iOS 12 update woes: one step back after one step forward for iPhone X Suica users

Poor iPhone X Suica users. No sooner did they finally fix iPhone X Suica hardware problems by getting a Revision B iPhone exchange when the iOS 12 update set them back. Here we go again.

This time it really is software with iPhone X Apple Pay Suica Express Card sometimes unresponsive and Apple Pay demanding a Passcode/Face ID unlock at transit gates, or just good old error flicker. Users with Rev-B iPhone X devices say they didn’t have these problems with iOS 11.4.1.

This kind of thing has happened before: the Apple Pay Japan debut iOS 10.1 release for iPhone 7 had transit gate teething problems and the iOS 11.1 Apple Pay Cash debut release made life miserable for all Apple Pay Suica users regardless of iPhone model.

After dealing with Suica hardware problems for so long iPhone X users are very sensitive and, understandably, easily upset given that Apple knows about the iPhone X Suica problem but refuses to acknowledge it publicly, putting users through the Apple Support runaround game. I suspect iPhone 8 users are experiencing the same iOS 12 Suica issues but are less vocal about it.

This kind of Suica, “iOS loves me, iOS loves me not” version by version game is a consequence of Apple requiring iOS to operate Suica on pre-A12 Bionic devices. As my iPhone XS review makes clear, essential Suica operations run on A12 Bionic without iOS. This makes iPhone XS and iPhone XR Apple Pay Suica ‘bulletproof’ to any given iOS version. It just works, even when the battery runs down.

As one Japanese user complained on Twitter last night, “Is this (iOS 12 Suica) problem just an Apple ploy to get us to upgrade to iPhone XS?”

That’s not exactly the sound of a satisfied Apple customer eager to upgrade to a new iPhone. This years iPhone launch day was very quiet in Japan. Apple had better get cracking on fixing problems here if they value Japanese customers and want to keep them. These days Apple seems to take Japan completely for granted.

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Value Capture and the Ecosystem of Transit Payment Platforms

AppleInsider Daniel Eran Dilger’s very long editorial Apple Services and the ecosystem of value capture has an interesting bit at the beginning:

The term Value Capture applies to rail and transit operators that are given the rights to develop the land around their stations. America’s intercontinental train routes were developed by railroads that were deeded land along their planned rail lines. These plots were then sold off or developed, capturing some of the value added by the fact that that land was adjacent to the transportation service the railroad had built and was operating.

Today, while most of America’s current transit systems (from Amtrak to BART) are now on the brink of failure and are often in worse shape than what you find in third world countries—despite the high tax subsidies paid to sustain them—there are many examples around the world of public and private transit operators performing extremely well simply because they were given the rights to develop the land around their stations, leading to extremely lucrative revenue sources that sustain their operations and growth while they provide efficient transportation services to the public.

Dilger goes on to explain value capture in the App Store ecosystem but misses important transit connections with Apple Pay:

The most successful value capture transit model in the world is the Suica Transit Platform business model on full display at  Tokyo Station. The shopping experience both inside and outside the transit gate is mind-boggling (the Drip Mania coffee softcream is to die for if you can find it) as is the cash flow. If JR East offered business tours in English the waiting lines would look like the lines at Tokyo Comic Con. It’s very strange that other transit agencies around the world, ahem in the west, ignore studying the Suica Transit Platform business model.

Tokyo Station is the Suica card epicenter for transit (regular trains, Shinkansen, buses), shopping, and other services like vending machines and coin lockers. You can buy Shinkansen tickets on the go on your smartphone. Every single store register has a Suica reader and the payment choice is either cash or plastic credit cards but contactless payment is strictly Suica. That is not a problem because Inbound Apple Pay users can join the Suica fun.

There has been a lot of overblown media hand wringing that Japanese contactless payments usage rates are far below what they are in China and Korea, and the Japanese government hopes to raise contactless payment usage rates to 40% by 2025 over the current 20% rate. This “problem” is remarkably easy to fix: create an open shared mobile transit cloud infrastructure that follows the Japanese Transit IC Card Interoperability model. Get the big Japanese transit cards on mobile that unlock the commuter pass and loyalty point goodies associated with the plastic IC cards, and the problem is solved. It’s that simple.

If that cannot be accomplished the Japanese government could talk JR East into hosting everybody else’s transit card on the Mobile Suica cloud with agreeable terms for big and small players. A concept just like the recently released Apple Pay Mizuho Suica. With all the important transit cards on mobile wallet platforms, contactless payment usage rates in Japan would quickly skyrocket beyond 40%. I guarantee it.

 

What the Hell is VISA Up To in Japan?

VISA is the least consumer friendly card company in Japan. Period. Mastercard, American Express and JCB are making it easy for Japanese customers to use their cards in mobile wallets (Apple Pay, Osaifu Keitai) both domestically and abroad with NFC Switching. NFC certification requires both NFC-A and NFC-F. Smartphones can do it all, how nice.

Except VISA does not want to play nice, they want to play market politics. Witness VISA’s latest boneheaded move reported by Masakazu Tatara on his excellent EPayments JP site: Visa is pulling the plug on Mobile Visa payWave (NFC-A EMV contactless). The last holdout is Sumitomo Mitsui who will terminate service at the end of December 2018. VISA on the iD and QUICPay (NFC-F FeliCa) contactless payment networks remains in place as does plastic card payWave.

As Tatara san asks, what is VISA up to? His quick review of the Mobile VISA payWave spec is helpful and remarkably similar to the Mobile FeliCa spec.

The secure methods for storing Mobile VISA payWave transaction information are:

  1. A mobile device with an Embedded Secure Element (eSE)
  2. HCE (Host Card Emulation in the cloud)
  3. A “Mobile eSE” SWP SIM
  4. A NFC Contactless Payment Sticker

As Tatara san explains, it is the #3 SIM card option that is really being phased out.  #1 includes Apple Pay and Osaifu Keitai devices. The recently released Google Pay Japan is simply an alternative Osaifu Keitai front end that entirely dispenses with the dead HCE-F. As if this was confusing enough, VISA Japan has not signed on with Apple Pay Japan or Google Pay Japan, nor is VISA payWave compatible with the Osaifu Keitai standard. This leaves #2 and #4 as the only real Mobile VISA payWave Japan options going forward. Good luck with that.

Japanese media has speculated that the Sumitomo Mitsu and Mizuho financial groups want to promote QR Code contactless payments over NFC and the death of Mobile VISA payWave proves that QR is winning the contactless payment turf war. Don’t believe it.

In Japan, aka the contactless payment turf war epicenter, the battle line is stored value vs. credit card with stored value cards the clear winner. This week’s Mizuho Suica announcement is proof of that. There isn’t any money for Japanese merchant support of EMV contactless because most inbound tourist business is mainland Chinese who only want to use QR code contactless AliPay and WePay which Japanese will never use.

So where is VISA going in the Japan market? One guess: the success of Apple Pay Suica and the release of the Global FeliCa iPhone/Apple Watch has VISA at a momentary standstill. Because if Google follows Apple’s lead and releases a Global FeliCa Pixel 3 with NFC switching, things will get very interesting. The more Global FeliCa becomes a ho-hum checkbox feature with every smart device, the more VISA Japan will have to play nice with Apple Pay and Google Pay or risk being shoved aside.

Which brings us back to FeliCa again. To outsiders it looks like the Japanese contactless payments market goes round and round, but it doesn’t. VISA Japan goes round and round playing market politics never moving forward, and that does damage. Last month I wrote:

It would be much better for customers if smart device manufacturers bundled all the major middleware stacks (EMV, FeliCa, MIFARE, China Transit, CEPAS) and simply called it Global NFC. Real Global NFC.

Until the industry does a better job of integrating NFC hardware and the various middleware pieces into a virtual whole, NFC confusion will continue to be a problem.

It would be much better for customers if the credit card industry stopped the contactless payment turf wars and started delivering solutions that help customers instead of sowing confusion.

UPDATE: a reader reports says that payWave on SIM cards is pretty much dead everywhere because the “secure element wars are over.” That’s interesting in light of Huawei offering FeliCa Osaifu Keitai service via Docomo with a SIM card. But that is a Docomo thing more than a Huawei thing.

The Big Implications of Apple Pay Mizuho Suica Branding

Apple Pay Branding Model
A diagram of how Mizuho plugs into Suica and how it could work with branding schemes like PASMO

Mizuho Suica for Apple Pay raises questions and fascinating possibilities way beyond yesterday’s announcement. Why now and why only Apple Pay? Is this the first of many Suica branded cards coming to Apple Pay?

The announcement was short, small and caught Japanese IT journalists off guard. Nobody anticipated Apple Pay Suica branding just appearing and working with a wallet app update. It’s slick and in true Apple fashion ‘just works’, but journalists missed important points with huge ramifications:

  • Mizuho Suica only exists as a virtual card hosted on the Mobile Suica Cloud, there is no plastic equivalent
  • DNP provides the Mizuho Wallet app backend

Put together this means the Apple Pay Suica branding vehicle is complete and ready to roll. Almost exactly the model outlined earlier.

The only remaining question is how many other transit companies and banks are going to get on? It’s tempting to think that with another Apple Event approaching, Suica’s eight sisters will join the Apple Pay branding parade: PASMO, ICOCA, TOICA, manaca, Kitaka, SUGOCA, HAYAKAKEN, nimoca. That’s probably a long shot but the vehicle is ready and waiting if they decide to join and time is running out if other transit areas want to benefit from the flood of inbound visitors anticipated for the 2020 Tokyo Olympics.

The Apple Pay Japan strategy of focusing on the stored value Suica transit card more than credit cards has been a tremendous success. Transit truly is the golden uptake path for contactless payments, exactly as the recent and widely regurgitated Juniper Research piece pointed out but everybody seemed to miss that point.

None of the other Japanese transit cards are on mobile but everybody building their own cloud infrastructure is out of the question. If JR East, DNP and Apple can coax the other Japanese transit cards to join the Suica branding scheme that finally offers commuter plans and more for everywhere and not just Tokyo, Apple Pay will easily become the de facto mobile wallet for Japan.

UPDATE 1: the Apple Pay Suica branding program is underway, sources say ‘stay tuned’ for more Apple Pay Japan payments and apps in the near future, September and October are the usual suspects.

UPDATE 2: I think one reason why Japanese journalists missed the virtual only Mizuho Suica point is because the Android Mizuho Wallet App release earlier this year also had virtual cards with one very important difference. Android Mizuho Wallet creates virtual Mizuho QUICPay JCB Debit cards not Suica. Mizuho Debit cards are hosted on the Mizuho system just like their credit cards. Virtual Suica branded cards are hosted on the JR East Mobile Suica Cloud, a completely different system with completely different implications.

UPDATE 3: I hate the blog title and am utterly clueless trying to find a better one that exactly captures why this is an important development.

Dead HCE-F, Global NFC ≠ Global FeliCa, and Other NFC Confusion

Apple Pay Stacks Explained
A simplified look at the major parts of a NFC contactless payment system like Apple Pay

NFC is a confusing name. It’s an upside down umbrella that catches every single naming convention connected with it: Type A, Type F, EMV, FeliCa, MIFARE, etc.  There are also all those smartphone platform and credit card company brand names built on NFC technology: Apple Pay, Google Pay, NFC Pay, Mastercard Contactless, etc. Companies have greatly added to the confusion changing brand names on a whim: Visa PayWave is now Visa Contactless, Google Pay was Android Pay and Google Wallet before that.

The confusion is perfectly captured by the ever-growing collection of acceptance marks cluttering up Japanese cash register counters.

How do you keep it straight? It helps to remember that NFC is just hardware.

NFC Certification = Global NFC
NFC-A and NFC-F support is required for NFC Forum certification for a device. NFC means NFC-A + NFC-F. NFC-B is optional. All NFC smart devices are Global NFC devices capable of supporting all NFC based payment systems. The street reality is they don’t because smart device manufacturers pick and choose what middleware they support. Everybody supports EMV but manufacturers pick and choose different middleware stacks for different models and different countries.

Global NFC ≠ Global FeliCa
Google’s Pixel 2 a perfect example of a Global NFC device that doesn’t do FeliCa because Google did not choose to license FeliCa middleware. Google also muddied the Android water considerably with the Google Pay Japan rollout that proves HCE-F is dead: Google Pay Japan is just an alternative front end sprinkled on top of existing Osaifu-Keitai middleware. We’ll see what Google cooks up for Pixel 3 but I suspect Google wants to have cake and eat it too: something like Real Google Pay for Pixel 3, Google Pay Lite for everybody else.

Apple on the other hand sells Global FeliCa iPhone 8, iPhone X and Apple Watch 3 worldwide. Inbound visitors to Japan with those devices can add a Suica card with all the benefits to Apple Pay. Inbound Android users are left in the cold feeling confused which is a shame.

It would be much better for customers if smart device manufacturers bundled all the major middleware stacks (EMV, FeliCa, MIFARE, China Transit, CEPAS) and simply called it Global NFC. Real Global NFC.

Until the industry does a better job of integrating NFC hardware and the various middleware pieces into a virtual whole, NFC confusion will continue to be a problem.