End of the line for Suica and the native Japan Transit IC smartcard standard?

There is a consistent theme among some Japanese tech journalists: the native Japan Transit IC smartcard system is obsolete and destined for that fabled junk heap, the Galapagos island of over-engineered irrelevant Japanese technology. The arguments always boil down to cited higher costs of maintaining the ‘over-spec’ proprietary FeliCa based inflexible transit IC architecture in face of ‘flexible, lower cost’ proprietary EMV contactless bank payment tap cards and smartphone digital wallets used for open loop transit. Is Suica really ‘over-spec’ or is it clever stealth marketing sponsorship from EMVCo members and the bank industry disguised as journalism? Logically the same argument applies to proprietary MIFARE smartcard transit systems as well but is never mentioned, presumably because it was invented in Europe instead of Japan.

Despite all the digital ink on the subject I have yet to see a single article where said costs are actually shown and compared. Smartcard deposit fees are a standard way to offset plastic issue costs and Japanese transit companies like to earn interest off the float of card deposits and unused stored value. But this is never discussed nor the fact that digital wallet issue is free of hardware costs.

Bank payment cards and smartcards have very different business models. EMVCo members and their card issuers can hide associated hardware and licensing costs in bank transaction fees that NXP, FeliCa Networks and other smartcard technology solution providers cannot. Without hard numbers we can only take journalist claims at face value, that transit smartcards are not smart at all, but expensive obstacles to lower cost open loop centralization nirvana.

I don’t buy the ‘one solution fits all’ argument and neither should you. One constant issue in our internet era is that too much centralization is not only a technology monoculture security risk, cloud services fail, and cloud centralization is abused to limit human rights. As speech is censored on SNS platforms and online profiling is used to limit freedom of travel with politically biased no fly lists, it is inevitable that face recognition transit gates will be used to track people and implement ‘no ride’ or ‘limited ride’ policies. These are issues that people must be aware of in the relentless rush towards online centralization of transit payments and services.

Nevertheless there are articles with valid criticisms well worth reading. I ran across one recently by Masanoya Sano on Nikkei that asks a good question: ‘Does taking 14 years to deliver Mobile PASMO mean the transit IC card foundation is crumbling? While I don’t agree with everything Sano san says he makes a good case that Japan Transit IC association members are failing in the face of a hydra-headed crisis: declining population with less ridership, fierce competition from other payment services such as PayPay and EMV based VISA Touch, and ridership killing COVID lockdowns. He argues that transit companies must fix some basic problems if the Japan IC Transit standard is to survive:

  • Increase coverage: get all transit on the Transit IC card service map
  • Go mobile: for all transit cards
  • Improve the transit IC card architecture: improve compatibility and loosen up current restrictions for 200 km and cross region transit, and the ¥20,000 stored fare limit

I believe most, if not all of these can be addressed with next generation FeliCa + 2 in 1 Suica (aka Super Suica) launching this year and deeper payment infrastructure sharing between transit companies. Nothing is guaranteed of course but here’s a look at each category and possible solutions.

Coverage
The transit IC coverage gap is the biggest failure of Japanese transit companies and there are big gaps. Suica only covers major population areas in Tokyo, Niigata and Sendai, roughly half of the stations on JR East are not wired for Suica. A similar situation applies to the other JR Group companies. JR East has promised to get their entire rail network on Suica with a simplified lower cost cloud based Suica in the 2020 fiscal year ending March 2021 but has yet to announce any details (they are specifically referenced in the new Suica Terms and Conditions effective March 27).

On the plus side JR West is expanding ICOCA coverage with a light rail approach of incorporating NFC readers installed in the train car for tap in/tap out for unmanned stations. No wires. SMBC and VISA use the same strategy for their VISA Touch transit boutique marketing program. It’s a practical low cost strategy for lightly traveled rural lines that reduces the hard wire requirement. Only stations that need it get wired and even those installations can use the lower cost JR East cloud based system.

JR West ICOCA area expansion includes on train NFC readers starting March 13, 2020

All major transit companies need to install these lower cost solutions to fill the transit IC gaps and integrate remaining isolated regions. VISA Touch transit boutiques are marketed as a solution for inbound and casual users, but these EMV only installation leave those transit areas off the transit IC grid for regular users and don’t work for wider area travel.

Mobile
Mobile Suica and Mobile PASMO combined represent 80% of the current transit IC card market. Mobile ICOCA (JR West) is due to launch in 2023. There is no word yet about mobile for TOICA (JR Central), manaca (Nagoya City Transit rail/bus), PiTaPa (Kansai region private rail/bus), Kitaca (JR Hokkaido), Sugoca (JR Kyushu), nimoca (Nishitestsu), Hayaken (Fukuoka City Transit). This is a big challenge but the borrowed Suica infrastructure used for Mobile PASMO is a strategy that can be applied to the other major cards.

Improving Transit IC
JR East is releasing the 2 in 1 Suica card architecture that incorporates new FeliCa OS features the most important being the “2 cards in 1” Extended Overlap Service. New regional transit card using this new FeliCa OS and Suica format are launching this month in Aomori, Iwate and Utsunomiya. The next challenge for JR East is expanding 2 in 1 Suica to existing and important region transit cards inside the JR East transit region such Niigata Kotsu Ryuto and Sendai City Transportation Bureau icsca.

The ultimate long term success of the Japanese Transit IC systems depends on infrastructure sharing and integration. For this to happen other JR Group companies and private rail outside of the JR East regions have to incorporate the 2 in 1 Suica format and improvements for their own cards and regions. Only when all Transit IC Mutual Use Association members are using the new format can they link and combine services in new ways, and add new features such as raising the stored fare card value above the current ¥20,000 limit.

Will it be enough? I have no idea. Immediately I see problems for the Kansai region PiTaPa card association companies (Hankyu, Hanshin, Keihan, Kintetsu, Nankai) as they have to make fundamental changes to use the new card format. I don’t see a Mobile PiTaPA in its current incarnation and this is why SMBC (who run PiTaPa card accounts) and VISA are targeting the Kansai area for VISA Touch transit: non-JR Kansai transit companies have their backs against the wall and no way easy forward to mobile except for going all in with JR West Mobile ICOCA, or taking what SMBC offers them.

Open Loop competition
Kansai area private rail companies never managed to create the equivalent of PASMO. PiTaPa is a postpay card that has credit card issue checks and cannot be purchased at station kiosks like all other transit cards for casual use. Issue is limited, so Kansai transit companies issue JR West ICOCA commuter passes for people who can’t use credit cards. This is the context surrounding the SMBC VISA Touch transit for Nankai announcement that got lots of press attention as the first major test deployment of open loop on a Japan Transit IC card system.

Junya Suzuki’s latest Pay Attention installment has a deep dive on the VISA Touch Japanese open loop transit system solution powered by QUADRAC Q-CORE server technology. It is the solution also used for the Okinawa Yui Rail monorail fare system that integrates Suica/Transit IC and QR support. He argues that open loop EMV is good enough because, (1) we don’t need the over-spec FeliCa 200 millisecond (ms) transaction speed (it’s actually faster, between 100~150 ms), (2) it has a leg up on future MaaS and cloud integration. Holding onto Suica local transaction performance as ‘faster/better’ is a myth holding back progress.

I have tremendous respect for Suzuki san and his work but his arguments fall down for me here. He completely ignores the white elephant in the room: closed loop is here to stay because the open loop model cannot support all fare options. Even on the open loop systems that he champions, Oyster and Opal for example, closed loop cards are still essential and are transitioning to a closed loop EMV model for digital wallet issue. The only change is the closed loop card transition from MIFARE to EMV because bank partners are running the transit system account system backend instead of the transit company. In other words it has nothing to do with technology at all, it is bank system convenience. Bank convenience is what it all boils down to.

Making the right technology choices are essential in our era of limited resources, ride the right horse and you succeed. I want to believe the cloud holds the promise to extend transit IC to low transit volume rural areas that don’t have it now, but every time I use a slow cloud based stera payment terminal I’m reminded how impractical that approach is for stations with high transit volume.

Does it make cost sense to replace the current transit IC system and re-create it with EMV open loop when Opal, Oyster and OMNY systems will always need closed loop cards? The practical thing is leveraging a good system already in use. Upgrade the Japan Transit IC system we have now, spend precious resources that fix current limitations and extend it with new technologies like UWB Touchless.

The strength and weakness of the Japan Transit IC standard is that it’s not top down but based on mutual cooperation. It’s not one entity but association members have to move forward as if they are one. JR East has been the technology leader and is working to improve and share it at lower cost. 2021 is not the make or break year for Japan Transit IC, but it will be an important and challenging one that will set its future direction.

The good old Japan Transit IC card mutual use map, all the little one way arrows marked with the ‘IC’ logo pointing outside the main IC area indicate transit system compatibility.