Value Capture and the Ecosystem of Transit Payment Platforms

AppleInsider Daniel Eran Dilger’s very long editorial Apple Services and the ecosystem of value capture has an interesting bit at the beginning:

The term Value Capture applies to rail and transit operators that are given the rights to develop the land around their stations. America’s intercontinental train routes were developed by railroads that were deeded land along their planned rail lines. These plots were then sold off or developed, capturing some of the value added by the fact that that land was adjacent to the transportation service the railroad had built and was operating.

Today, while most of America’s current transit systems (from Amtrak to BART) are now on the brink of failure and are often in worse shape than what you find in third world countries—despite the high tax subsidies paid to sustain them—there are many examples around the world of public and private transit operators performing extremely well simply because they were given the rights to develop the land around their stations, leading to extremely lucrative revenue sources that sustain their operations and growth while they provide efficient transportation services to the public.

Dilger goes on to explain value capture in the App Store ecosystem but misses important transit connections with Apple Pay:

The most successful value capture transit model in the world is the Suica Transit Platform business model on full display at  Tokyo Station. The shopping experience both inside and outside the transit gate is mind-boggling (the Drip Mania coffee softcream is to die for if you can find it) as is the cash flow. If JR East offered business tours in English the waiting lines would look like the lines at Tokyo Comic Con. It’s very strange that other transit agencies around the world, ahem in the west, ignore studying the Suica Transit Platform business model.

Tokyo Station is the Suica card epicenter for transit (regular trains, Shinkansen, buses), shopping, and other services like vending machines and coin lockers. You can buy Shinkansen tickets on the go on your smartphone. Every single store register has a Suica reader and the payment choice is either cash or plastic credit cards but contactless payment is strictly Suica. That is not a problem because Inbound Apple Pay users can join the Suica fun.

There has been a lot of overblown media hand wringing that Japanese contactless payments usage rates are far below what they are in China and Korea, and the Japanese government hopes to raise contactless payment usage rates to 40% by 2025 over the current 20% rate. This “problem” is remarkably easy to fix: create an open shared mobile transit cloud infrastructure that follows the Japanese Transit IC Card Interoperability model. Get the big Japanese transit cards on mobile that unlock the commuter pass and loyalty point goodies associated with the plastic IC cards, and the problem is solved. It’s that simple.

If that cannot be accomplished the Japanese government could talk JR East into hosting everybody else’s transit card on the Mobile Suica cloud with agreeable terms for big and small players. A concept just like the recently released Apple Pay Mizuho Suica. With all the important transit cards on mobile wallet platforms, contactless payment usage rates in Japan would quickly skyrocket beyond 40%. I guarantee it.

 

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