Apple’s Handsome Anthony Moment

Good old William S. Burroughs hit the nail on the head explaining what the title of Naked Lunch really meant: that awkward frozen moment when everybody in the restaurant sees exactly what is on their fork. iOS developers staring at the App Store fork don’t like what they see: an Apple platform that’s supposed to be a level playing field, where the reality is that Apple plays favorites and cuts side deals, a losing game of lowering standards.

People far smarter than me already editorialized Tim Cook’s opening statement at the Congressional antitrust hearing. I won’t go into it here except to say, what did they expect? The whole affair, on all sides, media included, was like a bad lip read parody, an awkward Handsome Anthony intro without the humor.

Octopus Cards Limited (OCL) released an iOS Octopus app for tourists last week that perfectly illustrates what’s at stake in Apple’s losing game of lowering standards. The long delayed Apple Pay Octopus launch in June was very successful but OCL shut inbound visitors out by limiting the Apple Pay Octopus service to Hong Kong issue bank payment cards. This is something that Apple Pay Suica has never done. All Apple Pay cards and iPhone users from around the world are welcome to use Suica. This is why Suica remains the gold standard of what a transit card on mobile should be.

Instead of following the Suica example, the Octopus Tourist app adds an Octopus card to Apple Pay Wallet with a non-Hong Kong issue card. However the currency charged to the users Apple Pay cannot be in local HKD currency. OCL forces the users to choose another currency which because the default currency for the life of the card. This adds an invisible surcharge over using local currency transitions, 4% or more, which is OCL taking a cut.

This is called forced Dynamic Currency Conversion (DCC) and is a credit card compliance rule violation. Visa, Mastercard and all stipulate that merchants cannot impose any requirements on the cardholder to use a non-local currency. Why OCL is so brazenly breaking these rules, and why Apple is allowing this level of gouging in a major app from a major Apple Pay payment provider is not good at all. As FeliCa Dude says, “Apple should swiftly rebuke this kind of grasping banditry lest it poison their platform.”

If Apple does nothing, I think we’ll have the answer Tim Cook didn’t give at the Congressional hearings. Okaaaay?

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T-POINT? We don’t need no stinkin’ T-POINT

In the ephemeral COVID era we live in assurance don’t come easy, especially with JP cashless market data. Half the fun is taking the crumbs you find, a 1000 person web survey here and there, and seeing what trends you can tease out of it.

First of all the usual disclaimer: cashless use is highly regional, depending on transit use and many other factors like age group, shopping habits, and reward points. It’s this last item that makes the CreditCard no Yomimono survey so interesting.

Reward points are the dangling carrot all Japanese cashless players use to drive card use. New comers like PayPay use them shamelessly to capture customers and build their platform. Japanese customers love to play the ‘what combo gets me the most points’ game but they are also notoriously cold shoulder when they feel gypped. And once they drop something, they never come back.

The survey skips over regional point systems like JRE POINT (though I think that’s debatable considering Mobile Suica on Apple Pay/Google Pay/Osaifu Keitai), and examines ‘national’ point systems: d POINT, T-POINT, Rakuten POINT and PONTA with a simple question. Which one do you use? 2,271 people said:

  • Rakuten POINT: 59.9%
  • d POINT: 18.4%
  • T-POINT: 14.4%
  • PONTA: 7.3%

It’s clear to see why JR East cut that special deal for Rakuten Pay Suica: the different online Rakuten businesses for shopping, travel, etc. mesh well and there are a lot of people invested in Rakuten POINT. The deal puts Super Suica in a good 2021 launch position for new local transit partners, MaaS NFC Tag Suica and more as the platform grows.

It’s a bittersweet deal however for JRE POINT. It’s a real shame and missed opportunity that the major IC transit cards (Suica, ICOCA, TOICA, etc.) are compatible for transit and eMoney, but not for points. Even if they all kept their own point branding and simply offered 1=1 point exchanges, people would use them more.

The decline of T-POINT is not surprising, dropping from 60% in a 2015 survey. Culture Convenience Club (CCC) and SoftBank ran T-POINT into the ground and it’s not coming back. It’s only a matter of time before SoftBank kisses T-POINT (and CCC) goodbye and unveils PayPay POINT.

PONTA is another major that has not gained much traction so far but this might change with the recent LAWSON Bank PONTA Plus branded credit card push. All of the point systems need to add Apple VAS and Google SmartPay support and drive acceptance on the merchant POS level. The less we have to deal with separate plastic point cards, all the better.

JRE POINT and Ekinet finally connect in 2021

In case you ever wondered what the QR Code reader on JR East station tickets machines is for: picking up online preordered JR East commuter passes, and nothing else. This will change in the Super Suica summer of 2021 along with a ‘renewed’ Ekinet service. Instead of entering a PIN code, users can flash a QR Code in the Ekinet App at station kiosks to pickup reserved paper tickets or pay for tickets at an ATM.

The biggest change is that Ekinet points are morphing into JRE POINT…finally. Just like you use JRE POINT for a free Suica recharge, you can use JRE POINT for ticket purchases, updates to reserved seats, Green Car seats, etc. The expanded Ekinet will support more Shinkansen eTicket discount options and Business Ekinet will be gaining Shinkansen eTickets for the first time. The press release says that the inbound only JR-EAST Train Reservation system will be getting an overhaul at the same time.

Let’s hope the renewed Ekinet is easier to use than the current one.

The All or Nothing Cashless Downside

Following the recent devastating floods in Kyushu, Kyodo News posted a short story noting that people complained about cashless payments because nothing works without electricity and mobile service. Hard cash they said, ‘really feels safer.’ The article also noted that the Japanese government has allocated funds to investigate the issue and will test disaster relief cashless strategies later this year.

The piece stirred up some online discussion between Japanese IT journalists who cover mobile payments. With natural disasters happening every year in Japan, disaster relief is a very important issue. The journalists questioned the cashless ‘all or nothing’ downside in disaster situations. Junya Suzuki posted a new installment in his long running ‘Pay Attention’ series that addresses some of the issues the Kyodo piece raised.

While it is true that hard cash is an excellent last resort, that’s only true if you have it on you when disaster strikes. If you loose your possessions and local area infrastructure is heavily damaged, getting access to your cash via ATM is just as problematic as finding a cashless checkout that works. What’s the fastest way for people in a disaster situation to get access to their money? Mobile ATM bank trucks in Kyushu provided some relief but as Suzuki san explains, there are multiple weak links in the payments chain, from local ATMs to bank servers, when electricity and mobile service is knocked out over a wide area for long period.

Some people will roll their eyes and moan about Japan being so behind the times, but in addition to testing electronic backup methods the government tests will include paper list checks of credit cards, just like the good old days of credit card carbon paper slips. This is plain old visual number checks by real people. Will the tests take into account that latest issue bank cards have removed card numbers á la Apple Card? I hope so. No doubt the paper lists will be faxed and require a hanko seal or thumb print for verification, but hey, in a disaster anything that works is good.

Road to Super Suica: cloud and offline feature integration for MaaS perfection

Mobile Suica Shinkansen eTicket service via Suica App ended in March 2020, replaced by the cloud based JR East Ekinet Shinkansen eTicket service. Since Mobile Suica Shinkansen is gone and Ekinet eTickets live on the cloud, I assumed that iOS 14 PassKit would remove the Mobile Suica Shinkansen related (isInShinkansenStation) call because there’s no need for it anymore.

A reader pointed out that not only was I wrong, he reported that iOS still uses the PassKit Suica Shinkansen call with Ekinet eTickets. Notification Center throws out the same ‘Shinkansen’ Suica Notification when the user goes through a JR East Shinkansen gate with an eTicket.

This is handy for the user event transaction record even though the Shinkansen transit fare is not recorded: eTickets have nothing to do with Suica balance transactions, they’re along for the ride so to speak. The interesting thing is that the Shinkansen notification does not show when using the JR East ‘Touch and Go’ Shinkansen service which does use the Suica balance. It also does not show when using the JR Central Shinkansen SmartEX/EX Reserve eTickets which are cloud based like Ekinet.

The eTicket side attraction offers some insight into the ‘what stays offline and local, what goes to the cloud’ dilemma JR East (JRE) faces as it closes in on the next generation ‘2 in 1’ Suica architecture due for release in spring 2021. JRE has said many times and in many ways that the future of the Suica platform will combine cloud services with the fast local processing of the FeliCa powered Suica architecture. However, details are few, with different pieces dribbled out in bits like the new Ekinet Shinkansen eTicket service.

What’s the overall vision and goal of next generation Suica which I call Super Suica? There’s a lot of ground to cover to find out so let’s examine things in 2 basic categories: the card architecture (offline and local) and the payment platform (cloud) even though those distinctions are increasingly blurred. Here is my take based on what JRE has announced so far.

Super Suica: the Transit Card

Next Generation Suica “2 cards in 1” architecture, new FeliCa OS, new IC card format announced by Sony, JR East, JR East Mechatronics (JREM) in September 2018 for release in spring 2021. Ultra Wideband Touchless support will likely be in place on the mobile side though it will be a few years before Touchless transit gates are in service.

The next generation ‘2 cards in 1’ Suica architecture hosts partner transit cards and services on Suica infrastructure, effectively extending the Suica system to non-JRE transit companies. 2 in 1 partner transit cards gain the benefit of Suica hardware and Mobile Suica infrastructure with considerable cost savings related to plastic card issue and management. The heart of Super Suica remains the offline stored fare. JRE hopes to grow Mobile Suica cloud services as much as possible with the lower cost next generation Super Suica architecture.

Stored Value Update, Region expansion and Commuter Pass Changes
Starting with the basics, it’s a no-brainer that Super Suica will raise the current ¥20,000 stored value limit, likely doubling it to ¥40,000. This would put it in line with other eMoney prepaid cards like WAON and nanaco, also similar to the recent Hong Kong Octopus stored value update. The increase would have broad appeal to tourists, business travelers and shoppers everywhere and extend the JR East ‘Touch ‘n Go” ticketless Shinkansen service area.

Transit cards cover wide areas but transit card commuter pass areas are currently limited to sub-regions hard-wired for IC transit card support

A long standing hurdle for Super Suica to clear is the transit IC card region limitation. The current transit card architecture assigns cards to a unique areas and the stored value doesn’t work across regions. Transit systems within the same card region such as JR East and PASMO have their fare systems connected so that a user’s transit card can enter a JR East station then exit a PASMO member station with the fare instantly calculated and deducted from the offline card balance.

This region limitation is a real problem for transit users in fringe areas. In order to use an IC transit card they have to exit and re-enter separate transit company gates at specific transfer station points. There is a Japanese word for this: matagaru which means ‘dismounting the saddle’. The only viable options are mag strip commuter passes or paper tickets.

The 2 in 1 Heart
In September 2019 JR East, JR Central and JR West announced new cross region commuter pass rules going into effect in spring of 2021, exactly when Super Suica arrives. Superficially the changes are about making cross region local to Shinkansen transfers easier for commuters, but the timing suggests other changes are coming.

The ‘2 in 1’ Super Suica concept has special meaning for commuter passes. The current Suica only supports 2 basic patterns via a card id commuter pass account number: JR East only lines, and connected commuter passes covering JR East and connecting lines. 2 in 1 Super Suica will support commuter passes on non-JR East lines and bus lines.


Super Suica: the Platform

File:ICCard Connection en.svg
Japan Transit IC Map

The primary aim of Super Suica is extending the platform reach with shared infrastructure to rural areas too small to establish their own local transit cards. Pay close attention to the transit cards outside the pink area, with the exception of PiTaPa. These are 2nd tier local area transit cards currently orphaned from eMoney or transit interoperability. There are also ‘off the map’ areas such as Utsunomiya Light Rail and Iwate Transit Co. Ltd. who have announced Super Suica agreements with JRE. These are the initial target areas.

Super Suica enlarges the pink area to include those 2nd tier and off the map cards. Those who sign on join the common interpretability area for transit and eMoney, and also gain access to Mobile Suica hosted Apple Pay Suica, Google Pay Suica and Osaifu Keitai. This is a real boon for smaller areas who, up to now, couldn’t afford to launch their own card operations. I suspect it will be very attractive to all transit card operators who run on shoe string budgets, they can save money by offloading card operations to JRE and get the mobile goodies.

What does Super Suica mean for the major transit cards like ICOCA and TOICA? It depends on what kind of deal JRE offers them. Even if the majors don’t sign on directly I see them getting access to the new Suica card format and Mobile Suica IT assets. At the very least we’ll see something similar to Mobile PASMO: licensed Mobile Suica IT assets rebranded as Mobile ICOCA, Mobile TOICA, etc.

2 in 1 Reward Points and Auto-Charge
In addition to the 2 in 1 commuter passes, Super Suica also supports different reward point systems. Users will be able to exchange points for a Suica recharge just like they do now with JRE POINT and Rakuten Pay points. Auto-Charge for 2 in 1 partner branded credit cards will certainly be supported as well. Points and Auto-Charge may seem mundane but they are very important to customers and transit companies, a vital part of luring foot traffic, new businesses and visitors to local areas in an era of shrinking passenger traffic.

Expanding and leveraging the Recharge Backend
The ever expanding Mobile Suica recharge backend is a fascinating development mostly ignored by the media even though it’s where the action is. Suica and the other transit cards are a huge green pasture full of cash (less) cows waiting to be milked by card companies and payment platforms. JRE lets them milk Mobile Suica cows for a cut. Up until Apple Pay Suica came along in 2016, JRE was the only recharge backend. As of July 2020 there are 5: JRE, Apple Pay, Google Pay, Mizuho, Rakuten. 2 in 1 partners will have the ability to add their own recharge backends with apps, if they so choose.

Other points to remember: the recharge backend only works on iOS and Android platforms, point rewards can be used for Suica recharge. Currently that only works with JRE POINT and Rakuten Points but this will be extended to the ‘2 in 1’ partner point systems.

JR East plans to grow Suica financial services and has invested in crypto coin ventures

MaaS Suica
It’s clear that the really big Super Suica changes will be on the cloud side. Transit card eMoney has been a huge success, but Suica has to evolve to remain a viable payment platform in today’s hyper competitive world of mobile payments.

That next step is Suica NFC Tag payments. Think of it as Suica transactions without a reader, where your smartphone is both Suica card and Suica reader and let’s call it MaaS Suica. JRE joined the MaaS alliance in November 2019 closely followed by an December 2019 press release announcing NFC Tag tests with 4 partners: JRE (Suica), DNP (NFC Tags), Sony (FeliCa) and AquaBit Spirals (NFC Tag SmartPlate payments software).

JRE & us (AquaBit Spirals) have announced to conduct technical verification for the use of NFC tags focusing on transportation and ‘payments’, and that the role of Sony is to investigate technical specs as part of promoting a lifestyle through ‘FeliCa’ tech. You may know what we mean😉

AquaBit Spirals CEO Tomohiro Hagiwara

It’s clearly implied by the diagram and by comments from AquaBit Spirals CEO Tomohiro Hagiwara that Suica powers the NFC Tag payments middle section via the cloud. This means the Suica card balance on smartphones works ‘over the cloud’. Suica is unchained from the NFC reader and can be used to pay for any kind of NFC Tag linked service or item.

JRE has been testing MaaS using QR Codes instead of NFC Tags with their Ringo Pass app for Saitama. The pilot project is covered in the NFC Forum article JR East Railway And NFC Propelling The MaaS Revolution. A 2nd MaaS pilot project has been announced for Sendai. An interesting side note here is that the old card reader+Windows+plastic Suica card Suica Internet web shopping service is going away this year, the final plug is due to be pulled by September 2020. I think we’ll be hearing much more about MaaS Suica with the Super Suica launch.

NFC Tags and App Clips level the playing field with QR
One of the ways PayPay and other QR Code players disrupted the Japanese market so quickly was leveraging the low entry point bar of static QR codes combined with mobile smartphone apps. All stores need is an official QR Code sticker. Small merchants are freed from having to invest in POS hardware to go cashless.

NFC Tags eliminate the cost advantage of QR and level the playing field. Combined with the capabilities of iOS 14 App Clips, they become a killer app:

The pieces appear to fit very nicely now: the NFC background tag sheet pops-up ‘while the screen is on’, the right code snippets load in for a simple focused task, the user can Sign In with Apple ID if needed, and pay with Apple Pay. Simple, uncluttered action; no apps, no Safari launch. And we have background NFC tag reading on every current iPhone model.

MaaS Suica combined with new technologies like App Clips and background tag reading iPhone has the potential to take the Suica eMoney payment platform to a whole new level. Success depends on how aggressively JRE promotes the service and how they license it to sister transit card operators. It would be great if we got MasS Suica, MaaS ICOCA etc. working seamlessly as a single mobile payment just like transit cards do now.

The Bigger Picture
Super Suica, the card, and Mobile Suica aim to deliver more services, such as the renewed and expanded Ekinet coming in summer 2021, with a lower cost internet based cloud infrastructure while keeping the great thing about Suica: super fast secure offline transactions and interoperability.

Based on what JRE has said over the past 2 years in the press and in recent company announcements, it seems we’ll have 3 basic versions of Suica: (1) Hard-wire Suica (what we have now) for major stations and stores, (2) Wireless Suica, a simplified low cost cloud based gate terminals to cover rural stations not currently on the Suica map, (3) MaaS NFC Tag Suica to cover everywhere else.

There will be 2 kinds of Super Suica partners:

  • Direct 2 in 1 partners host cards on Super Suica with all the benefits of Mobile Suica.
  • Indirect partners get the new Suica card architecture, New FeliCa OS improvements, Mobile Suica IT assets and wireless Suica gate system technology. The arrangement will be similar Mobile PASMO who licensed Mobile Suica IT assets but run their own cloud service with their own backend mobile recharge, commuter passes and reward points.

If Mobile PASMO is any indication, I think most of the major transit card players will end up as indirect partners. It would be great if Super Suica turned out to be an all encompassing nationwide thing on digital wallet platforms. The truth is that commuter passes, recharge backends, auto-charge and point reward empires are the crown jewels. Transit companies will always want to keep those in-house.

Next generation Super Suica won’t be a slam dunk national transit card that does it all, but it will be start line towards that goal. Think of it as a new foundation of shared infrastructure and services with transit companies working toward a cohesive de facto standard that has lots of mobile potential.

The timing is also good: in these COVID challenged times all transit companies are under enormous pressure to streamline, consolidate and bury old grudges. The current situation will likely drive Super Suica uptake as the payoff is more mobile services with reduced operating costs. Another case of COVID driven ‘unfortunate success’. I remain hopeful that, in the end, we’ll be pleasantly surprised.