The Apple Pay Code Payment + App Clip Connection

The Apple designed App Clips code combines a visual code and a NFC tag

When the AliPay Apple Pay leak surfaced earlier this year the stock story was that Apple Pay must support AliPay and WeChat Pay if Apple Pay is to have any relevance for iPhone users in China. The real story is more interesting and is centered on App Clips, not AliPay or other specific QR code payment players.

Until now Apple Pay has been all about the NFC ka-ching thing, but it has also evolved along the way. Apple Pay debuted with NFC-A EMV in 2014, it added NFC-F FeliCa with Suica in 2016, MIFARE Student ID passes and PBOC China transit cards in 2018.

iOS 14 is the first time Apple Pay is moving beyond NFC. CarKey will incorporate Ultra Wideband when the Car Connectivity Consortium Digital Key 3.0 spec is finalized and ‘Code Payments’ are coming at some point in the iOS 14 cycle.

Tap or Scan Simplicity
The strength of code payments is simplicity and low cost. iPhone is both a radio (NFC) and camera (scanner). NFC always has an advantage over a scanner in that it works without light and can be activated just by the user pointing their device at an NFC reader or tag.

The downside is the NFC reader side of the equation: the reader + cash register/transit gate + transaction software has a higher initial investment than a code scanner attached to a POS system. The promise of App Clips is they finally put NFC, specifically NFC tags, on the same low cost entry bar of QR codes.

App Clips are activated by:

  • App Clip Codes
  • NFC Tags
  • QR Codes
  • Safari App Banners
  • Links in Messages
  • Place Cards in Maps

Let’s examine the ‘real world’ App Clip activation triggers: Apple App Clip codes, NFC tags, QR codes. For Apple designed App Clip codes, “You can scan them with your camera or tap one using NFC.14” The #14 footnote is interesting: “Camera support for scanning an App Clip code will be made available in an iOS 14 software update later this year.”

This means those fancy Apple designed App Clip codes are coming after the initial iOS 14 launch, and when they do Apple Pay Code Payments will certainly be coming with them. It boils down to one thing: making App Clips a simple tap or scan process. NFC tags still enjoy the ’point here’ advantage as App Clip does the rest. For visual codes the user has to launch the camera and scan before App Clip takes over.

The Code Payment/App Clip Network Connection Requirement
Apple Pay Wallet NFC payment cards have 3 major features that payment apps do not:

  • Direct side button Wallet activation with automatic Face/Touch ID authentication and payment at the reader
  • Device transactions without a network connection
  • Ability to set a default main card for Apple Pay use

Apple Pay Code payments can possibly offer this for dynamic code payments where a scanner reads the code off the iPhone screen. However, static code payments are messy because Apple Pay requires a network connection to process the payment just like apps do. In the Apple Pay code payment scenario suggested by the AliPay screenshot leaks, a static code scan directly activates the appropriate Apple Pay code payment (AliPay, etc.), the user enters the amount, taps ‘Pay’, authenticates, and Apple Pay does the transaction via the network connection. It’s a similar scenario for NFC tag payments.

It’s because of this network connection requirement that I believe Apple is pushing Apple Pay NFC tag and code payments wrapped in the App Clip experience. They will work by themselves of course, but they work better as part of the total App Clip experience. This is where App Clip codes come in.

What about App Clip codes? The iOS 14 preview page says:

App Clip codes are Apple-designed identifiers that are uniquely paired to specific App Clips and provide an easy way to find and launch an app experience at the exact place and moment you need it. You can scan an App Clip code with your camera or by tapping one using NFC.14 We will be adding support for them in an iOS 14 software update later this year.

How is this any different from regular NFC tags or QR codes? I suspect it’s a mini qualification program for developers, payment providers and merchants to supply the ultimate App Clip experience. It also works as App Clip branding and advertising for Apple.

Are there special App Clip code tags that push the App Clip experience further than regular NFC tags and QR? I suspect so and that could be fun. Think about it, what if the Apple designed App Clip code NFC tag activated an App Clip with code payment. A QR payment without the static QR code. That would be the ultimate App Clip experience indeed.

iPhone SE too popular in Japan?

Yes, as crazy as that sounds, but according to Kenta Yamaguchi’s piece on ASCII that’s exactly what is happening. The point of his story is that starting today, second brand carriers Y! mobile and UQ Mobile are selling iPhone SE instead of iPhone 8. Until yesterday they only offered the budget Apple Pay Suica capable iPhone 7 and normally they would offer iPhone 8, but iPhone 8 is nowhere to be seen in the budget lineup. Instead they are offering iPhone SE only 4 months after it went on sale at first tier carriers.

The big loser here is Rakuten Mobile who do not offer iPhone SE. Apple fully understands the ‘Face ID sucks in the face mask COVID era’ market opportunity, aka unfortunate success, that is the A13 Touch ID powered iPhone SE. Apple also wants many background NFC tag reading capable iPhones out there for iOS 14 App clips, so iPhone SE is going on sale everywhere.

Yamaguchi san says the SE is so popular that major carriers are bitching it will slowdown the 5G migration in Japan…while still selling as many iPhone SE units as they can. 5G will just have to wait until Apple comes up with a budget 5G Touch ID iPhone SE.

Hama Pay adds dual NFC/QR as iOS 14 Apple Pay QR payments loom

The recent Bank of Yokohama Hama Pay app update created some buzz with the addition of an Apple Pay iD Prepaid card option. It’s similar to the Toyota Wallet approach: the bank app links the user’s bank account to an open front end bank payment service with QR code payment for debit and credit and NFC payment for prepaid.

The difference with the Hama Pay prepaid card is that VISA JP issues the iD card which means it cannot be used internationally the same way that the Toyota Wallet Mastercard iD card can; Mastercard supports iOS NFC switching, VISA JP does not.

Another weird thing: the Hama Pay ad blurb uses the ‘Touch Payment’ branding phrase with iD. Up until now VISA JP reserved that exclusively for EMV contactless card issue but not for FeliCa cards, which of course iD is. Does this mean VISA JP will finally sign with Apple Pay? Probably not.

The Toyota Wallet also uses a QR+NFC frontend

IT journalists approach the story as a NFC vs QR dilemma for banks, but I don’t think this captures the whole story. iOS 14 Apple Pay is adding QR code payments for the first time and this means that QR Code Wallet payments don’t need to launch an app, they will work directly from the lock screen just like any Apple Pay card.

This represents a big evolution of Apple Pay from NFC only to an open front end approach that includes NFC, Code payments and Ultra Wideband. It will be very interesting to see how bank apps evolve in the iOS 14 era as we move away from the plastic era ‘A vs B’ mind set to the bewildering variety of ‘A~Z take your pick’ era of mobile payments. We still have the Apple Pay/Face ID with face mask passcode nonsense…but that’s another post for another day.

iOS 14 Apple Pay is adding Ultra Wideband and QR into the mix

The Apple Pay monopoly debate: are we really comparing Apples with Apples?

Ruimin Yang’s detailed and thoughtful post, “Apple Pay monopoly, are we really comparing ‘Apples’ with ‘Apples?“, outlines the entire Apple Pay system architecture, how it compares to other digital wallet platforms, (Google Pay, Samsung Pay) and what ‘open vs closed’ means in the whole ‘Apple Pay is a monopoly’ debate. I highly recommend it if you have any interest in digital wallet payments.

As Yang explains, ‘open’ is not easily defined and the options are not easily implemented, especially when it comes to Apple’s highly customized and constantly evolving Apple Pay platform built around their A/S series chip Secure Enclave and Embedded Secure Element. Apple has spent a lot of time, money and effort in building the Apple Pay brand as the high benchmark standard for secure, private and easy to use digital wallet transactions and services. It is not your standard off the shelf NFC + Secure Element package.

It is telling that Germany, a country with one of lowest rates of credit card use and whose banks fought to keep Apple Pay out, is pushing for ‘open NFC’ the most. It sounds like an across the board move but it’s really aimed at Apple Pay.

This is European business politics in the age of digital wallet wars: mobile payments and digital wallets have disrupted everything and the traditional players, banks and card companies i.e. the real gatekeepers, are doing everything they can to keep the upper hand by using the open NFC argument to force their own branding on Apple’s platform in place of Apple Pay.

In the European tradition, regulation is invariably the go to strategy for keeping the status quo. I still think Junya Suzuki has it right: the EU would never demand the same thing of Samsung or Huawei that they are demanding from Apple. In other words, politics.

Previous coverage:
What does open Apple Pay NFC really mean? (11-17-2019)
The Apple Pay EU antitrust investigation (6-20-2020)

Why is MTA OMNY asking Apple to fix Face ID?

MTA is asking Apple to fix Face ID. We all know that using Face ID with face masks sucks but the MTA situation is special. It’s a perfect storm of 2 separate issues, the Face ID with face mask problem and the OMNY rollout problem combined in a COVID crucible.

The MTA OMNY rollout started in May 2019 with Apple Pay EMV Express Transit support, aka Open Loop. This means regular credit and debit Apple Pay cards work for transit on new OMNY readers. It sounds great but there are downsides: open loop doesn’t support the full set of MTA transit fare options so many users have to stick with the good old MetroCard swipe until the native OMNY smartcard arrives.

Lately we don’t hear much about the OMNY card. It seems delayed along with the rest of the OMNY rollout. And because the rollout is delayed, open loop isn’t really useful because the entire system doesn’t support it. The old chicken or egg problem.

One outcome of this mixed mode is the long running complaint of unwanted Express Transit fare charges that has been constant with OMNY transit gates since the very beginning. Many users who still use MetroCard may not be aware that Express Transit is on when going through an OMNY gate. If iPhone gets close enough to the reader, bingo.

This should not be happening, so the stock advice is ‘turn off Express Transit’. The mixed mode MetroCard/OMNY open loop rollout seemed like a nice idea but implementing Express Transit before the system was completed turned out to be a bad call compounded by the COVID crisis, a victim of poor gate design, poor planning and execution.

The irony here is that iPhone users riding MTA end up turning off Express Transit, the very thing that helps keep face masks on. MTA is asking Apple to help but a ‘how to use Face ID with face masks’ ad campaign courtesy of Apple isn’t going to fix anything.

Until the OMNY rollout on MTA is completed and Apple comes up with something better than the iOS 13.5 Face ID tweak, New Yorkers will have to deal with it and use passcodes. After all, commuters with Face ID iPhones in Japan, Hong Kong, Singapore and China have been wrangling with face masks for years and Apple never lifted a finger. Get used to it.