Multi-device provision powered iOS 17 Wallet kills off the old Suica 2-step

The Apple support pages for adding transit cards and e-Money cards has a completely new updated section for transferring cards to a new iPhone: iOS 17 Setup Assistant automatically transfers the cards for you, there is also a completely new section to transfer cards manually in Wallet app.

The pre-iOS 17 way to transfer cards is very different. Transfer is manual only, Setup Assistant does not move transit cards automatically, and in Wallet app you have to remove the transit (or e-Money card) from the old device first, before it will appear in Previous Cards ready to be added to the new device.

In iOS 17 Wallet the first thing you see is all the cards on your other devices, a paired Apple Watch or the old iPhone if you are setting up new iPhone Wallet:

This is multi-device provisioning, a new iOS 17 Wallet feature that Apple isn’t promoting very much because all the action happens behind the scenes. Make no mistake though, this is a game changer because it eliminates a whole mountain range of confusion when transferring stored value cards. Stored value cards keep the balance on the card itself so they can only exist on a single device. The truth is in the card, not the cloud.

This has caused a lot of confusion and frustration over the years for Apple Pay Suica users who assumed that Suica cards work like credit cards, then panicked when they upgraded to a new iPhone with Quick Start Setup Assistant only to find that Suica was not on the new iPhone. This is gone now because iOS 17 Wallet multi-device provisioning makes everything automatic and easy: it transfers the card you want to transfer and “removes” it from the other device, except that it “leaves” an empty place holder card on the old device. No deletion necessary. The old Suica 2-step is officially dead. From the Apple support page fine print: “Once transfer is complete, the previous card will remain visible in the Wallet app with an indication that the card can’t be used.”

Let’s take a look as I move a PASMO card from Apple Watch to iPhone:

As you can see the transfer is completed with PASMO now in iPhone Wallet but the PASMO card is also on the Apple Watch Wallet listed as ‘Unavailable’. If you look in Apple Watch Wallet you see this:

This is where it really gets interesting. Don’t remove the unavailable card. Leave it there and transfer it back from iPhone, voila PASMO is back on Apple Watch. The same PASMO card on iPhone is still there as ‘This card cannot be used’. Remove or leave it. Either way is fine. Think of it as a decorative place holder that can be re-filled with the real card contents at any time.

If you hanker for the old way of removing a card when transferring to or from Apple Watch, Watch app still offers it in Wallet and Apple Pay settings, tap ‘Add’ in the ‘Other Cards On Your iPhone’ section.

So there you have it. Multi-device provision powered iOS 17 Wallet changes a lot of things: Setup Assistant automatically takes care of transferring Suica, PASMO, Octopus, China T-Union, Clipper, etc. to a new iPhone. This is likely another benefit of Apple dropping support for non older power reserve embedded secure element (eSE) iPhone models in iOS 17. It’s what power reserve eSE v2 iPhone XS and later can do that older models can’t. Wallet is far more flexible and seamless dealing with multiple devices. Users probably won’t see much difference but tech support folks have had a huge load taken off their hands. This is Apple making the Wallet user experience, already the best out there, a far better one.

NFC VAS done right: Pi-xcels NFC background tag read powered e-receipts

In the traditional Buddhist cosmos there are sub-human hells of suffering: fighting demons, hungry ghosts, terrifying animals and so on. In the human realm we create our own hells. QR code payment app checkout stress, is one of them.

We’ve all experienced checkout stress, that unfunny comedy routine when someone at the head of the line launches a QR code app in a store network challenged environment, digging around for a discount coupon that they have to login for, of course. Finally ready to pay, the Frankenstein QR code + NFC combo reader spits out a read error…the checkout staffer says, “You’re holding it wrong,” and so it goes.

As much as QR + NFC all in one readers have evolved, the integrated POS systems that drive the entire checkout experience for merchant and customer alike are less than ideal. Checkout stress never goes away. But why QR when we have all those NFC based payment solutions, didn’t NFC supposedly win the contactless payment wars?

It comes down to VAS, Value Added Services, the catch all phrase for post payment goodies: time limited store coupons, store reward points, cash-back rebates and so on. Easy VAS is one of the big reasons why QR code payment apps (PayPay, Rakuten Pay, dPay, etc.) took off in Japan despite all the faster card payment NFC infrastructure. When it comes to store checkout, people care less about speed, more about rewards and coupons. It’s cheaper and easier to do VAS customization when it doesn’t dependent on card company payment networks. Smaller merchants using prepackaged POS systems (AirPay, RakutenPay, Square, etc) don’t have an easy way to incorporate customized NFC VAS services.

NFC Failures
The industry is littered with failed attempts to extend NFC functionality beyond its core success with smart-cards and payments: NFC peer to peer never took off, NFC VAS never took off, Apple’s App Clips attempt to leverage NFC background tag reading into a easy ‘tap, order, pay’ experience has also been a spectacular failure.

Apple VAS Developer page
Apple VAS in action at LAWSON where all receipts are paper and usually tossed.

NFC VAS has a very high bar to achieve what’s illustrated on the Apple VAS Developer page for a POS system like LAWSON self-checkout in the above video. There is POS system software integration, hardware certification, and Apple Pay contactless pass development. These are the choke points of NFC VAS: the high level of integration required to make it work. Only stores with deep IT pockets can afford this level of resources which is why LAWSON is the only Japanese store chain to support Apple VAS for dPoint and PONTA point cards when paying with Apple Pay.

Fortunately there is an NFC solution for easy entry level VAS: Pi-xcels NFC digital e-receipts. You might be asking yourself, e-receipts, are you serious? Don’t laugh, it’s hard to create a fast and easy user experience that works seamlessly across different devices. Pi-xcels Founder Daniel Lim and Co-founder Chua Zhen Rong demonstrated their NFC e-receipt solution to me recently. It was impressive. Fast performance and a simple ‘it just works’ user experience. The only thing they needed for the demo was 2 mobile devices, an iPhone and an Android OS based mobile Ingenico AXIUM DX8000 NFC reader.

One of the easiest ways to do VAS is paper receipts with QR coupon store specials. It’s low tech but reliable. Anyone can use them. This is why LAWSON uses them all the time despite having a fancy POS system with NFC VAS. The only problem with any paper coupon is losing them, in a pants pocket, the uncharted depths of a bag, the ‘I know it’s here somewhere’ checkout comedy routine. Digital e-receipts are always on your device.

The Pi-xcels e-receipt seamlessly zips to the users iPhone immediately after the Apple Pay ding with a background tag read notification (iPhone XS and later). Tap the notification and Safari immediately loads the e-receipt. It’s a quick, clever use of NFC background tag read that App Clips promised but never delivered, that safely puts receipts on the user’s device. How does Pi-xcels achieve this?

Pi-xcels NFC background tag read e-receipts in action

NFC background tag read done right
Pi-xcels does this by prepackaging NFC VAS integration. They license their technology to the NFC reader manufacturer so that the e-receipt function is part of the basic reader software menu. It’s the prepackaged integration that NFC VAS has lacked when competing with flexible QR code apps.

They achieve fast performance by cleverly leveraging offline embedded secure element transaction processing while the OS is free to go online to process the e-receipt, add points, generate barcode coupons, etc., all the post transaction extras to be incorporated in the NFC NDEF tag read/write.

To me the genius stroke is how they use NFC background tag reading. The power of background tag reading is that it’s automatic with one condition: the screen must on to be automatic. In the case of iPhone Apple Pay, the screen is on and unlocked for transaction authorization, so the background tag read is instantaneous and seamlessly takes the user to e-receipt download with a tap. If App Clips had delivered this ‘it just works’ focused, simple user experience, it could have been a hit instead of a dud.

Security is a given as there is a secure wall between what goes on with the NFC payment transaction process handled by the secure element, and the e-receipt NFC tag read/write process handled by the OS. They are separate processes. Lim says they plan to incorporate point reward post-transaction processing for showing points on receipts and/or launching the relevant app with the same seamless speed seen in the video. Pi-xcels technology works across all NFC flavors: A-B-F. There is a lot more that can add without losing the key elements of focused simplicity and speed.

Ingenico is the first licensee and Lim says they expect to announce other NFC reader manufacturer licensees soon, major players in the Japanese market. He said, “We think we can stitch up most of the market.” He may be right. The Pi-xcels strategy is keenly focused on the entire mobile payments experience. Imagine the potential for e-receipts when Tap to Pay on iPhone launches in Japan as expected in late 2023~early 2024. Tap to Pay on iPhone POS solution providers with Pi-xcels technology integrated in the mobile POS software would let smaller merchants easily add NFC VAS at checkout.

If Pi-xcels can execute their licensee agreements as planned, I think they stand a good chance of stitching up the Japanese market. There is no competition for the flexibility and ease of e-receipts that double as a QR code coupon VAS delivery vehicle. It’s an excellent fit with how Japanese customers use barcodes and QR for coupons and reward points at checkout. It finally brings the advantages of inexpensive QR VAS with simple prepackaged mobile based NFC VAS integration for small merchants without deep IT pockets. The Pi-xcels strategy of building a mobile based NFC digital receipt platform is simply, NFC VAS ‘for the rest of us’.

Forget the Suica vs EMV open loop soap opera, it’s all about loyalty program banks now

Quick, what’s the number one complaint foreigners had when they couldn’t use their foreign issue VISA cards for Apple Pay Suica recharge anymore? Was it inconvenience? No, it was points. Specifically Chase Sapphire VISA 3x travel points. And what’s the number one compliment that foreigners have about using EMV open loop transit boutiques? Earning reward points. The Chase Sapphire VISA crowd had already moved on from Suica to PASMO back when JR East pulled 3x travel points for 1x shopping points for Suica recharge back in May 2021. Points are where the action is.

Go on over to YouTube and check out Wendover Productions How Airlines Quietly Became Banks. The video neatly explains what industry insiders and analysts have know for some time: flying passengers is a money losing business, the profit is made on selling services with loyalty programs, loyalty programs that are in reality clever financial instruments…loyalty program banks if you will. Reward points are like virtual money, but they can be treated like futures trading in that they will be traded in for certain services at a certain value…at some point. The untaxed reality gap is where all the fun happens: there are ways to earn real money off virtual money without a fixed holding period.

This is why airlines have made loyalty programs into separate subsidiary companies that are worth more than the money losing parent airline companies. The key takeaway: airlines are in the business turning a profit by selling services with attached loyalty programs to passengers riding on money losing airlines. Starbucks does a similar thing with their Starbucks card loyalty program which is also called a massive bank, all that unspent money on all those cards, similar to the Suica float. The Japanese point economic zones, Rakuten, PayPay and NTT docomo dPay have been doing all this for years already.

Is there anybody doing the same thing with rail transit with ridership still reeling in the post-Covid era? Very, very few. How many rail transit companies have a loyalty program similar to what airlines do: earning and using rewards across many different services? You probably can’t come up with one. JR East JRE POINT is a rail transit company loyalty program, the only comprehensive one that exists right now and it will formally joined with a real bank too in 2024 with the launch of JRE BANK. The recently launched JR West WESTER aims to become loyalty program, perhaps even a loyalty bank. Let’s take a closer look at how the comparisons stack up internationally.

Most transit operators around the world don’t offer loyalty programs. JRE and, maybe, MTR are the only ones.

The key difference is that Suica and Octopus are both transit and payments cards, in other words a payment platform. Owning the payments side is key for driving loyalty programs. It’s interesting too that Suica, Octopus and EasyCard used FeliCa and MIFARE that allowed them to build payment platforms that are independent of EMV. Another interesting aspect is that while JR East is a private transit company, Octopus is mostly government owned but doesn’t act like a public transit owned company.

All of the western transit companies are government owned and expected to be ‘public transit’ where making profit isn’t the bottom line. The reason why most MIFARE based transit cards never evolved beyond being transit cards (Taiwan’s EasyCard being the outstanding case) and leave the point reward franchises to the EMV open loop card brands, comes down to local politics of public transit. But is this really in the public interest?

My argument in countless posts over the years is that leaving everything to EMV open loop card brands is giving away a money franchise to the EMV consortium. It leaves money on the table that could have been used to build local transit linked services and infrastructure ecosystem that benefits all transit users and encourages transit ecosystem use.

Japanese ridership and fare income will only go down from here so Japanese transit companies need to be like airlines and earn money from selling service extras. Much better for long term transit sustainability to become a loyalty bank that leverages transit infrastructure loyalty linked services into profit. A close examination of the 10 Transit IC cards gives us a good idea of how open loop support in Japan will play out.

Most of the Transit IC cards have limited point rewards but very few have loyalty programs.

Outside of JRE POINT and WESTER, most of Transit IC cards except for TOICA and PiTaPa have some form of point bonus rewards for riding transit. Most are bare boned, manual affairs that involve a trip to the station ticket kiosk machine to load reward points. Tokyo area PASMO member transit companies have their own point systems, as do Osaka area PiTaPa transit companies which is the problem: despite sharing the same Transit IC card brand, the various point systems have no compatibility or synergy. There are a bunch of point card fiefdoms that cannot evolve into loyalty program platform. PiTiPa is the worst off of all, a failure with a shrinking user base despite being a credit card post-pay transit card.

The smallest transit cards, by user number, without robust point systems are exactly the first systems targeted for open loop by the SBI Holdings backed Japanese open loop Quadrac consortium (Quadrac for backend servers, Japan Signal for gate readers, VISA for sponsorship, SMBC for stera payment processing) : Fukuoka City Transit (hayaken) and Nankai (PiTaPa). They can implement open loop without diluting their loyalty programs because they don’t have any. It’s a similar case with ‘shared’ transit cards like PASMO.

PASMO members TOKYU and Tokyo Metro have stronger point systems silos but those silos do not translate across the PASMO ecosystem. Users can dump earned points into their PASMO card with a point recharge but there is no method for tying point rewards to services across the entire ecosystem. The dilemma for PASMO members, especially Tokyu who footed the bill for building Mobile PASMO, is balancing open loop and closed loop without diluting their PASMO related point business.

Here’s a Q&A that hopefully sums up some basic points of where things go from here.

Q: Will Suica disappear?
A: No. Suica is a loyalty platform and ecosystem, not a transit card.

Q: Will JR East replace FeliCa with EMV as the Suica foundation technology?
A: This is a topic that Japanese IT media loves to dream about like salarymen fantasizing about manga sex they read on the commute home. FeliCa and EMV are proprietary technology packages that come with licensing price-tags. EMV has the added risk that JR East would have to ally with a EMV payment brand to create a EMV white-label closed loop Suica card, like OMNY card. There are other disadvantages: NFC A is the slowest NFC transaction flavor no matter how much backend optimization the Quadrac consortium come up with, and offline payment transaction support is limited because mutual authentication and card balance is done on central servers. Last but not least: JR East owns a nice big chunk of FeliCa Networks along with Sony and NTT Docomo.

Q: Will EMV open loop be ubiquitous across all transit operators in Japan?
A: No, for the business reasons outlined above. JR East, JR West, and probably JR Central will not implement open loop as they want to sell closed loop Shinkansen tickets with loyalty programs. There isn’t any reason to partner with a EMV card brand for a white-label closed loop card when they already own FeliCa and QR closed loop products. There is also the scale problem. Open loop has been pushed by the media as a solution that solves every transit ticketing problem. It doesn’t. The reality is that open loop works best with simple fare structures. Closed loop works much better with complexity and interconnectivity.

In closing, Japan is the only country where open loop is being deployed by private rail transit companies that need to make money. Just as airlines ally and break with different card issuers for their loyalty programs, for business reasons and market politics, expect a similar market dance here. Payment technology, whether EMV, FeliCa or QR is just a means to an end of owning a vertically integrated loyalty program empire. The Japanese payments market will continue to be interesting ride that cannot be experienced anywhere else.

The VISA open loop squeeze: VISA’s Apple Pay Suica recharge block one year later

It has been a year since the VISA payment network in Japan stopped accepting foreign issue VISA cards for Apple Pay In-App use with Suica and PASMO Wallet cards (and the recently launched Apple Pay ICOCA card too).

With no explanation or reason, one little VISA payment system configuration change by the merchant acquirer eliminated the default go-to transit and payment card any visitor to Japan with iPhone and a VISA Wallet card Apple could add and use nationwide. Plastic Suica cards were the only option for inbound visitors with iPhone who only have VISA cards, and now the plastic card option is severely limited.

That very same month, VISA’s Nick Mackie, Vice President, Visa Acceptance Solutions, Head of Urban Mobility & Government gave an exclusive interview to Nikkei Business magazine in an article that announced VISA Touch sponsored open loop transit initiatives in Japan were going mainstream. Mackie explained that VISA Touch would ‘co-exist’ with Suica on Japanese transit gates, of course he didn’t mention that VISA in Japan has had a very rocky relationship with Apple Pay.

Wait a minute, what about Suica on store readers? Suica is a payment network, not a transit card. People forget that. Inbound visitors and Japanese open loop media advocates make the mistake of comparing Suica to London’s OYSTER, or Sydney’s OPAL but neither of those systems are payment networks that work outside of transit gate. The only relevant comparison is Hong Kong Octopus which, like Suica, is also a payment network, one that is central to the MRT business model, as Suica is to JR East.

Are we talking open here or global payment cartel economic neocolonialism?
People have this strange idea that EMV card companies are an open standard because everybody uses them. They are not. They are incumbent payment ecosystems with static global marketshare, in other words payment cartels, whose main revenue stream are interchange processing fees from processing different kinds of payments while selling value added services, i.e. your analyzed transaction data to customers. They are lucrative businesses because of their tremendous scale. EMV open loop transit is simply another effort to increase the volume of processing fees by capturing fare gate transactions, and selling the transit use transaction data analysis as a value added service to their business customers.

And because they are ecosystems there are many moving parts: EMV licensing fees, EMV compliance device certification fees, transaction processing networks. This means it is very difficult for new services to emerge and compete with a giant multi-arm consortium or recreate its vertical integration. They have to play with the EMV payment cartel if they are going to play at all.

In Japan mobile apps have provided an opening to link bank accounts with QR Code payment systems. QR Code App are popular for many reasons, the main one being that they offer ways to circumnavigate the EMV payment cartel. a mobile debit card scheme without the card or the EMV payment network as QR Codes circumnavigate the hammer lock of pre-installed EMV on smartphone secure embedded elements (eSE).

As I have written about many times, global NFC and Suica support on Android has been stymied by the lack of pre-installed Mobile FeliCa that works everywhere. Mobile FeliCa is the only real payment NFC protocol that can compete with EMV on payments. Calypso could but is transit only. The pre-install problem is why Navigo on Android had no choice but to develop the lower performance Calypso HCE, it was the only way for Île-de-France Mobilités (IDFM) to work around the lack of getting Android smartphone manufacturers to post-install Calypso eSE applets even thought the hardware fully supports Calypso NFC-B.

This is why the EU pressure to ‘open’ the iPhone NFC chip is so false to me. The current plan would only serve to increase the EMV payment cartel grip on mobile payments. If the EU really wanted to foster payment competition they would force manufacturers to pre-install Mobile FeliCa, and Calypso along with EMV and MIFARE. Nobody gets this except for a select few. I’d argue that Apple Pay actually levels the playing field by pre-installing and integrating all the necessary pieces, giving non-bank payment providers equal opportunity to bring non-EMV solutions to the mobile platform. Established players don’t like that. Western countries will continue to abide with the EMV payment cartel instead of enhancing payment competition, witness the proposed Credit Card Competition Act of 2022~2023 going nowhere in the American Congress.

The ramen shop arcade business model
Japan is lucky to already have alternative home grown payment networks even as the EMV cartel tightens its grip here. Unlike the western monopolistic ‘winner take all’, ‘one size fits all’ business culture, the nature of traditional Japanese business culture is akin to a ramen shop arcade. One successful ramen shop is okay but many together in the same area are better because more choice brings in more customers. More customers is more business that raises all boats. That’s why Japanese customers like having payment options, and are adept at juggling them for the points they want. Westerns say they like having options, but when they visit Japan complain they complain about having too many options.

VISA and their main Japanese partner SMBC group are investing heavily to market contactless payments under the banner of ‘Visa Touch’ along with the SMBC stera payment system to shift payments to EMV contactless and away from FeliCa based payment players such as iD (NTT Docomo) and QUICPay (JCB). Open loop stera transit is part of this investment.

What IT media in Japan and abroad never write about is the FeliCa ecosystem and how much of the technology licensing, payment processing, and other fees stay in Japan versus how much leaves Japan for Europe and America if that basic ecosystem is completely replaced with EMV. In other words what the long term price of removing the native payment system and replacing it with payment system neocolonialism? If you carefully examine what China has done, they have carefully cloned the basic EMV spec for transit, China T-Union PBOC 2.0/3.0, which neatly circumvents EMV licensing while maintaining compatibility, similar to what GhostScript did back in the PostScript era: PostScript compatibility without expensive Adobe licensing.

Stay in your lane: open loop reality in Japan
I see the VISA block of Mobile Suica, PASMO, and ICOCA as part of that VISA/SMBC effort. What better way to put pressure on domestic transit operators to add open loop by denying inbound visitors the ability to add and use Suica, PASMO, and ICOCA in Apple Pay Wallet? In any other age this kind of market abuse would come under anti-monopolistic regulatory scrutiny but here we are living in an age where regulators focus on Apple for the wrong reasons.

JR East and JR West will likely never add open loop as doing so dilutes their core business, Suica and ICOCA are central to their business strategy of extending those payments platforms into service platforms. The reality is that despite all the VISA and SMBC efforts, VISA Touch open loop transit will be just another ramen shop in the arcade, a thin client bolted on to the existing transit IC system, an EMV and QR Code reader bolted onto the current transit IC gate.

It will be at some stations and some transit operators, but it will not be everywhere. It can’t do reserve seating Shinkansen, Express Train fares, Green Seat Tickets, etc., those can only be accomplished with closed loop. The reality of open loop will be an extension of what we have now, separate gates and lanes for slower more error prone open loop, while the rest use transit IC gates because when you ride JR East, JR West and JR Central, the only choice will be closed loop Transit IC, and (eventually) QR.

And there will be no Express Mode for open loop. If there is one lesson we have learned from all open loop installations in the world to date it is this: smartphones do not support multiple Express Transit modes on the same system. As Suica, PASMO and ICOCA already have Express Mode, open loop with smartphones will always be just like the store reader payment authentication process.

The EMV payment cartel may want to be the only ramen shop in the arcade but I hope the lively variety of payment choices that flourish in Japan continue to flourish and provide new opportunities. I don’t have anything against EMV open loop, just as long as the EMV consortium partners play fare fair with all domestic transit payment players. May all boats rise together.

Fully baked totra cake

The Suica 2 in 1 Region Affiliate card program started in March 2021 with the kickoff launch of totra, but the transit card is only reaching it’s completed vision this month with the August 26 service launch of the long delayed Utsunomiya City LRT.

As outlined at totra launch time, the Suica 2 in 1 card uses the next generation FeliCa SD2 chip and FeliCa OS to combine Suica functions with region tailored transit service extras in one card. All of the Suica 2 in 1 cards offer the basic minimum of bus commuter passes and automatic transit points, these multiple region transit specific points automatically earned and used for discount fares. Suica 2 in 1 were the first Suica cards with disability fares, some Suica 2 in 1 region cards also offer senior fare cards.

Utsunomiya City has gradually added totra region extras that show what Suica 2 in 1 can do:

  • Transfer fare discounts: discounts for bus~LRT transfers that cap wider region to city center transit fare at ¥500
  • Fare capping: fares capped at ¥400 for city area transit
  • Transit points: automatic transit points earned and used when riding region transit (bus and LRT).
  • Senior transit subsidy: annual ¥10,000 senior (70+) fare subsidy awarded as ‘Welfare Transit Points’.

The last one is an interesting one and illustrates the differently tailored region services, AKICA for example offers senior fare cards while Utsunomiya pays an annual senior transit subsidy. There are a few nice surprises on the LRT FAQ page such as paying group fare with a single Transit IC card and more totra extras such as day passes are in the works. As totra is also a Suica card it comes with all the JR East benefits as well: JRE POINT, Eki-Net Shinkansen eTickets, Suica Day Passes, etc.

There will be a lot more new Suica services coming as Suica 2.0 is rolled out in addition to My Number card region linked services. New developments leveraging individually tailored transit and region based services will be coming over the next 4 years. This kind of highly customized closed loop account based ticketing is extremely difficult to achieve with open loop.