a store, and customer movement around a station or bus stop. Such types of analysis empower stores to conduct more effective marketing and improve customer service.
"The system may identify customer flow among stores which could not be known before. It may reveal that a certain percent of shoppers who went to Store A dropped in to Store B, which sells different goods. So, the stores can increase their respective sales through cooperative marketing," says Sugimoto.
Response time is critical in making these complicated types of analysis. Detailed data is collected for the customer analysis system from electronic-money terminals and point-exchange machines in stores and ticket machines at stations.
Three months after the service was started, more than 100,000 nimoca cards were in circulation and being used at about 650 member stores and more than 1,250 electronic-money terminals. In just a few years, data volume is expected to reach 1 million data items per day. A high-performance database is needed to promptly extract the necessary information from such a huge volume of data and achieve satisfactory response time in analyzing the information from a variety of viewpoints.
"We can maintain a response time of less than several seconds even if we do a sophisticated and complicated analysis, making it possible to provide higher-quality service for member stores," Sugimoto notes. "Our linearly scalable Teradata system can cope with a future transaction increase and allow for any new flexible analysis. This is one of the benefits we have gained from installing the Teradata solution."
Down the line
NIMOCA Co. has additional plans, such as creating an afflilation with Kyushu Railway Co.'s SUGOCA card, Fukuoka City Subway's Hayakaken card and East Japan Railway Co.'s Suica card in the spring of 2010. In addition, the nimoca card will be part of a Ministry of Land, Infrastructure, Transport and Tourism-supported verification test for promoting international card use in Asia.
With future business in mind, Sugimoto says, "We want to aggressively expand alliances with the cards and services provided by not only railroad and bus companies but also airlines and other companies." Great expectations are placed on the nimoca business, which positions the card as a tool for vitalizing the community.
Satoru Enomoto, an editor and writer based in Japan, covers business and information technology.
