Japan boasts one of the biggest cell phone markets in the world and often sees advancements in mobile technology before many other nations. In recent years, Japan has undergone a major transformation, thanks to Near Field Communication (NFC) mobile payment technology.

NFC technology can have a variety of applications, from identity documents and social media to commerce solutions. The United States and several other European countries are just now starting to experiment with NFC payment systems but it still seems as though we have some hurdles to overcome. Don’t throw out your wallet just yet!

Several U.S. retailers, like Gap, Toys-R-Us are starting the process by partnering with banks and Google’s new payment service, Google Wallet. However, recent studies show that less than 25% of consumers would actually use their phones in place of credit cards or cash. Larger cities like New York, San Francisco and Chicago will be the first to warm up to the idea; a fact that tells us exactly how the entire nation of Japan caught on to NFC payments years ago.

Many point to the fact that Japan is a very densely populated country with a high percentage of citizens using public transit. In the Tokyo area, half of the 35 million residents commute by public transportation. The Japanese jumped at the chance to make their daily commutes easier with a faster, more convenient ticket payment system. This is what most likely primed the country for the advent NFC. The Japanese were already accustomed to using it on a daily basis, which made it easy for retailers and other businesses to start implementing the new mobile payment system.

In the United States, businesses need to find a way to overcome staggering security doubts among consumers. There also seems to be a lot of confusion over fee/profit management. Who gets the profits from the merchant fees? Banks, cell phone carriers, merchant account providers and tech companies all want a slice of the pie. Retailers don’t want to pay larger fees for a premium service, especially if consumers are already wary. Adding to consumer fear is the passing of the buck. Retailers may raise their prices when faced with higher merchant fees.

With only 500,000 installed NFC readers in the entire U.S., we still have a long way to go. 2012 and the years to follow will bring development and beta testing. What remains to be seen is how quickly it catches on, if at all.

Meanwhile, smart phone credit card processing is gaining more popularity among business owners and even consumers. Perhaps this will be our “Japanese transit” moment? Only time will tell!