To understand Apple’s 3rd revolution let’s start at ground zero, the NFC Forum Tokyo meeting in July 2016 where JR East dropped the Suica bomb and explained the NFC normalization effort to make all the different NFC flavors (A-B-F) work as one.
There are two parts:
- An earlier contactless payment NFC normalization effort which resulted in the current EMV NFC A-B standard
- A later public transportation NFC normalization effort that resulted in a NFC A-B-F standard that is now a requirement for Global Certification Forum (GCF) certification of global NFC devices
Here is a summary of those efforts. I hope your eyes don’t glaze over.
How many sore butts, bad bento and committee meetings did it take to produce that? The only important thing to remember is that NFC certification only covers the NFC hardware, not the payment protocols. EMV only uses NFC A and the requirement for global NFC device certification is NFC A-B-F. This is the problem: one standard for NFC hardware, another one for software that runs payments. Do we sit around and wait for EMVCo to re-normalize and add NFC-F?
Apple’s genius solution was ignoring all that and choosing the new GCF NFC standard to launch Apple Pay into the Japan market by pre-installing both EMV and Mobile FeliCa. Everything works out of the box.
One seamless NFC world standard
The whole reason for making NFC A-B-F a single standard was to let our smart devices solve things and ‘just work’ in every country instead of forcing local transit operators and vendors to install unnecessary or incompatible contactless payment infrastructure. NFC A-B processing time for example is too slow for Japanese ticket gates that are designed to instantly process fares in the busiest train stations (Shinjuku, Tokyo, Ikebukuro) in the world.
Long term implications are going to be very interesting. Even though Apple is not advertising it, pre-installing Mobile FeliCa into every iPhone 8, iPhone X and Apple Watch Series 3 makes FeliCa a standard on a level unimaginable, and unattainable up to now.
Put another way, there are lots of global standards which FeliCa and MIFARE are. There are also global standards that really matter. Thanks to Apple, FeliCa just became the latter.
iOS 11 Apple Pay features
iOS 11 Apple Pay combined with global NFC in iPhone 8, iPhone X and Apple Watch Series 3 is a very flexible solution with innovative features that pay big dividends not only in Japan but around the world. These include:
- Visitors to Japan with the new iPhones can easily add FeliCa cards to Apple Pay
- Other countries can add FeliCa Suica-like services
- Seamless NFC A-B-F switching allows FeliCa and EMV payment systems to co-exist
- Dual device account ID for Japanese FeliCa credit cards that allow them to be used with Apple Pay outside of Japan
- Up to 12 Apple Pay cards can be added to iPhone 8, iPhone X and Apple Watch Series 3
These improvements remove the FeliCa barrier for both inbound visitors and outbound Japanese. Ideally we could even have on-the-fly NFC switching for adding a FeliCa ID to Apple Pay credit cards that need one temporarily for the payment terminal, but credit card companies, banks and the industry would not allow that: too many processing fee apple carts would be knocked over. But it is a great start that does not end there because Apple’s real genius stroke is Apple Pay Suica.
Why Suica is the only card that matters
Credit cards are messy. Creating one is complicated, you have to be a certain age, there are pin numbers, security codes, expiration dates and credit ratings to deal with. As easy as Apple Pay makes it, you’re still dragging around the creaky complicated territorial infrastructure mess the banking industry built for credit cards. Debit cards are a little easier but still have the same creaky processing infrastructure.
Apple Pay Suica does away with all of this. Anybody can get one and add one to Apple Pay. It only holds the money that you add to it. You can recharge it on the go, you can recharge it with cash, you can use it without a network connection. You can use it for all public transit in Japan and buy stuff anywhere too.
Suica also solves a big problem for visitors to Japan. There are not many stores in Japan where visitors can use foreign issued Apple Pay credit cards: McDonald’s, Ikea, Tokyo Disney World. It will get better but these things take time.
If you have iPhone 8 this is solved now because you add Suica and charge it with your Apple Pay credit card of choice. It’s the best of both: use your credit card from home and get the benefits of FeliCa and Suica in Japan, Easy. Done. Get on the train and go.
Suica is the secret sauce that makes Apple Pay ‘sticky’. Apple Pay is breaking the Japanese mobile wallet utilization glass barrier i.e. people who bother to turn it on, that has stubbornly remained at 20% no matter how many mobile wallet capable mobile devices are out there, regardless of platform. Even more astounding and new is that once Japanese users start using Apple Pay, they use it all the time: up to 60% to 70% of total purchases, figures not seen in the industry up to now.
Apple Pay Suica is the easy entry point, credit cards, points and convenience keep them there.
The 3rd Apple Revolution
Apple Pay, lead by Suica is changing the Japanese market. Japanese IT journalist Junya Suzuki wrote a book about Apple Pay when it came to Japan last October. He titled it “Apple Pay: the black ship of payments”. This is a reference to the ‘black ships’ of the Perry Expedition that opened Japan in 1852. Black ships in Japan mean big change.
Suzuki san thinks Apple Pay is the 3rd Apple revolution. The first was iTunes, the second was iPhone. I think he is right and it is not just about Japan, it is global. Apple Pay is rapidly changing payments in Japan right before our eyes. It’s going to be very interesting to see how iPhone 8 global NFC and iOS 11 Apple Pay will change payments in the rest of the world.
And I thank Junya Suzuki for letting me steal his Japanese title.
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