Growing the Global NFC Footprint

One of the challenges facing Hong Kong Octopus Card expansion to digital wallet platforms is the fragmented state of Android hardware and the small footprint of Android global NFC devices. There are lots of devices that can do NFC-F because it is required for NFC certification, but there are far fewer global NFC ‘it just works’ devices. As always Reddit user FelicaDude has the definitive explanation:

There are millions of NFC-F phones and devices outside Japan. That is because Type A and FeliCa are core requirements for NFC certification. If a phone supports NFC, it supports FeliCa.
What is required to be compatible with most payment terminals in Japan is an Osaifu-Keitai provisioned secure element: that can be a SWP-enabled SIM card (not available yet), the Mobile FeliCa chipset with embedded SE, or an iPhone 7 provisioned for Osaifu-Keitai.
The international iPhone 7s can do basic FeliCa read/write without encryption, because they embed a FeliCa-capable CLF <contactless frontend>. Apple has chosen not to provision them with Osaifu-Keitai keys, probably to avoid paying royalties to FeliCa Networks for each device.

The good news for iPhone users is that Apple went global NFC with iPhone 8/X/Apple Watch Series 3 and later by implementing the complete FeliCa secure element (SE) package with keys on the Apple A Series and S Series chips. The important thing to remember is that Apple does this without any dedicated FeliCa chip, it is Apple hardware top to bottom. This means that Hong Kong already has a large footprint of Apple devices ready to use Apple Pay Octopus from day one.

The bad news for Android users is that a similar global NFC packaged Android device doesn’t really exist yet. All-in-one off the shelf global NFC chip packages like the NXP PN81 are new to the market, but the standard practice to date has been adding a dedicated FeliCa chip to a smartphone model only in the markets that need it, like Japan.

The Google Pixel 3 has the global NFC ready NXP PN81 but has not used it for FeliCa support, going with a separate hardware model for Japan. The Pixel 4 leaks so far have not offered any NFC information. The success of Pixel 3 in Japan guarantees that at the very least, Google will offer the same deal: a Pixel 4 FeliCa chip model for Japan.

If Google is smart, Pixel 4 will activate and leverage the entire range of PN81 global NFC functions for all models, or have its own embedded secure element on a Google custom chip similar to what Apple has done. Even with that in place, and even if Google Pay Octopus was a reality, the footprint of Octopus ready Android devices in Hong Kong is far smaller than iPhone and Apple Watch.

The global NFC iPhone and Apple Watch footprint means that lots of people in Hong Kong, or visiting Hong Kong can add Octopus to Apple Pay when iOS 13 arrives this fall. I predict 2 things: Apple Pay Octopus will be as successful in Hong Kong as Apple Pay Suica in Japan, and Apple Pay Octopus launch day will experience a similar stamped of online users that nearly brought down Apple Pay Suica iCloud back in 2016. It will be interesting to see what Octopus Cards Limited does with that success and how it grows the global NFC footprint.

UPDATE
FeliCa Dude has answered and posted the definitive take of iPhone 7 FeliCa support for all things from Octopus to iOS 13 Core NFC. We own him thanks for taking the time to cover all the angles in such detail.

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Apple Pay Octopus and the Pixel 4 Global NFC Question

Apple Pay Octopus on iOS 13 this fall puts Pixel 4 and Google Pay in an awkward market position. Pixel 3 is a success in the Japanese market because of the inclusion of a dedicated FeliCa chip in Japanese models. Non-JP Pixel 3 models have a global NFC ready NXP PN81 chip but FeliCa is not activated for some reason, inbound users cannot use Google Pay Suica, or anything else, in Japan.

The question for Pixel 4 is this: will Google Pay use all the features of the NXP PN81 chip, or go with a custom implementation of FeliCa on their own chip for a global NFC device along with an enhanced Google Pay that seamlessly incorporates and builds on Osaifu Keitai software (killing off JP carrier Osaifu-Keitai SIM nonsense for good) instead of simply candy wrapping it, like they do for Pixel 3 JP Google Pay.

If Google goes with the first choice, Google Pay Octopus becomes a future possibility. It would also force other Android smartphone manufacturers to follow suit.

If Google keeps that same Pixel 3 arrangement they have for Pixel 4, a separate hardware model for Japan, Google Pay Octopus becomes a murky proposition. More of the same would be a shame. I hope Google does the smart thing and the right thing: global NFC on all devices is the way to go.

Contactless Payment Turf Wars: Apple Card and the Prepaid Innovation of Apple Pay Suica

The Apple Card tag line says it all, “A new kind of credit card. Created by Apple, not a bank.” This is a bank card that’s not a bank card, except that it is a bank card with basic limitations that can never be changed: a bank card is postpay and this chains it to the creaky banking industry that everybody knows and loathes, with predatory fees, credit checks and service nonsense.

To overcome this limitation, and the slow uptake of EMV Apple Pay and Apple Cash, Apple is merging the postpay Apple Card and the prepaid Apple Cash, glued together with Apple Pay into one service. Two is better than one, right? This merge of postpay + prepaid is a long overdue development for the American market that builds on ideas and experience that Apple gained from Apple Pay Suica in Japan.

The credit card drag on Apple Pay adoption
The slow uptake of Apple Pay and other digital wallets in the USA is pointed out from time to time. The eMarketer blog piece in May 2018 predicted stronger growth for In-App loyalty prepaid cards like Starbucks, over Apple Pay and Google Pay. The Starbucks card is like many prepaid loyalty cards that offer points and rewards along with apps that let users add the loyalty card and attach a credit card for easy In-App reloads. It’s an easy entry point for customers to enjoy the benefits of using prepaid cards and get the most out of their purchases.

There are other factors cited for slow Apple Pay adoption rates in America, but I think the basic reasons are simple. During my 4 month American stay in 2018, I was surprised how slow and uneven the Apple Pay experience was at checkout. Pulling out a plain old credit card was often the faster hassle free choice. Either way it’s the same credit card right? It’s marginally move convenient, but not a new service.

That is the problem. Apple Pay and digital wallets are new technology but bank cards carry the combined weight of a creaky, out of date banking industry. Banks operations are retro, analog businesses living in the digital age on borrowed time. Bank cards with all kinds of new technology attached to them are still the same stodgy card services from the same stodgy banks.

The real point of the eMarketer piece is that In-App prepaid cards with postpay credit cards attached on the backend, offer customers a convenient new merged service that is than far better than either by itself, with bank cards limited to a indirect backup role. The prepaid card is the main point of contact between the customer and merchant, not the bank card. And this makes all the difference because it’s where the innovation is.


Japan Transit IC eMoney Transactions for non-transit purchases topped 8 million a day in April 2019

Apple Pay Japan success built with prepaid
Prepaid card use for transit and purchases in Japan dwarfs credit card use, especially with younger people. The major prepaid cards include WAON, nanaco, Rakuten Edy and Japan Transit IC cards (an interesting bit of history is that Suica and WAON were initially conceived to be a single card). Of these the Japan Transit IC card standard occupies a very special category, 255 transit companies form a common interoperability standard which includes Suica. There are more issued Transit IC cards than people in Japan, everybody has one.

File:ICCard Connection en.svg
Japan Transit IC Map, a very cool animated timeline is also available

The core group of 9 major cards (Suica, PASMO, ICOCA, TOICA, Kitaka, manaca, SUGOCA, nimoca, HAYAKEN) also share a common prepaid purse: Transit IC eMoney. The national coverage and scale of the major cards transforms Transit IC eMoney into something special found nowhere else: a de facto national prepaid card standard.

Transit IC eMoney transactions for non-transit purchases topped 8 million a day in April 2019. At current growth rates, transactions should be more than 10 million a day when Super Suica arrives in April 2021 and significantly enlarges the common eMoney purse footprint while unifying it.

The success of Apple Pay in Japan is very different from any other country: it was not accomplished with bank cards, it was accomplished with the Suica transit card with it’s common prepaid Transit IC eMoney purse. The success formula has 2 basic ingredients: de facto national prepaid purse for transit and purchases matched with Apple Pay postpaid bank cards for recharging Suica. Prepaid + Postpay as one service with bank cards limited to the backend for reloading.

The concept is just like In-App prepaid loyalty cards: a prepaid front end with a flexible open ended postpay backend. But this one is much more powerful because it can be used everywhere for transit and purchases. Putting the Suica prepaid card on Apple Pay and Google Pay with their infinitely flexible postpay backend for instant, anywhere, anytime recharge and reloads takes everything to a whole new level of convenience and use.

One of the failures of Apple Cash is that the current version is pigeonholed as a peer to peer service. How different Apple Cash would be if it was positioned like Suica. Apple Pay HOP users are just getting their first taste of new things now, as will Chicago Ventra users when Apple Pay Ventra launches later this year. Unfortunately eMoney is not part of the mix for HOP and Ventra, only transit, nor are they compatible with each other.

A first step towards virtual currency?
I used Suica before Apple Pay arrived and have nearly 3 years of Apple Pay Suica use under my belt. The prepaid + postpay service model matched with transit + purchase eMoney is a combination that is almost impossible to describe to a person who has not lived with it. The daily experience is very different from using bank cards which feel like hard money wrapped in plastic. Hong Kong Octopus card users are probably the only ones who can relate to it, and then only Smart Octopus in Samsung Pay users.

Suica eMoney on digital wallets represents a small step towards virtual currency in a way that bank cards do not. QR Codes serve the same function for China, the first small step away from hard cash. Even though QR Codes payment systems are usually hard wired to bank accounts, they are not run by banks.

None of these schemes are real virtual currencies of course, but they are an important cushion for the mind. The daily use experience prepares people for a future where payments, and the whole infrastructure supporting them, will be completely different from what we have now. It changes old habits, and more importantly, old ways of thinking, just a little. Taking the next step from there is much easier.

A few days ago I wrote:

The Apple Card rollout due this summer is a head scratcher. There are lots of things Apple Card can do in Wallet that other cards, as yet, cannot do. It feels too big and important for just a press release and a new web page. And yet, by itself, it’s too small for a full blown Apple event. I think the Apple Card rollout is going to be a very interesting release for all things Apple Pay.

The new Apple Card + Apple Cash will be the first major postpay + prepaid Apple Pay service for iPhone users in America. The experiment will be fascinating to watch, but Japan remains the world’s most exciting and heady payments market experiment there is.

WWDC19 Apple Pay Scorecard

NFC technology lineup in iOS 13

Now that WWDC19 is over, here’s a look at the scorecard compared with the WWDC19 Apple Pay wish list. iOS 13 Core NFC gained Read/Write support for NDEF, FeliCa, MIFARE, ISO 7816 and ISO 15693. This means that iOS 13 apps can finally support contactless passports, drivers licenses, retail and manufacturer vicinity NFC tags, transit ticketing, badging, and much more. For developers this is a huge and welcome development.

The details are interesting. On the MIFARE side, Ultralight, Plus and DESFire are supported, the security weak Classic is not. FeliCa is there of course, but the weird thing is that all devices from iPhone 7 and above are supported. You might remember that from the Apple Pay point of view iPhone 7 is not a global FeliCa iPhone, but it is from a iOS 13 Core NFC point of view. I guess FeliCa support on all iPhone 7 models was really there all along, Apple just didn’t tell us…until now.

WWDC is all about developers so there was no marketing mention of the new iOS 13 Core NFC enabled NFC tag Apple Pay that Jennifer Bailey showed at Transact last month. It makes more sense to mention new services like that with new products at the fall event.

The Apple Card rollout due this summer is a head scratcher. There was nothing new for PassKit or Wallet at WWDC19, but there are lots of things Apple Card can do in Wallet that other cards, as yet, cannot do. It feels too big and important for just a press release and a new web page. And yet, by itself, it’s too small for a full blown Apple event. I think the Apple Card rollout is going to be a very interesting release for all things Apple Pay.

The end of just “Apple Pay”: iOS 13 and multiple Express Cards

Express Transit Card for transit cards and Express Mode for Student ID cards in iOS 12 are kind of a mess. They are the same option for the same thing with different names in different places. Express Mode for Student ID is on the card itself, while Express Transit is in Wallet settings.

Express vs Card Clash

Prepaid cards, stored value (SV), present a problem for Wallet. SV cards in Wallet want to be exactly like they are in plastic, tap and be done without any authentication. But what happens when Wallet has multiple SV cards, each one wanting to be an Express Transit or Express Mode card? The fine print on Use Express Transit with Apple Pay illustrates the messy dilemma and limitations of iOS 12 Wallet: you can set one payment card and one transit card per transit network, except for China which doesn’t allow EMV Express Transit at all.

The fine print on Apple Support

In this scenario an Apple Pay user can set both a HOP card and a payment (credit/debit) card to use on Portland TRiMet. What happens at the transit gate if the iPhone user also has a Student ID card in Wallet with Express Mode turned on? Apple Pay HOP and Student ID card are both MIFARE cards, the payment card is EMV. If TriMet has their backend system act together and are using the latest NFC chip sets from NXP, the gate reader will call up the HOP card and ignore the others. Everything ‘just works’, the user is on their way.

If the transit fare system is not configured correctly, or uses outdated technology, the same Apple Pay user ends up with ‘card clash’ at the transit gate. Instead of automatically selecting the HOP card, the gate says, ‘give me a NFC card’ and Apple Pay goes into default mode that completely ignores Express Transit: the user has to unlock the device then manually select and authenticate a card with Face ID/Touch ID.

Multiple Express Cards in iOS 13 Wallet

There are major Japanese eMoney prepaid cards on Android Osaifu Keitai and its candy wrapper cousin Google Pay that are missing on Apple Pay: WAON, Rakuten Edy and nananco. One ‘missing on Apple Pay’ reason is that iOS 12 Apple Pay Wallet lacks a smart way to deal with multiple Express Transit and Express eMoney Cards. Wallet can hold multiple Suica cards but only one of them can be Express Transit. It’s the same deal for every eMoney card.

This started to change in iOS 12.3 with the addition of Express Transit with Payment Cards. The massive rebuilt of iOS 12.3 Wallet means that iOS 12.3 is basically iOS 13 Wallet already, and the heavy work continues with the temporary removal of Payment Card Express Transit in iOS 12.4 Public Beta.

iOS 13 Wallet will complete the journey, hopefully delivering a vastly improved and unified Wallet UI that elegantly solves the multiple Express Transit/Express Card issue, and eliminates card clash. At a transit gate the user should only have to tap, at checkout the user should only have to select a payment logo on a screen or tell the sales clerk Suica, Mastercard, etc., and pay.

The end of paying with just “Apple Pay”?

More payment options in iOS 13 Apple Pay Wallet will present users with a problem: more choices. Telling the sales clerk “Apple Pay” does’t work anymore except in regions where bank cards remain the only Apple Pay option. In Japan, Apple Pay users already say Suica, iD, QUICPay or NFC Pay. Hong Kong Apple Pay users will have the option to use Octopus or bank cards, and so on.

As Apple Pay matures with more payment options and services, it starts to resemble our real overstuffed wallets. 30 years of using a Mac has not organized my work life one bit. In the long run, I doubt Apple Pay will organize my wallet life any better, but it’s a hell of a lot more fun to use.

Full coverage on the WWDC19 iOS 13 Apple Pay Wish List