Note: with the Apple keynote, global FeliCa iPhone 8 and iOS 11 Apple Pay, there is lots of information scattered across many posts summarized here along with new analysis. The use of FeliCa refers to the NFC-F part of FeliCa technology except when discussing payment networks.
To understand Apple’s 3rd revolution let’s start at ground zero, the NFC Forum Tokyo meeting in July 2016 where JR East dropped the Suica bomb and explained the NFC normalization effort to make all the different NFC flavors (A-B-F) work as one.
There are two parts:
- An earlier contactless payment NFC normalization effort which resulted in the current EMV NFC A-B standard
- A later public transportation NFC normalization effort that resulted in a NFC A-B-F standard that is now a requirement for Global Certification Forum (GCF) certification of global NFC devices
Here is a summary of those efforts. I hope your eyes don’t glaze over.
How many sore butts and bad bento did it take to produce that? The only important thing to remember is that EMV only uses NFC A-B and the requirement for global NFC devices is NFC A-B-F. This is the problem: two different standards for contactless NFC. Do we sit around and wait for EMVCo to re-normalize and add NFC-F?
Apple’s genius solution was ignoring all that and choosing the new GCF NFC standard to launch Apple Pay into the Japan market.
iOS 11 Apple Pay features
iOS 11 Apple Pay combined with global FeliCa in iPhone 8, iPhone X and Apple Watch Series 3 is a very flexible solution with innovative features that pay big dividends not only in Japan but around the world. These include:
- Visitors to Japan with the new iPhones can easily add FeliCa cards to Apple Pay
- Other countries can add FeliCa Suica-like services
- Seamless NFC A-B-F switching allows FeliCa and EMV payment systems to co-exist
- Dual device account ID for Japanese FeliCa credit cards that allow them to be used with Apple Pay outside of Japan
- Up to 12 Apple Pay cards can be added to iPhone 8, iPhone X and Apple Watch Series 3
These improvements remove the FeliCa barrier for both inbound visitors and outbound Japanese. It would be great if Apple had on the fly NFC switching for adding a FeliCa ID to Apple Pay credit cards that need one temporarily, but credit card companies, banks and the industry would not allow that: too many processing fee apple carts would be knocked over.
But it is a great start that does not end there because Apple’s real genius stroke is Apple Pay Suica.
Why Suica is the only card that matters
Credit cards are messy. Creating one is complicated, you have to be a certain age, there are pin numbers, security codes, expiration dates and credit ratings to deal with. As easy as Apple Pay makes it, you’re still dragging around the creaky complicated territorial infrastructure mess the banking industry built for credit cards. Debit cards are a little easier but still have the same creaky processing infrastructure.
Apple Pay Suica does away with all of this. Anybody can get one and add one to Apple Pay. It only holds the money that you add to it. You can recharge it on the go, you can recharge it with cash, you can use it without a network connection. You can use it for all public transit in Japan and buy stuff anywhere too.
Suica also solves a big problem for visitors to Japan. There are not many stores in Japan where visitors can use foreign issued Apple Pay credit cards: McDonald’s, Ikea, Tokyo Disney World. It will get better but these things take time.
If you have iPhone 8 this is solved now because you add Suica and charge it with your Apple Pay credit card of choice. Easy. Done. Get on the train and go.
Suica is the secret sauce that makes Apple Pay Japan ‘sticky’. Apple Pay is breaking the Japanese mobile wallet utilization glass barrier that has stubbornly remained at 20% no matter how many mobile wallet capable mobile devices are out there, regardless of platform.
Once users join Apple Pay Suica, credit cards, points and convenience keep them there.
The 3rd Apple Revolution
Apple Pay, lead by Suica is changing the Japanese market. Japanese IT journalist Junya Suzuki wrote a book about Apple Pay when it came to Japan last October. He titled it “Apple Pay: the black ship of payments”. This is a reference to the ‘black ships’ of the Perry Expedition that opened Japan in 1852. Black ships in Japan mean big change.
Suzuki san thinks Apple Pay is the 3rd Apple revolution. The first was iTunes, the second was iPhone. I think he is right. Apple Pay is rapidly changing payments in Japan right before our eyes. It’s going to be very interesting to see how iPhone 8 global FeliCa and iOS 11 Apple Pay will change payments in the rest of the world.
And I thank Junya Suzuki for letting me steal his Japanese title.