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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The iPhone SE Bright Spot in Japan

MacRumors and other sites are reporting the Counterpoint Research note that indicates iPhone SE sales will be the ‘bright spot’ in Apple’s Q3 2020 quarter. I have alway said that iPhone SE will do well and it will be an especially bright spot in Japan because: (1) it’s the only Touch ID model in the Face ID sucks with face mask era and everybody in Japan is wearing face masks, (2) the easy entry point SE upgrade from pre-iPhone 7 brings those users into the Apple Pay Japan orbit as Japan goes cashless, there’s a regular flow of first time SE ‘I’m on Apple Pay Suica now’ tweets.

The analysis matches up with Japanese SE user comments but, surprisingly, does not mention the iPhone SE Touch ID upside:

Apple’s ‌iPhone SE‌ sales are “unlikely” to cannibalize sales of the 2020 iPhone 12 models because ‌iPhone SE‌ purchasers are “more pragmatic” about price, less concerned with 5G connectivity, and the smaller display is “not considered a hindrance.”

In the current ‘who knows what’s happening today’ environment with talk of another soft lockdown to combat rising 2nd wave COVID infections, iPhone users in Japan will remain hyper pragmatic and face masks will continue to be de rigueur.

For that reason I don’t think iPhone 12 will do very well here and high end iPhone sales will be sluggish until Apple delivers a version of Face ID that works seamlessly with face masks, or something else like in-display Touch ID. 5G won’t move the sales needle. For the time being iPhone SE will carry water for the entire iPhone line in Japan. We’ll find out the full story at the Q3 2020 earnings call on July 30.

Japan Cashless X-Day

Anybody care to chart the Japanese cashless transformation?

Now that the CASHLESS Rebate program is over with transaction rates reportedly going back to ‘normal’ (an estimated 1% rise over rebate program rates), JP media outlets report that some smaller merchants might go back to cash to keep profit margins intact. Real transaction rates are always hush-hush but QR payment rates recently revealed in connection with the Japan QR (JPQR) unified code scheme give us an idea what goes on behind the curtain:

NTT Data already lowered basic CAFIS transaction rates in response to the stera payment co-venture from SMBC-Visa Japan-GMO. As the JPQR transaction rate chart makes clear, banks and payment players have plenty of transaction rate wiggle room. The Japanese government is pushing cashless. If necessary the push will become shove for lower rates and yet another cashless program but where do things stand right now?

July 2020 is the proverbial “X-Day” crossover point: Japan is cashless now, even though the transformation is uneven, ongoing and very messy. On the customer side cashless is the mindset and survival behavior for many Japanese, even for older folks who under normal circumstances would prefer using cash until they day they die.

Faced with the reality of handing money that carries the risk of infection, people are going cashless instead especially with contactless smartphone payments. Junya Suzuki was right all along: Apple Pay turned out to be “the black ship of payments” catalyst that finally nudged Japan from cash to cashless. That and COVID.

Market analysts will undoubtably demand chart data that clearly explains and quantifies the transformation before declaring a ‘winner’ but they have a long wait. That’s because the cashless transformation is sloppy with huge regional variations, all happening right before us. But all of this is an afterthought and our priorities are different now, getting accurate market survey information of any kind in the current environment is extremely difficult.

The Tokyo Olympics was supposed to be the event heralding the cashless era but the COVID crisis has forced much more change very quickly. Evidence is best found in the countless little rituals of daily life that have evolved and are not going back. Merchants who do go back to cash face the risk of fewer customers: when offered a choice people choose cashless.

This realization hit me yesterday when my partner complained about his Docomo dPAY points taking a hit because the Summit supermarket staffer tapped a wrong payment button on the new POS cashless menu options added on July 1. He wanted to pay with iD. A year ago he never used iD, dPAY or Apple Pay and never wanted to, but life changed.

These days I hear contactless reader sounds everywhere, FeliCa chirps and EMV beeps are common as clear plastic sheeting and foot position floor stickers at checkout. And just when posting this the Ministry of Land, Infrastructure, Transport and Tourism announced that Japanese Expressways will be going cashless only with ETC. If there’s anything that defines this sea change it is this: it’s not a ‘victory’ over cash that the media sometimes depicts, nor does it feel like progress. In the COVID era it merely feels like survival.

Another Japanese government cashless promotion gimmick: My Number Point (Updated)

Now that the CASHLESS Rebate program is over, we have a new Japanese government program promoting cashless use for points: My Number Point. And yes it comes with an app. There’s just one tiny gotcha: you have to have a plastic My Number card because as the campaign name makes clear, the whole enterprise is about motivating people to register for a one. The program runs July 1~March 30. Users can get the equivalent of up to ¥5,000 in points in exchange for ¥20,000 worth of cashless shopping.

The basic idea is that starting from July 1, you use the My Number Point app to read the NFC tag in your My Number card and register your cashless payment service of choice: Suica, PayPay, credit card, etc. The full list is here.

After you buy ¥20,000 worth of stuff by August with your registered cashless payment, you get points. We won’t know how bad the sign up process is until it goes live. At best it looks convoluted, and a lot of hoops for only ¥5,000 in points. COVID is already more than enough motivation for going cashless but payment players are dutifully offering extra points for registration.

As your dutiful field reporter, I volunteer to dive into the NFC tag registration process on July 1 and tell you all about it. Here’s the official list of compatible iPhone devices.


Suica/JRE POINT Registration
The registration process, like the app, looks and acts like a government bureaucracy product. It’s not pretty but gets the job done. But it’s a fun exercise using the My Number Card NFC tag for secure login. Here is a quick summary.

Before you start: you’ll need a My Number Card, and a JRE POINT account with your Mobile Suica registered.

(1) Have your My Number Card and 4 PIN login code ready and launch the app. The My Number Card NFC tag read with iPhone seems very allergic to any surrounding metal. Hold the card in your hand, it takes about 8 seconds for a successful read.
(2) Follow steps 1~6 shown here to login and get to payment system registration
(3) You need 3 pieces of info from your JRE POINT account: the JRE POINT exchange number, the registered katakana account name, the registered birth date. Tap the link to the JRE POINT page and login, copy the JRE POINT exchange number and paste it in the Payment Service ID, past the katakana name (no spaces) in Security Code 1, enter the registered birth date into Security Code 2. Enter the last 4 digits of your current iPhone number in the last field.

JRE POINT Info for My Number Card Point registration

(4) After entering and confirming your JRE POINT information you have to enter your My Number Card PIN and read NFC tag again. This completes the process, you should see a green confirmation checkmark.

From here all you need to do is purchase ¥20,000 worth of goods or recharges with Mobile Suica by August 31. The timing and details of the My Number Point bonus into your JRE POINT account should be coming soon. Check the My Number Point page for details.

Dear Starbucks, please give us a NFC Starbucks rewards card

The Starbuck app server was down this morning. Fortunately my daily Starbucks has Suica payments and the staff kindly stamped customer receipts so everybody could get the Starbucks Card refill discount. I posted a silly throwaway tweet about it but received some thoughtful reader feedback that put things in perspective.

On the surface it’s true that Apple controls Wallet NFC card access with PassKit NCF Certificates. However, the Mobile Starbucks Card for Osaifu Keitai came out in March 2014, two years before FeliCa made it into iPhone 7. The mobile card was put out by Starbucks Japan which was not majority owned by Starbucks USA. USA corporate bought out the Japanese business partner at the end of 2014 and brought it under full control. Up until then Starbucks Japan stock was a popular item for the free coffee ticket goodies that came with it. The food was better too. Mobile Starbucks is a relic that will likely be ditched at some point, like the free coffee tickets and good food.

Starbucks USA has never shown any real interest in creating a NFC rewards card. They chose the barcode app route that supports direct bank card registration and recharge. Eventually they added in-app Apple Pay and Google Pay support. Silly market analysts announced that Starbucks app was ‘bigger than Apple Pay’, until they decided that Apple Pay was bigger than apps after all.

Starbucks has put real effort into protecting staff and customers during the COVID crisis. It’s an amazing effort that doesn’t get much attention. Despite this, physical Starbucks Cards are still mag strip cards handed over to staff and swiped at checkout. If Starbucks put out a digital wallet Starbucks Card, how should they do it?

The easiest way on iOS would be an Apple VAS NFC contactless pass. In Japan this is what PONTA and d POINT cards are. Apple VAS is NFC A but it works in combination with any Apple Pay payment protocol, EMV, FeliCa, PBOC, etc. Smart Tap is a similar rewards card NFC method for Google Pay.

This is what customers get when they pay with ‘Apple Pay’ on the Lawsons JP POS system: the reader polls the Wallet default payment card and rewards card, the payment transaction occurs and points are automatically added to the rewards card.

This flexible ‘2 in 1’ contactless payment + rewards package would be very nice to have with Starbucks Card. For app users it would eliminates the ‘open app, pull up barcode, make sure card has enough balance’ nonsense that happens far too often and is easily thwarted by a weak WiFi signal. It would also reduce handling physical cards at checkout.

Unfortunately this requires a POS system that supports NFC contactless, and Starbucks in Japan only supports popular contactless payment cards like Suica and PASMO when the store location is in a station retail area. Starbucks has demonstrated a lot of forward looking business sense in the COVID era so far. I hope they rethink their Japanese POS strategy and incorporate contactless payments and reward cards as standard at all store locations.