Financial Times Dissin’ Japan again: The painful path of curing Japan of its cash addiction

The UK media has a thing about Japan. Japan must always be portrayed as ‘pathetic’. Pathetic losers, pathetically isolated, pathetically out of step, arrogant, etc. Does this make UK readers feel better about themselves? I don’t know, but I have learned to take any UK media coverage of Japan with a large dose of skepticism, laugh at it, or do what the Japanese do: ignore it all together. After all, who cares what UK journalists think about Japan when they cannot be bothered to spend the time and effort to find out what’s really going on, and actually report it.

Case in point, today’s Financial Times piece: The painful path of curing Japan of its cash addiction (paywalled). It has all the nasty lazy hallmarks of UK style Japan reportage: the ‘Galapagos trap’ (Japanese isolated from the rest of the world), the ‘FeliCa failure’ (FeliCa has stunted the spread of cashless systems that have taken hold elsewhere in the world, i.e. EMV is king of the world and Japan is isolated), and now the ‘QR code failure’ (Japan was slower than China applying OR codes for mobile payments, isolated and out of step again).

This last failure, of course, leads into the recent 7-Eleven QR Code 7pay launch and security meltdown, and the narrative that FT really wants to sell here: the grand parable of modern Japan, a nation of has-beens:

the (7pay) incident has become part of a grand parable of modern Japan: a country in a permanent tension between its high-tech image and the realities of aging consumers and squandered opportunities.

WTF? I thought we were talking about contactless payment trends in Japan here, not the UK take of the world order. Why is the management failure of one company the only narrative that matters despite the many successes and changes happening right now? FT’s pathetic Japan narrative, is pathetic.

FT offers little hard evidence for the failure of FeliCa and QR, and of course completely ignores the success of things like Apple Pay Japan, the expansion of global NFC smartphones, the continuing growth of Suica use, and neglects to explain the reason behind the Japanese QR Code push: obtaining personal information for Big Data.

As any Japanese IT journalist will tell you, analyzing real Japanese contactless payments market trends is very difficult because the beast is highly regional. What you find in Tokyo is completely different from Fukuoka, or rural areas. You have to look at many different pieces to understand the trends and where they are going.

The best thing FT can offer is a 6,000 person web survey from MyVoice which does not include any crucial context, which in Japan is everything. What regions are we talking about here, what’s the age spread, the amount of use, average purchase amounts, etc. There are tons of little web surveys but they don’t convey the big picture. Sure, lots of people might use PayPay to buy this weeks discount gum or get the startup campaign goodies, but that has nothing to do real day to day contactless payments use.

The rest of the piece is padded out with phoned in quotes from the usual suspects: ‘financial analyst experts’ from Credit Suisse and Mizuho Financial Group, the latter of which have skin in the game with their own QR Code payment system.

All in all it’s the low easy road that big established media takes too often these days. The Financial Times had a great opportunity to explain the exciting changes happening in the Japan payments market right now, and open a lot of eyes and minds. Unfortunately they blew it. That’s a loss for everybody, especially FT.

Update: fellow blogger in Japan Michael Camilleri has posted his take of the infamous Financial Times piece, a highly recommended read.

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NTT Docomo Celebrates Osaifu Keitai 15th Anniversary

It all started today, July 1, 2004, when NTT Docomo launched the iMode FeliCa mobile wallet, called Osaifu Keitai in Japanese. It was the world’s first mobile payment platform, a tremendous achievement and forerunner to the Apple Pay and Google Pay services we have today. To celebrate the anniversary Docomo has lined up a bunch of point campaigns for all the Osaifu Keitai payment networks: Mobile Suica, iD, QUICPay, WAON, nanaco, Edy. Unfortunately Apple Pay users are only eligible for iD and QUICPay (details will be available later).

Docomo also has a nifty anniversary page highlighting all the Osaifu Keitai payment networks, when you tap or click the payment icon it plays the feedback sound you hear at the register. The Suica sound is the original one we heard way back in 2006, which you don’t hear anymore. It’s a fun way to celebrate the trailblazing mobile payment platform that Docomo and Sony invented.

Visa Japan Finally Ready to Sign on to Apple Pay Japan?

IT journalist Junya Suzuki was answering a question of mine regarding dual mode (EMV/FeliCa) credit/debit cards which are somewhat mainstream, even on Docomo dCard, but the plastic issue Sumi Trust Visa contactless cards are EMV only.

I guess Visa Japan still wants to promote payWave (banded as Visa Touch in Japan) over better customer service. Because if Visa was promoting better customer service, they would offer dual mode for plastic cards and Apple Pay like Mastercard and American Express do.

Visa Japan has yet to sign directly with Apple Pay, the reason why Japanese issue Visa cards don’t work for Apple Pay Suica Recharge, but there may be hope. Suzuki san’s tweet suggests Visa Japan might finally sign with Apple Pay, “in the very near future.”

I certainly hope so, but given that Visa Japan has ‘been in discussions with Apple’ to officially join Apple Pay Japan since the service launched in October 2016, and have done nothing the whole time, I’ll believe it when I see it.

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.

Suica Tops Contactless Use in Tokyo Area

Another market survey, another few data points. MoneyZine writers Hideyuki Kato and Isamu Saito report some interesting results of 2 different cashless use surveys. As I reported a year ago, Apple Pay has brought a lot of changes to the Japanese payments market but it’s hard to make sense of it due to highly regional preferences: Suica is king in the Kanto area, ICOCA in the Kansai, and so on.

The 1st data point is a survey from Yumenomachi that ranks the different cashless payment methods:

  • Credit cards: 88.4%
  • Transit cards: 49.7%
  • Apple Pay/Google Pay/Osaifu Keitai: 35.4%
  • Prepaid Reward Cards (nanaco, WAON, Edy): 31.7%
  • QR Codes (Line Pay, PayPay, etc): 25.6%

The 2nd data point is a survey from One Compath. This survey reports 56% of the respondents as using cashless more than a year ago, with slightly different ranking:

  • Credit cards: 71.4%
  • Transit cards: 31.7%
  • Prepaid Reward Cards (nanaco, WAON, Edy): 53.0%

The 3rd data point from the same One Compath survey is very interesting but not surprising. It ranks prepaid card use separately for transit and reward cards by prefecture. Transit card use for payments in the Kanto Area (Tokyo, Kanagawa, Chiba, Saitama) is 85%, while prepaid reward cards are the overall winner on a national basis. This is because of the reach of AEON supermarkets and convenience stores in rural areas where people don’t use transit cards or the local transit cards do not support purchases. The next generation Super Suica format is aimed specifically at incorporating these small rural area transit cards so they can be used anywhere as Suica.

One take away is that in the Kanto area Suica is easily the most used contactless card at checkout (Suica issuance is twice that of PASMO). Credit cards lead in cashless, but are still mostly swipe or Chip and PIN at checkout. When prepaid cards are totaled together, credit card and prepaid card use is almost equal. The surveys do not look at average purchase amounts for the different cashless methods. I suspect that Suica and other prepaid card use leads for smaller purchases while credit cards are used for larger purchase items.

We also know from a previous survey by IT journalist Sachiko Watanabe that most iPhone users do not use Apple Pay:

  • Only 27% of iPhone users who can use Apple Pay use it
  • 50% don’t use Apple Pay but are interested in using it
  • 22% don’t use Apple Pay and don’t care about using it

These numbers jive with the 35.4% digital wallet use figure in data point 1. The short summary here is that there is still plenty of opportunity for Apple Pay to grow in the Japanese market, and the Super Suica format in 2021 has the potential to break down the regionality and shake up the market.