Apple Pay Octopus and the Pixel 4 Global NFC Question

Apple Pay Octopus on iOS 13 this fall puts Pixel 4 and Google Pay in an awkward market position. Pixel 3 is a success in the Japanese market because of the inclusion of a dedicated FeliCa chip in Japanese models. Non-JP Pixel 3 models have a global NFC ready NXP PN81 chip but FeliCa is not activated for some reason, inbound users cannot use Google Pay Suica, or anything else, in Japan.

The question for Pixel 4 is this: will Google Pay use all the features of the NXP PN81 chip, or go with a custom implementation of FeliCa on their own chip for a global NFC device along with an enhanced Google Pay that seamlessly incorporates and builds on Osaifu Keitai software (killing off JP carrier Osaifu-Keitai SIM nonsense for good) instead of simply candy wrapping it, like they do for Pixel 3 JP Google Pay.

If Google goes with the first choice, Google Pay Octopus becomes a future possibility. It would also force other Android smartphone manufacturers to follow suit.

If Google keeps that same Pixel 3 arrangement they have for Pixel 4, a separate hardware model for Japan, Google Pay Octopus becomes a murky proposition. More of the same would be a shame. I hope Google does the smart thing and the right thing: global NFC on all devices is the way to go.

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iOS 13 and the Transition to Global NFC

Crowd Cast president Takashi Hoshikawa updated his Japan Cashless map introduced back in January, the cacophony of QR Code payment platforms continues to grow. Just like any gold rush, QR will crash and burn at some point. Big players will gobble up the smaller ones and things will settle down.

But something else is going on. There’s a small but important difference, so small that Takashi Hoshikawa is not aware of it: he labeled the FeliCa section in the upper left corner as NFC.

This is the result of using Apple Pay on a global NFC iPhone where all the necessary hardware and software is seamlessly unified. The old plastic card mentality of different walled off technologies: contactless credit card (EMV), transit card (FeliCa, MIFARE), ID card (ISO 7816), NFC A/B or F, etc. slips away and becomes one seamless NFC Wallet in the mind. This mindset is also on display in SearchMan co-founder Naoki Shibata’s recent article on Rakuten Pay Suica: no mention of FeliCa anymore, it’s just one NFC thing.

This is an important and natural, but quiet progression that will accelerate with the enhanced NFC support in iOS 13 and expansion of new services like Apple Pay Octopus. iOS 13 Apple Pay Wallet will set the standard for global NFC that just works, a standard that Google Pay will struggle to match because of Android hardware fragmentation.

Players that leverage the advantages of global NFC and offer new services based on them, like JR East (Inbound Apple Pay Suica), and Mastercard (NFC switching dual mode bank card services) will gain, while companies that stick with the old ‘one thing’ contactless plastic card mentality, like Visa, will lose. It’s that simple.

Apple Pay Octopus and the future of the Octopus Transit Platform

UPDATE: Hong Kong OCL officially announced Apple Pay Octopus

One downside of breaking a tech story on the internet is news aggregator sites. Responsible tech news sites like MacRumors and AppleInsider post outside sourced news that serves their readership and sends traffic to the original source. And then there are not so nice aggregator operations posing as news sites like The Verge, TechCrunch and 9to5Mac who craft crappy posts, lifting whole chunks from outside stories, or simply lifting without attribution, minimizing any outside contribution to keep traffic on their own site.

So it’s a bummer that SC Yeung’s excellent EJ Insight story “Why Hong Kong can expect Apple Pay support for Octopus Card,” quotes the 9to5Mac ripoff of my piece instead of the original, but it’s an interesting read with good analysis. Yeung makes the same point I did a few months ago that the expansion of Octopus to Apple Pay is an important step forward for the platform. But it can’t stop there: Octopus Cards Limited needs to continue digital wallet expansion and create new business opportunities. Unfortunately it has to accomplish this while parent company MRT Corporation is opening up its transit gates to QR Code and EMV payments which will compete with the subsidiary OCL Octopus card business:

MTR will begin accepting QR code payment starting from next year and the rail operator will also add more contactless payment systems on its gates in future. For commuters, Octopus Card will no longer be the only choice for MTR payments…

<It> is becoming clear that <OCL> needs a new business model to maintain its market-leading position. Using a specific card for payment is no longer a modern way of payment. The core issue for Octopus is transform into something bigger, moving beyond the current payment functions and offer a lot more, perhaps even a mobile banking service, to retain users.

Why HK can expect Apple Pay support for Octopus card

JR East has taken a very different approach. Suica is a central business pillar and JR East will be expanding it with the next generation Super Suica in April 2021. Suica will gain the ability to virtually host other transit card under the same Suica umbrella on plastic and on mobile. Think of it as a national transit and payment card with Express Transit anywhere, anytime. How fascinating it would be if Octopus had a similar kind of opportunity to expand outside of Hong Kong.

Even from the short vantage point of 2.5 years since the launch of Apple Pay Suica, it’s already easy to see the charges that it has brought to the Japanese payments market. It will be interesting to watch the changes that Apple Pay Octopus brings to Hong Kong.

Sayonara 10% Consumption Tax

There have been consistent rumors that the 10% consumption tax with cashless point rewards due to start in October was going to be spiked. Now that there are rumors of a ‘double’ election this summer, and especially after President Trump mused about scrapping the whole postwar American-Japanese defense treaty system, I think we can safely assume the 10% consumption tax is never going to happen. Prime Minister Abe can have a tax increase or he can change the constitution. He can not do both, and no politician is going to support the tax increase publicly going into the summer election, even thought the Komeito is said to want it enacted.

So who are the losers? Well, Komeito for one which the Abe government needs sidelined in order to amend the constitution, and Rakuten for another as they were hoping to ride the cashless point reward with consumption tax wave. Buckle up everybody, it’s going to be a long hot summer with lots of political debate over the constitution and Japan Self-Defense Forces.

Apple Pay Octopus Launching in Hong Kong with iOS 13 and Apple Maps Transit Integration

Octopus Cards Limited officially announced Apple Pay Octopus July 11, 2019

It’s finally happening. Hong Kong iPhone users have waited eagerly for the ubiquitous Octopus transit card to arrive on Apple Pay ever since the first global FeliCa iPhone models were announced in September 2017. They were disappointed when Octopus Cards Limited (OCL) unveiled the first smartphone wallet version of the FeliCa based Octopus as Smart Octopus in Samsung Pay in December 2017, reportedly an exclusive deal. Needless to say, there was no mention of Apple Pay.

After Apple and OCL set things in motion in December 2018 with tests for a tentative Chinese New Year launch but then put things on hold, Hong Kong iPhone users are finally getting their wish: Octopus on Apple Pay will launch in Hong Kong with iOS 13. The iOS 13 beta contains specific Apple Pay Octopus references along with Apple Pay server side references (link now closed) which indicate that OCL is field testing with the latest beta:

Screenshot of live Apple server link JSON code June 25 10:00 am Japan local time, link was terminated by 3 pm

The June 25 code leak forced their hand and OCL officially announced Apple Pay Octopus on July 11 after not answering earlier requests for a comment, the press release promised more details soon:

Suica Similarities
Octopus is based on the same FeliCa technology used for Suica and both cards are very similar. Octopus is used extensively for fast transit and contactless payments of all kinds. According to Wikipedia there are over 33 million Octopus cards in circulation as of 2018 used by 99 per cent of Hong Kong residents. The addition of the Octopus transit payment platform to Apple Pay will drive its adoption in Hong Kong far more than regular credit/debit cards can ever accomplish, as it has in Japan with Apple Pay Suica.

The digital Smart Octopus in Samsung Pay is very similar to Apple Pay Suica, with fast Express Transit-like use and performance, but the setup is a little more user friendly for inbound visitors: a new virtual Octopus card can be created directly in Wallet without using a separate app like SuicaEng or HOP App. You can transfer a plastic Octopus card, but just like Suica and HOP, the plastic card cannot be used after transfer, and the same virtual card can only be used on a single device at a time. The Apple Pay Octopus experience will be the same and Express Transit a given.

Apple Maps Transit Integration
Earlier Apple Pay Octopus reports mentioned Hong Kong Apple Maps Transit launching at the same time. Sources confirmed that Apple Maps Hong Kong transit directions were ready to roll a long time ago but have been held back for a simultaneous release with Apple Pay Octopus. It makes sense for Apple to offer both services as an integrated whole as they did for the Apple Pay Suica launch. If the Japan launch is anything to go by, confirmation won’t come until very late in the beta test cycle, if at all, Transit will simply appear.

Global FeliCa iPhone and Apple Watch
The Apple Pay Octopus device profile will be the same as Suica: iPhone 7/7 Plus purchased in Japan (models A1779/A1785), iPhone 8/8 Plus, iPhone X, iPhone XS/XS Plus, iPhone XR set up with Face ID or Touch ID, and Apple Watch Series 3 and later. There is a chance that iOS 13 will retroactively enable FeliCa for all iPhone 7 models to support the Apple Pay Octopus launch.

The iPhone XS and XR models have the A12 Bionic exclusive Express Transit with power reserve feature that gives users an additional 5 hours of Express Transit use when iPhone in low battery power reserve mode. A12 powered FeliCa performance is also much improved over previous iPhone models. My experience with Apple Pay Suica performance on iPhone XS has been as fast and reliable as plastic Suica with none of the iOS issues of previous iPhone models, performance on iOS 12.3 is stellar. Apple Pay Octopus performance on iPhone XS/XR models will have the same advantages.

Hong Kong iPhone X users need to be aware of the iPhone X NFC hardware problem found on early production devices that causes endless issues with Apple Pay Express Transit. Apple has quietly provided replacement Revision B iPhone X devices for users who experience Express Transit gate errors in Japan and China. Hopefully Apple will offer the same courtesy to Hong Kong iPhone X users who encounter the issue.

The First Transit Platform Business Model
The Hong Kong Octopus card was the first real transit platform (contactless transit and eMoney) that had a tremendous impact on the development of Transit for London (TfL) Oyster card, Opal in Australia and other transit card fare systems around the world. It’s great for Hong Kong users that OCL is expanding the Octopus platform to include more digital wallets. I hope OCL continues to expand both the service on other digital wallets, and the business opportunities. For Apple this is an important opportunity to kick Hong Kong Apple Pay use into high gear and will certainly drive Apple Pay credit/debit card use on the recharge end far more than regular bank card Apple Pay, last but not least it’s a vindication of Apple’s global NFC “it just works” anywhere vision for Apple Pay.


Related Apple Pay Octopus Coverage
Future of Octopus Transit Platform (6-28-2019)
Global NFC on iPhone and Android (7-16-2019)
iPhone 7 FeliCa and Octopus Support (7-18-2019)
FeliCa Dude Detailed Analysis of iPhone 7 FeliCa and Octopus (Reddit 7-19-2019)
Octopus Coming to Apple Pay (Initial coverage from 12-18-2018)