VISA Japan has been busy this year marketing VISA Touch contactless cards with the SMBC group, leveraging the SMBC-GMO-VISA co-venture stera payment platform that launched in 2020. We have already seen a few VISA Touch stera powered ‘transit boutiques’: smallish inbound tourist centric transit companies that don’t support Transit IC cards like Suica and PASMO. This could be changing.
Nankai Electric Railway along with VISA Japan, SMBC and QUADRAC Co., Ltd., a SoftBank and hedge funded systems company that develops VISA Touch and QR fare systems among other things, announced a co-venture test of VISA Touch and QR Code open loop fares for ‘inbound tourists’ on Nankai transit gates in 2021. ‘Test’ not ‘rollout’. That will come later in 2022. The wording of the press announcement is vague with photo ‘images’ of what it might look like. It reads more like a VISA PR release than a Nankai one.
To understand why Nankai is testing this it helps to know a few things. Nankai lines service Kansai International Airport that up until COVID hit had a lot of inbound tourists from China visiting Universal Studio Japan in Osaka, amoung other things, the AliPay thing being the most important.
The other important thing to know is that Kansai area transit companies (Hankyu, Keihan, Nankai, Hanshin) never developed a PASMO like transit prepaid card for non-JR group transit companies. PiTaPa is a failure because it’s a post-pay transit card, a SMBC managed credit card with credit card checks. It cannot be bought from a station kiosk like any other transit prepaid card and is unsuitable for students and other commuting masses without credit cards or the patience to apply and wait for a PiTaPa card in the mail that is pretty much limited to transit and a few select participating merchants.
This is why Hankyu and Osaka Metro ‘borrow’ the JR West ICOCA card for issuing commuter passes. It’s a mess. But it also means that transit companies in the PiTaPa SMBC orbit are in a weaker position, open to SMBC pressure and loan incentives to try VISA Touch open loop (not really open loop when it’s an exclusive VISA Touch arrangement and nothing else right?).
It also helps to know that stera Panasonic JT-C60 NFC readers are the slowest transit Suica compatible readers I have every used. These same readers are used in VISA Touch transit boutiques and we all know that EMV contactless is slower than FeliCa.
So what is Nankai testing exactly?
(1) Transit gate friction. Transit IC card tap speed is less than 200 milliseconds (ms) while legacy mag strip paper ticketing is 600 ms. The stera Panasonic readers are far slower than 600 ms, if that’s what they end up using for the test…it’s hilarious to imagine Nankai retrofitting a bulky slow Android based NFC reader on a Omron transit gate.
(2) Fare system overhead. How much does the centralized fare processing and linking to VISA and AliPay cost and how does it perform versus local stored value transit IC cards.
The eventual rollout plan will be based on hardware and system cost balanced against the estimate of capturing more inbound transit revenue. There are also transit gate layout issues to consider, is it better to go with slow and fast lane transit gate layout, or retrofit every gate as cheaply as possible. Does any of this make sense in the COVID era when tap speed is more important than ever?
The Real Friction Point: Inbound and Privacy
We’ll see how it works out but since the advertised point of this effort is for the benefit of inbound tourists, I’ll come out and say it: one of the best things about COVID is the elimination of inbound tourists and their luggage on commuter trains in heavily trafficked areas like JR East Yamanote.
Large groups of people with lots of luggage riding commuter trains during rush hours without following common sense etiquette is a huge stress point for regular commuters. When doors are blocked by luggage and tourists who don’t know, or don’t care about other people using the train, it’s trouble in the making.
The hallmark of any good transit system is safety and reliability, a finely tuned balance of servicing all customers and wisely investing in infrastructure. And transit data privacy, one of the things that open loop advocates don’t talk about. There are risks of sharing transit fare data with outside companies, which is what open loop is all about. All too often in the grab for inbound tourists and in the rush of implementing open loop, transit companies ignore this balance at the expense of regular transit riders. Nankai must keep this in mind. If they do not it will end up being a ‘do less with more overhead’ endeavor, an expensive and security risk proposition for Nankai, but not for VISA, SMBC and QUARDRAC.
UPDATE 2021-12-01: Nankai and SMBC announced an extension, open loop tests will continue for another 12 months up to December 12, 2022. Test stations have also been added on the Koyasan line. It’s pretty easy to see that COVID related dramatic declines in tourists and transit use has delayed the rollout, which is exactly what the announcement outlines. In other words: we need more user data before spending a lot of money on a new ticketing system that might not recoup costs.
The real aim of Nankai open loop is the uptick in tourist traffic in connection with the Osaka-Kansai Expo 2025. Hopefully the state of world travel will be in better shape then than it is now.