2019 looks to be a year of change and going cashless. JR East is swapping out old reserve seat ticket machines with new ones that only take credit cards and transit cards (Suica, PASMO, etc.). This sign in Ikebukuro station says the last day for cash purchases is February 27, cashless operation starts March 1. From this date customers who want to buy reserve seat ticket purchases with cash have to line up at JR Ticket Offices (Midori-no-madoguchi) and at Travel Service Centers (View Plaza).
It will be interesting to see if the new machines will use the ‘smart bin’ design approach that accepts both plastic cards and smartphones for Apple Pay Suica, etc.
Here are QR Codes in action at subway transit gates in Beijing.
And here is Suica in action.
Working Backwards from the User
The Suica development starting point was a user problem with magnetic card commuter passes. Old style paper passes were visually inspected at gates and could stay ‘in-wallet’ with a clear plastic opening. Magnetic card commuter passes had to be removed from the wallet and feed through the gate reader. Engineers wanted to recapture the simplicity of paper passes with IC cards.
The development process involved a lot or trail and error but Suica turned out not only to be convenient and fast but also user friendly in the way that people use things, in-wallet or otherwise. This is a classic Steve Jobs design principle: start with the user experience and work backwards to the technology.
Smartphones replicate the in-wallet experience as ‘Express Cards’ on digital wallet platforms like Apple Pay and Google Pay. The user pulls out the device and holds it to the reader. No unlocking or Touch ID/Face ID required.
QR Codes and EMV contactless on smartphones share the same transit problem of old magnetic card passes: they are not ‘in-wallet’. Devices have to be unlocked to open an app or perform a biometric authentication. This problem is compounded by poorly designed transit gate QR and EMV readers that end up forcing users to adapt to the technology and it slows everything way down. This is a design failure that would never meet the requirements of Tokyo stations where a gate has to clear 60 people a minute.
What’s fascinating to me is the assumption by some people in China, Hong Kong and even Japan that the QR Code success in China automatically qualifies it as a global payment standard regardless of the technology and business models already in place. This doesn’t ring true to me, there is something else going on.
China for example has put a lot effort into creating and promoting the China T-Union transit card standard which can be added to MI Pay, Apple Pay and Huawei Pay. Nevertheless there are not many people using China T-Union in the video. The Japanese tweet comments say that recharging China T-Union cards are not very convenient and do not offer the point goodies that AliPay and WeChat Pay do. Bingo. Is it really is that simple?
Technologies that have viable business models attached to them work better in the long run. FeliCa fares better than China T-Union or CEPAS (EZ-Link) because a transit platform like Suica does better job of attaching services and point goodies on the back end. Perhaps if China T-Union had a better business model that offered more recharge reward goodies and services on the backend to compete with QR ecosystems people might use it more, unfortunately business promotion is hard for government run transit authorities.
Recruit’s AirPay POS system for small stores deftly navigates the entire Japan cashless map and is running an TV ad campaign featuring Joe Odagiri and rich visitors from abroad in various roles with credit cards. The punch line is “Do you take cards?” to which Joe Odagiri the store owner invariably replies, “cash only”. The rich customers walk away and Joe says, “I wish we had AirPay.” It pokes fun at the Japanese penchant for cash.
When Nikkei writes that suppliers are experiencing an ‘extraordinary decline’ in Chinese demand I take it with a grain of salt. Nikkei has a long history of insider trading reporter scandals. To me they are more market manipulation mafioso than a reliable media outlet. However, the source the Nikkei report is Nidec Chairman Shigenobu Nagamori. When Nagamori san says he’s never seen anything like this Chinese drop in demand for Nidec products across the board, people across Japan sit up and listen. This is a serious contraction in Chinese manufacturing and there will be a lot more reports coming as the Nidec story gets picked up. It’s just the tip of the iceberg but at least the China construction sector seems to be holding up as Komatsu is still seeing some sales growth there.
Shigenobu Nagamori is a charismatic founder who loves and lives his company every bit as much as Steve Jobs loved and lived Apple. He obsesses over little details and tours Nidec factory floors making sure everything is clean and properly stored. Sweat the details and the big things take care of themselves. He has lived and survived many recessions. When a downturn comes the first thing he does is cut company executive and board member salary and bonuses while holding the line for regular employees. Real leaders rally the troops by sharing the hard times.
Steve Jobs famously worked for a dollar a year salary. I wonder if Tim Cook and the Apple Leadership will take a pay and bonus cut like Steve Jobs did and Shigenobu Nagamori does. It would certainly rally the Apple team if they did.
How about doing a nice little marketing campaign with the Japanese carriers offering a nice trade in price for those old Osaifu-Keitai with a discount on a iPhone XR or iPhone 8? I know, I know, you only want to sell iPhone XR but until the Face ID camera has magic x-ray ability at an affordable price, all those face mask users in Japan will really appreciate a Touch ID iPhone 8 choice. Offer trade in customers free assistance moving and setting up their Mobile Suica accounts in Apple Pay Suica at local Apple Stores. I’m sure it would be a success.