I ran across an untidy but interesting Twitter thread that mentioned Apple Pay Suica in the larger context of evolving NFC smartphone services.
Suica (Metro card / digital money in Japan) now lets you transfer the card to Apple Pay. Some thoughts about the future of FOBs, cards, and wallets…You use NFC to transfer your Suica by tapping the card with your iPhone, the same way you’d tap to use Apple Pay.
Devices support some kinds of NFC but not others. Until now, you couldn’t tap to use credit cards — it was blocked by the device.
But this is changing! Apple will support card payments now, in an app that IT will make & provide to vendors. This lets Apple compete in new hardware markets: first phones, now point-of-sale, payments, inventory mgmt, etc.
Physical cards are on the way out. But not everyone is on-board. FOBs, subway cards, ID cards, drivers licenses, and building security cards have been slow adopters of mobile. I’d love to copy my building FOB to my phone 😁 There’s nothing stopping me other than that I can’t.
Apple is moving into those markets….Airports, Driver licenses (in 30 / 50 US states). How far this tech goes & the speed of adoption depends on iOS, Android, and the people at ID / security / FOB / card companies adopting the change. They may need help! And there may be startup potential in that space… if anybody is interested!Twitter thread
The intention was discussing the implications of Apple’s recent Tap to Pay on iPhone announcement, but it stumbled over a rarely discussed but vital point about the extremely slow migration of various physical card services to mobile devices. Why can’t we just load these in Wallet…all the technology is in place right?
The mobile chokepoint is not technology but the backend systems to seamlessly deliver, verify and securely manage individual ‘card’ services (payment cards, transit cards, ID cards, keys, etc.) in digital wallets. Those systems are not up to the job. You can be sure that Apple wants to get iOS 15 ID in Wallet driver licenses out quickly as possible but corralling all those state run systems into a coherent user friendly whole that holds up to the high expectations and massive base of iPhone users eagerly waiting to use it, is a very big challenge. It’s a similar challenge behind every kind of digital wallet service.
This backend weakness is easy to see with transit cards, there are relatively few on mobile with most of the cards exclusive or limited to certain digital wallets like Apple Pay and Samsung Pay. There are special challenges too as a mobile transit card service hosts all the functions of ye olde station kiosk card machine (card issue, adding money, pass renewal, etc.) and more, on the cloud, pushing it out to apps and connecting to digital wallet platforms like Apple Pay.
Despite the challenges, the rewards for going mobile are clear. If there is one lesson Apple Pay proved in Japan with Suica it is that building a mobile foundation early on is key to future success. Mobile laggards like Hong Kong Octopus have paid a heavy price. Unfortunately for regions where transit is operated as a public service instead of a sustainable business, spending money building transit card mobile service systems is often considered an extravagance.
This is why open loop is popular as means to get out of the plastic smartcard issue business and get mobile transit service for free using EMV contactless VISA-mastercard-AMEX payment networks. Like many things in life, free is never free.
Banks have had an easier path to mobile thanks to the strength of EMV payment networks, but only on the payment transaction end. Mobile card issue is another matter up to individual banks. Look at the Apple Pay participating bank list for the United States. The long list didn’t happen overnight. It has taken years for mobile backend systems to be put in place to make this happen.
It’s all about the backend
A sadly overlooked aspect of the Japanese market is the crazy collection of contactless payment options: Suica, iD, QUICPay, WAON, nanaco, Edy, PayPay, LinePay, dBarai, VISA-mastercard-AMEX Touch payments and more. The reason for this is Japan’s early lead in creating the first mobile payment platform, Osaifu Keitai, in 2004.
Not everybody used Osaifu Keitai early on, but it grew the mobile payments foundation so the market was ready for new mobile payment platforms when Apple Pay launched in 2016. More importantly, the early lead also meant that bank card issuers, payment networks and transit companies had backend systems firmly in place servicing a large installed base of various digital wallet capable handsets (Symbian) and smartphones (Android) that quickly extended to Apple Pay and Google Pay.
The backend flexibility is easy to see on the Mobile Suica page that shows all the different Mobile Suica flavors: Android (Osaifu Keitai), Apple Pay, Google Pay, Rakuten Pay. Mobile Suica is also on Garmin Pay, Fitbit Pay and is coming to Wear OS.
Mobile issue and verification
Adding a ‘card’ to a mobile wallet is sometimes called ‘onboarding’, but this is really a banking term: “digital onboarding is an online process to bring in new customers,” as in setting up a payment account and getting an instant issue debit or prepaid card to use in Wallet with an app, or using the app for QR Code payments (like PayPay or Toyota Wallet).
Success or failure for any mobile wallet card service depends on reliability, simplicity and the speed for adding cards and using them. From VISA:
When it comes to digital onboarding, the average amount of time after which customers abandon their application is 14 minutes and 20 seconds. Any longer than this, and 55 percent of customers leave the process.How to boost your customer’s onboarding experience
There is also context. Futzing for 14 minutes might apply for people setting up a bank app, but a transit app user trying to get through a ticket gate at rush hour is a completely different matter. Judging from the large number of negative Suica App user reviews and complaints on twitter, Japanese transit users probably give it 2 minutes before giving up and calling it all crap. Speed is the key.
How long does it take?
The speed of adding a card to Wallet depends on a number of factors, what kind of wallet service are we dealing with (car key, hotel key, home key, office key, payment, transit, ID), does the user need an account first, can a physical card be transferred, what kind of user verification is required.
User verification with digital credentials is still in its infancy which is why driver’s licenses and state IDs in Apple Wallet is fascinating and important. How does one authenticate their own ID card? Apple explains the process but doesn’t say how long verification takes or reveal backend details:
Similar to how customers add new credit cards and transit passes to Wallet today, they can simply tap the + button at the top of the screen in Wallet on their iPhone to begin adding their license or ID… The customer will then be asked to use their iPhone to scan their physical driver’s license or state ID card and take a selfie, which will be securely provided to the issuing state for verification. As an additional security step, users will also be prompted to complete a series of facial and head movements during the setup process. Once verified by the issuing state, the customer’s ID or driver’s license will be added to Wallet.
The verification process is similar to the recent addition of Mobile Suica student commuter pass purchases where students take a picture of their student ID and upload it. Online verification takes ‘up to 2 business days’ because Mobile Suica has to manually verify the ID information with the school. Hopefully the Face ID setup-like ‘additional security step’ is the magic iPhone ingredient for instant verification by the state issuer. However notice that Apple doesn’t spell out where the face and head movements are stored. Hopefully it will stay in the Secure Enclave and never be stored on a server. We shall see when ID in Wallet launches with the iOS 15.4 update.
As you can see from the table below, the journey from backend system to Wallet varies widely by the type of service. The easier additions are the ones done in Wallet app: card scans for payment cards and ID or simply tapping to add transit cards.
Physical card scans are the primary way to add payment cards but this is changing, apps will replace plastic card scans over time. In Japan there are a growing number of ‘instant issue’ credit/debit digital cards from top tier banks that can only be added to Wallet with an app and account. Digital onboarding is the direction banks are going, where everybody has to go to an app first to add a card to Wallet. This leaves transit cards as the only card that can be added without an app or account.
Who owns the thing in Wallet?
Physical keys, fobs and plastic cards may seem inconvenient at times but they are personal property we carry on our person. One downside of digital wallets is that convenience carries a risk that the thing in Wallet isn’t necessarily ours. What is added with a simple tap can also be taken away by a technical glitch, or in a worst case scenario, without our consent. As backend systems improve and integrate, more services will migrate to our digital wallets. Without doubt much of this will be convenient but read the fine print and always keep your eyes open to the tradeoffs and risks. In other words don’t let your digital wallet be a potential chokepoint of your life.