Apple Pay Drove FeliCa Contactless Growth in 2018

The CreditCard no Yomimono site (CCY) has collected and listed all the FeliCa contactless card issued to date numbers released by Japanese companies in 2018 into one convenient table. WAON is missing because AEON didn’t release any numbers this year, CCY estimates WAON card numbers at 70 million . The numbers are fairly recent and roughly inline with the Japanese fiscal year through early 2018. They are very interesting but as CCY points out the number of issued cards does not always translate into actual use: previous surveys indicate that Rakuten Edy is used much less frequently than Suica at the cash register.

Prepaid Transit IC cards (Suica, PASMO, etc.) are by far the largest at 143,700,000 which means that every person in Japan has at least one. CCY also notes the explosive 51% growth rate of QUICPay which they attribute to Apple Pay. This is one half of the story. JCB has certainly done an excellent job of working with Apple Pay but I suspect another reason is that Japanese Apple Pay Suica users switched from using Japanese issue VISA cards that don’t support Apple Pay Suica recharge in favor of QUICPay cards like JCB VIEW that do.

Any way you look at the numbers one thing is clear: prepaid cards are far more popular than credit cards for contactless payments in Japan. The huge installed base of Transit IC cards also bodes well for the Super Suica card that will integrate them into a single format for plastic issue and mobile hosting in early 2021.

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More Smart Octopus

I assumed the Smart Octopus Coming to Apple Pay post would be ignored in the end of year rush period. However the timing perfectly coincided with an Octopus Cards Limited press conference where the CEO demurred any Octopus tie-up with Apple and the post got much more attention than I ever anticipated. Obviously there are lots of iPhone users in Hong Kong who want Smart Octopus Apple Pay. A few readers were confused by the situation and asked for some clarification.

First of all the source who correctly predicted last years Smart Octopus on Samsung Pay launch tipped me about the Apple Pay launch. That in itself was enough for me but here’s the thing: if Octopus Cards Limited (OCL) is really serious about expanding Octopus use on mobile platforms, taking the next step of getting Smart Octopus on Apple Pay is the only way to achieve that.

Digital Wallets like Apple Pay and Samsung Pay are the most tightly integrated NFC software and hardware digital wallet platforms out there with integrated FeliCa, but Apple is the only one to integrate the necessary Secure Element on their own A Series/S Series hardware with FeliCa Networks keys, and sell the package globally. All the major NFC technologies are standard on Apple Pay: NFC A-B-F, EMV, FeliCa, MIFARE, VAS.

Smart Octopus on Google Pay might look nice on paper but it can’t achieve anything of scale yet because of the highly fragmented nature of Android: to date hardware manufacturers have yet to produce an answer to Apple’s global FeliCa iPhone and Apple Watch, even though everybody’s smartphone has a NFC A-B-F chip. Not even Google has pulled it off. Huawei says they are planning to add global Felica but it will take time.

OCL is playing coy because majority shareholder Hong Kong MTR has added QR Codes and EMV contactless to the transit gate mix removing the exclusive Octopus Card franchise, but the technology and market politics don’t mesh. On one hand you have a fast, established and ‘open’ in-house contactless payment system (as in anybody can buy a plastic Octopus card and ride) basically run by public transit companies. On the other hand you have slow and ‘closed’ contactless payment systems (as in only people with certified credit cards and bank accounts can ride) run by major outside credit/debit network companies chipping off money from both customers and transit companies.

In this context putting Smart Octopus on Apple Pay isn’t just adding a card to a digital wallet platform, it is also a statement of who ultimately controls, operates and benefits from the public transit gates. It’s more about market politics than technology, in other words another battle in the contactless payment turf wars. The outcome will be fascinating to watch but determines whether Octopus will remain a great transit payment platform for Hong Kong with a future, or not.

Smart Octopus Coming to Apple Pay with Hong Kong Transit Apple Maps (U)

It’s exactly a year since the Hong Kong Smart Octopus card launched on Samsung Pay. And just like last year, rumors are flying again before a launch, this time on Apple Pay. We will know in the next few weeks. It may arrive in tandem with a iOS 12.x update though last years launch was a low key ‘what? it’s here?’ affair.

Global FeliCa has been standard on all iPhone and Apple Watch models since 2017 and the device use profile will certainly match what Apple support lists for Suica:

  • An Apple Watch Series 2 (purchased in Japan), Apple Watch Series 3, or Apple Watch Series 4
  • An iPhone 7 or iPhone 7 Plus (purchased in Japan), iPhone 8, iPhone 8 Plus, iPhone X, iPhone XS, iPhone XS Max, or iPhone XR

The process for adding cards will be slightly different from Suica and closer to Apple Pay China Transit Cards for Beijing and Shanghai: new cards can be created in Apple Pay Wallet and plastic cards can be transferred, but just like Suica, plastic Octopus cards cannot be used after being transferred.

A lot of iPhone users in Hong Kong have been waiting for Smart Octopus on Apple Pay since the debut of global FeliCa iPhone, it will certainly be a welcome addition.

Update
Hong Kong transit directions will also be added to Apple Maps with the Apple Pay Smart Octopus launch. They will be integrated similar to Japanese transit in Apple Maps that notifies insufficient Suica Express Card balance for on route transit fare.

Apple Maps Transit integrates Apple Pay Suica information

Update 2
More Smart Octopus

iOS 12.1.1 Suica Express Transit Performance

Apple has never issued an iOS update that specifically mentions Suica or Express Transit Card performance, so each update becomes a guessing game of what’s fixed and what’s not. iOS 12.1.1 was released December 6 in Japan and there has been very little mention of Suica performance on Twitter. Not necessarily a good thing, if performance has changed dramatically, good or bad, people tweet about it.

I reached out to a few trusty Revision B iPhone X Suica user sources. They report no change from the buggy Suica performance they’ve experienced since upgrading to iOS 12. A few iPhone 8 users have also complained about buggy Suica performance. My experience with Suica Express Transit on iPhone XS continues to be excellent though Apple Pay Suica recharge performance is poor when recharging from a Suica notification short cut.

Here’s the iOS 12.1.1 performance score as I see it:

  • Suica Express Transit performance on pre A12 Bionic iPhone: B-
    • Occasional error flicker at transit gates
    • Unresponsive Apple Pay Suica recharge, 50% failure rate when recharging via Suica notifications
  • Suica Express Transit performance on A12 Bionic iPhone: A-
    • Unresponsive Apple Pay Suica recharge, 50% failure rate when recharging via Suica notifications

As pointed out in earlier posts Suica Express Card with power reserve on A12 Bionic is a significant departure from previous devices both in operation and performance. Also the iOS 12 Suica Express Card error flicker issue is a iOS 12 software issue that is completely different from the iPhone X Suica NFC hardware problem.

The quick summary is that Suica Express Card performance has not improved from iOS 12.1. We’ll have to wait until iOS 12.1.2 and try again.

The 30% Apple Pay Japan Solution

Japanese IT journalist Sachiko Watatani who writes for MyNavi posted a fascinating 2 part (1 and 2) iPhone user survey regarding Apple Pay. There are many interesting details but the big summary points are:

  • 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

Other important data points: 34.4% use Apple Pay daily, 24.9% use Apple Pay every 2~3 days, 37% use it for public transportation, 69% use it for convenience store purchases. Unfortunately the survey questions did not make any distinctions between different card types like Apple Pay Suica which is stored value with Express Card functionality, and regular Apple Pay credit cards. The survey only addressed “Apple Pay” use.

Comparing results with the earlier MMD Labo report is frustrating because the surveys addressed different user sets with different questions. The only thing worth comparing is the “don’t use mobile payments but am interested” category. The MMD figure was 29.9%. The much higher interest in Apple Pay is probably due to Suica and the ubiquity of transit IC payment store options. Other noteworthy comparison tidbits from MMD are mobile payments for transit use @ 63.5% and convenience store purchases @ 59.1%.

Watatani san was confused about the low transit use result and thought it might be due to PASMO commuters answering the survey. I think she is partly right. One of the biggest findings from earlier this year was that Apple Pay Suica use is highly regional because the initial uptake is closely linked to commuter passes. Getting all the transit IC cards and commuter passes on mobile is something that JR East and Sony are already working on.

The good news for Apple is that 50% of Japanese iPhone users who don’t use Apple Pay are interested in using it. The bad news is that Apple has to give them better reasons to use it. A good starting point would be the items I outlined earlier: extend Apple Pay Japan prepaid card support while working to lower merchant side transaction fees, and for goodness sake issue a iPhone X Suica problem repair program.