State of Suica 2022

Now that the 1st wave of Suica 2 in 1 card launches is complete, it’s a good time to review the ‘State of Suica’. And it’s always interesting to examine the cultural differences too, when it comes to labeling trends as ‘good’ or ‘bad’. Westerners for example invariably say, what’s the point of having so many Suica card flavors? It’s a waste, better to have just one. It’s a classic double standard professing to want but insisting that life should revolve around single kind of credit card. Japanese don’t seem to care much as the culture is adept at ‘振り分け’: this thing for doing this, that thing for doing that. And the region affiliate users getting Suica for the first time seem pretty excited and all Suica varieties work the same for transit and e-Money purchases.

As of now we have the following plastic Suica card flavors beside the regular Suica available at station kiosks: Rinkai Suica, Monorail Suica, Welcome Suica and Suica Light. On the Mobile Suica side we have: Osaifu Keitai, Apple Pay, Google Pay, Fitbit Pay and Garmin Pay, along with branded Mobile Suica for Rakuten Suica and au Suica on Osaifu Keitai and Mizuho Suica on iOS. Last but not least we have 11 new Suica 2 in 1 Region Affiliate Transit cards that are the keystone of JR East’s MaaS strategy.

What exactly are the differences? It comes down to commuter passes or points. For Suica 2 in 1 cards specifically, it is both. This is a small but very important difference. All the other non-regular Suica outside 2 in 1, come with specific features and limitations. Rakuten and KDDI au users can recharge those Suica with those outside point systems but they can’t add commute plans. Welcome Suica expires in 28 days, Rinkai and Monorail Suica exist for commuter passes and nothing else, and so on.

Suica 2 in 1 doesn’t have limitations and does more than any other Suica: it can hold 2 different commuter passes (one from JR East, one from the region affiliate) and it supports 2 different point systems: messy JRE POINT which is an optional account setup manually linked to the Suica card number, and local government subsidized region affiliate transit points which are automatic and stored on the card itself. The only thing the user needs to do is use the appropriate card for transit to earn and use transit point discounts.

In a mobile payment era where everybody is distinguishing themselves with increasingly complex reward point schemes, the simplicity and flexibility of Suica 2 in 1 transit points, think of it as locally processed transit point stored fare, can go places that old Suica cannot. Imagine how many more people would use Suica transit in Tokyo if it came with transit point discounts. There are other 2 in 1 features not yet supported by regular Suica: disabled and elderly transit user discounts. These are coming to Tokyo area plastic issue Suica, and PASMO too, this October though I suspect those won’t come to Mobile Suica until it gets an upgrade.

Mobile FeliCa hasn’t been updated to the next generation ‘Super Suica’ FeliCa SD2 architecture yet, but once updated we should see Suica 2 in 1 on mobile and new Suica features, along with more Suica 2 in 1 Region Affiliate cards. All in all the new Suica 2 in 1 card format tells us where JR East wants to go.

There are some interesting numbers from the JR East FY results. All things transit took a huge hit in FY 2021 from the COVID pandemic, Suica included, but are now recovering though still below pre-covid transaction levels. Another surprise is the popularity of Eki-Net eTickets, a 39% usage rate is not bad for a service that only started in March 2020. One of the smarter things JR East did with Eki-Net eTicket discounts is making them simple and available to all Eki-Net users and credit cards. The JR Central EX system has 2 different Shinkansen eTicket tiers (EX-Press and smartEX) with larger EX discounts limited to select credit cards.

There are lots of things that JR East needs to do longterm, more Suica day passes, Mobile Suica recharge that is available 24/7, phasing out legacy mag strip ticketing and UWB touchless transit gates. In the short term we have Cloud Suica and Mobile ICOCA coming online in March 2023, the end of the current fiscal year. At the very least it should be an interesting time for JR West ICOCA users, and one more nail in the PiTaPa coffin.


The Apple Pay monopoly debate part 1: context is everything

John Gruber did everyone a favor outlining some of the stakes at play in the remarkably glib, “Remarks by Executive Vice-President Vestager on the Statement of Objections sent to Apple over practices regarding Apple Pay.” The objections are annoyingly vague and refuse to specify how Apple Pay stifled competition and innovation:

(The) Digital Markets Act will…require companies designated as gatekeepers to ensure effective interoperability with hardware and software features they use themselves in their ecosystems. This includes access to NFC for mobile payments.

Today’s case addresses a conduct by Apple that has been ongoing since Apple Pay was first rolled out in 2015 <sic, 2014 actually>. This conduct may have distorted competition on the mobile wallets market in Europe. It prevented emergence of new and innovative competition that could have challenged Apple.

Mark Gurman and Jillian Deutsch at Bloomberg also did everybody a favor unmasking PayPal as one of the instigators behind the EU Commission Apple Pay investigation. Yes, that PayPal…the financial service that snuffs out user accounts whose politics they don’t like, or worse just seizes their money.

Both pieces miss important context surrounding the debate however…and with this issue context is all, especially how Apple Pay is playing out in other global markets. Most of what follows I’ve covered in earlier posts but hope to pull the various issues together in one post. Yet again, we kickoff with an updated Apple Pay diagram.

‘Open’ NFC, gatekeepers and secure element wars
Europe has been calling Apple Pay unfair since the very beginning, with many EU member banks holding out as long as they could. German banks only joined Apple Pay in December 2018 when Vestager was already actively seeking Apple Pay complaints. Less than a year later Germany passed a bill to force Apple to ‘open’ their NFC chip. Australian banks tried the same in 2017.

The so called Apple ‘NFC chip’ is not a chip at all but a hardware/software sandwich. The Apple Pay ecosystem described in iOS Security is a collection of tightly integrated polished pieces: Secure Element, Secure Enclave, NFC Controller, Wallet and Apple Pay Servers, all wrapped into a slick, easy to use UI with a final security wall of ‘secure intent’, a double-click side button hot-wired to the Secure Element. This approach has been so successful that people divide mobile payments history into pre-Apple Pay and post-Apple Pay eras.

NFC has been on Android far longer than iPhone, and ‘open NFC’ at that, but is far less successful capturing mobile payment users than Apple Pay. This is because Android device manufactures made the classic mistake of taking the ‘let’s take awesome NFC technology and figure out how we’re going to market it’ approach. Jennifer Bailey’s Apple Pay team choose the hyper focused Steve Jobs approach of starting with the customer experience and building backwards while asking: “what incredible benefits can we give the customer, where can we take the customer?” That choice made all the difference.

Apple Pay has a very simple rule: any card that loads a Java Card applet into their embedded secure element (eSE) has to reside in Wallet app. The maximum number depends on how many Java Card applets it can hold at any one time, the previous limit was 12, the iOS 15 Wallet limit is 16 cards. Developers have two ways to access iPhone NFC: 1) Core NFC framework for NFC operations that don’t use the secure element, 2) Secure Element pass certificates for NFC operations that need secure element transactions (payments, keys, ID, passes). Any developer who wants to run applets in the eSE has to apply for a PassKit NFC/Secure Element Pass Certificate. This is covered by NDA but a company called PassKit (not Apple) gives us an idea what Apple’s Secure Element Pass guidelines are:

Apple care a great deal about the user experience. Before granting NFC certificate access they will ensure that you have the necessary hardware, software and capabilities to develop or deploy an ecosystem that is going to deliver an experience consistent with their guidelines.

The end to end user experience, the whole reason behind the success of Apple Pay. But this gatekeeping is what riles banks and financial service providers who want to load their applets into the secure element without the Apple Pay gatekeeping, without the Apple Pay ecosystem and without the Apple Pay commission. They want to do their own transactions with their own app for free. This is what the EU Commission means when Vestager says: “Evidence on our file indicates that some developers did not go ahead with their plans as they were not able to to (sic) reach iPhone users.” It should read: when they were not able to reach iPhone users for free. Either the developer didn’t apply for a Secure Element Pass, didn’t pass the certification process, balked at Apple’s certification conditions, or couldn’t agree on Apple Pay commission rates.

Secure element gatekeeping is not new, it is an essential part of the secure element system:

A Secure Element (SE) is a microprocessor chip which can store sensitive data and run secure apps such as payment. It acts as a vault, protecting what’s inside the SE (applications and data) from malware attacks that are typical in the host (i.e. the device operating system). Secure Elements handle all sorts of applications that are vital to our modern digital lives…

Mobile Payments
Here, the Secure Element securely stores card/cardholder data and manages the reading of encrypted data. During a payment transaction it acts like a contactless payment card using industry standard technology to help authorize a transaction. The Secure Element could either be embedded in the phone or embedded in your SIM card.

Lifecycle management
It’s crucial that SE-embedded devices are secure throughout their lifecycle. That’s why Secure Elements need to have an end-to-end security strategy. It’s no use developing a robust security solution for a device which becomes obsolete after a period of use. This is why Secured Elements can be updated continuously to counter new threats.

What is a secure element?

Few people, especially a PayPal or EU Commission vice president, discuss the crucial secure element lifecycle management aspect. It’s not convenient for them to say the secure element ‘gatekeeper’ is responsible for keeping it secure. Far more convenient for their arguments to omit this, portray gatekeeping as unnecessary and gatekeepers as evil. In the end however, Apple has to maintain secure element updates from the various licensed secure element providers (EMV,FeliCa Networks, MIFARE, and so on) if secure payments are going to work at all This is what people who say, ‘it’s my device, we should be able to use NFC how we want,’ do not understand.

People also forget that nothing is free, you get what you pay for. With Apple Pay as gatekeeper, users get simplicity, innovation and feature updates. Simplicity: users get NFC they can use out of the box without Android-like NFC complexity such as secure element positions and obscure express mode settings.

Innovation: Apple Pay has features like Global NFC. iPhone and Apple Watch are the only smart devices that come with FeliCa built in as standard to use in Hong Kong or Japan, while Android limits functionality by market region. It’s astounding that Android, not even Google Pixel Android, has matched this basic functionality yet. We’re seeing more innovation as Ultra Wide Band (UWB) extends Wallet functionality to include ‘Touchless’ car keys and eventually, UWB enhanced automatic card selection as you approach the reader; more helpful than you might think.

Feature updates that, ‘just work’: the recent seamless Apple Cash switch from Discover to VISA, PBOC 2.0 flavored China T-Union transit cards, MIFARE Student ID, or the addition of in-app purchases and dual mode NFC for Japanese VISA card users when VISA JP finally buried the hatchet with Apple.

And the lesson? Apple Pay changed everything in the Japanese payments market, a catalyst that opened up competition and payment choices, for everybody. All boats rose together. It’s one of the most vibrant payment markets that Apple Pay operates in.

Japan is key to understanding what’s really going on in the Apple Pay monopoly debate. Japan was the first market with an established mobile payment platform in place, long before mobile EMV contactless payments took off in Europe. iPhone also has a much larger marketshare in Japan than it does in Europe. It’s a shame people pass up the opportunity to learn from the successes and failures here.

So what’s the EU Committee vision for ‘open NFC’? I think it’s a rehash of the secure element wars when carriers locked mobile payment services to SIM contracts. In 2013 Google incorporated SimplyTapp HCE (Host Card Emulation ‘secure element in the cloud’) technology as a NFC ‘workaround’ to ‘free’ NFC from the evil clutches of mobile carriers. Sound familiar? Android NFC has never been right since.

How little things change, swap ‘evil mobile carriers’ for ‘evil Apple’ and you have the same self serving ‘open’ vs ‘closed’ NFC chip nonsense that people are debating today. FeliCa Dude, the ultimate industry insider who has experienced it all, said it best: ‘It’s all eSE or nothing now.’

And yet we now have Île-de-France Mobilités (IDFM) turning back the clock, circumventing the eSE on NFC equipped Android devices and going all in with HCE for IDFM’s Smart Navigo service for Android. To me this says all you need to know what European priorities are regarding the ‘open NFC’ model: eliminate eSE gatekeepers by forcing the less secure network dependent HCE as a required option. Good luck with that. From a transit perspective, based on Mobile Suica user experiences, I don’t think HCE Smart Navigo will be a smooth ride.

The EU Committee ‘open NFC’ vision might look ideal…to Apple Pay competitors. Regular users however, will have to deal with the ugly reality of multiple NFC apps, multiple NFC secure element modes and clashing updates that cancel out NFC services. Apple Silicon eSE space is limited to 16 cards. If that sounds like a lot now, wait until you have credit cards, transit cards, home, car and office keys and ID installed along with ‘open’ NFC apps wanting their own eSE space too. Services will be squeezed out forcing the user to intervene. If the EU Committee thinks this environment fosters competition and innovation while growing mobile payment use, dream on.

Japanese tech journalist Junya Suzuki has covered NFC mobile payment developments in Europe, America and Japan for over 2 decades. He doesn’t think the EU is playing an even hand here, in his opinion Samsung and Huawei would never face the scrutiny that Apple now faces. In typical European cultural fashion, EU motives pay lip service to fair open markets while playing an underhanded game of chess to make Apple do what EU banking interests want Apple to do. In other words, a double standard.

What does Apple need to do?
I’ve always said that Apple needs to make the Secure Element Pass application process as transparent as possible. Keeping the blackbox NDA process as it is now makes Apple Pay a target, increasingly difficult to defend the status quo. Secure Element access on the level of Core NFC is a long shot, the very definition of a secure element means there has to be a developer certification process similar to EMVCo, FeliCa Networks, MIFARE, Calypso Networks Association, etc., that protects the privacy and business interests of all parties. But it would be great if there is a middle way where Apple can securely open things up for iPhone as a digital wallet, and iPhone as a payment terminal. We’ll see if Apple has anything to say about the subject at WWDC22.


Part 2: the gatekeeper difference

Recommended reading: Ruimin Yang’s wonderful overview, “Apple Pay monopoly, are we really comparing ‘Apples’ with ‘Apples?” examines the Apple Pay system architecture, how it compares to other digital wallet platforms, (Google Pay, Samsung Pay) and what ‘open vs closed’ means in the ‘Apple Pay is a monopoly’ debate.

How much does Smart Navigo HCE suck?

It’s interesting parsing app reviews that say ‘this app sucks’. How does it suck and why? As I’ve said before, the overwhelming negative App Store reviews for Suica App are not about the app but about poor network connectivity kills a connectivity critical service app. The poor connectivity is due to a variety of factors: carrier auto-connect and free WiFi or overloaded mobile connections messing with Mobile Suica recharge and other online functions. People assume the WiFi and cellular icons at the top of the phone screen indicate a healthy internet connection, which they decidedly do not.

Most users see Suica App as the software that controls everything Mobile Suica AND iPhone NFC hardware. It does not of course but people dump all blame on Suica App anyway. Fortunately most of what Mobile Suica does is done without an internet connection. The only time it needs one is recharge time with a credit card in Apple Pay Wallet app or Suica App.

Yet all that complaining over online Mobile Suica app services however, tells us something important about mobile internet connections in station areas, on trains and subways: they suck. Despite ubiquitous 4G LTE~5G cellular and WiFi coverage, reliable internet is notoriously fickle in those famously busy Japanese train stations. This is the real reason behind all those ‘this app sucks’ Suica App reviews. Interestingly enough, this is the same performance gripe with the mobile myki system in Victoria. Like Mobile Suica this became a problem because mobile internet connections weren’t up to the job of delivering reliable, trouble free ‘anytime, anywhere’ recharge/top-up, which people tend to do in transit.

Which brings us to Smart Navigo, the Île-de-France Mobilités (IDFM) Paris region transit card for mobile that is going wide on Android smartphones this year. IDFM has spent a lot of time and expense working with Calypso Networks Association (CNA), the transaction tech used for Navigo, to implement the less secure network dependent Calypso HCE ‘cloud’ secure element approach as the default mobile transit tech for Android devices in 2022.

It is very unusual that IDFM chose HCE as their go to mobile strategy on Android when the more secure hardware embedded secure element (eSE) is standard on all smartphone NFC devices these days, and does the job without internet connections. HCE is very different from eSE in that both NFC smartphone and the reader need a connection to talk with a server. HCE was also conceived for leisurely supermarket checkout, not the challenging transit enviroment. How does Calypso HCE compare to the network-less eSE experience? CNA says:

For security reasons, transactions using the personalization key or the load key are not possible through the NFC interface, and must be done with a secure connection to a server.

Only the Calypso debit key is stored in the HCE application for validation on entrance and control during travel, coupled with a mechanism of renewal of the Calypso Serial Number (CSN) to mitigate the risk of fraud : a part of the CSN contains date and time of validity of the debit key which shall be checked by the terminals.

Thales says: poor mobile network coverage can make HCE services inaccessible. In short no internet connection, no mobile transit service. Let’s compare the basic mobile transit card features of Mobile Suica with Calypso HCE:

It’s too bad IDFM didn’t study Mobile Suica shortcomings, they could have learned a few things. Most certainly they understand HCE shortcomings but chose it anyway for unknown reasons. Perhaps there are challenges getting Calypso retroactively installed on the eSE on many different Android devices and HCE was the only way to rollout Smart Navigo quickly. The Android platform reputation for keeping devices up to date with the latest software is lousy due to the slow manufacturer response.

Right out of the gate Smart Navigo HCE won’t support power reserve NFC transactions even on Android devices that support it for regular eSE NFC. In total, there are 6 core Smart Navigo features that are internet connection dependent vs 1 Mobile Suica feature. 6 more things to complain about when they don’t work…in other words the Smart Navigo HCE suck index is 6 times greater than Mobile Suica. If Suica App is anything to go by, there are going to be a lot of bad Google Play reviews for the HCE version of the Île-de-France Mobilités App.

iPhone and Apple Watch users can be thankful that Apple Pay Navigo will use eSE (as Samsung Pay Navigo already does), and avoid this mess when the service launches in 2023, matching the Mobile Suica experience, feature for feature.


2022-10-17 UPDATE

Navigo HCE does not support Express Mode, Android users have to wake-unlock-tap to validate. This is the price of using HCE instead of a secure element.

IDFM launched Smart Navigo HCE that does not support an Express Transit mode. Android users have to wake-unlock-tap to validate…the price of using HCE instead of an embedded secure element (eSE). That IDFM and Calypso went with HCE, despite the downsides and the fact that modern NFC capable smartphones all have eSE as standard, is very interesting and speaks volumes about the state of Android NFC and licensing fee headaches. Assume that Mobile Calypso don’t come pre-installed on smartphone eSEs, unlike EMV, then imagine the nightmare of: (1) dealing with all the Android manufacturers to retroactively update their devices so they are compatible with eSE Navigo (such as currently found on compatible Samsung Pay devices), and (2) getting Google Pay on board. Going the HCE route likely avoided a lengthy messy delay getting Navigo on mobile for the Android masses which is by far the majority in France.

This is exactly the mess that Apple Pay takes care of behind the scenes so users don’t see or deal with any of it. That’s the value of having a gatekeeper, better UI and security encourages users to use NFC payments and Apple Pay use far exceeds any other digital wallet…this is the benefit that Apple Pay delivers to developers. Too bad it’s going away for EU users that the EU is forcing Apple to give up their NFC gatekeeping role, which is very sucky indeed.

VISA Japan and Apple still at odds over VISA Touch debit cards

Mastercard but no VISA

The April 19 launch of SBI Neobank Mastercard debit card support for Apple Pay was a bit unique: the first time that a plastic issue Japanese debit card came to Apple Pay and the first Apple Pay Japan debit card supporting the FeliCa iD payment network. Another interesting aspect is that only the Mastercard version supports Apple Pay, the VISA version is plastic only with VISA Touch (EMV contactless) support.

There are plenty of bank app issue digital only debit cards from JCB, Mizuho, MUFG and others on Apple Pay. These all work on JCB’s QUICPay (FeliCa) and J/Speedy(EMV) payment networks. Apple Pay Japan supports many different mobile payment network cards thanks to Mobile FeliCa support, by far the largest selection of Apple Pay payment networks in the world: EMV (VISA, Mastercard, AMEX, JCB), iD, QUICPay, Suica, PASMO, nanaco, WAON. But VISA issue debit cards are not supported even though there are many, not a single one on Apple Pay.

Wasn’t this taken care of by the May 2021 Apple and VISA JP agreement? For credit cards yes, one year later they are still at odds over FeliCa support in debit cards. VISA Japan brand debit cards are VISA Touch EMV contactless exclusive, single mode cards. VISA JP credit cards are dual mode EMV/FeliCa for plastic and smartphones, but not debit cards. We don’t know the reason but debit cards deifintely fit the budget customer category while credit cards come with credit checks, perks and card membership fees for upscale cards.

As an easily available budget card, VISA cuts costs by dumping the dual mode EMV/FeliCa IC chip and transaction fees for the convenience of using FeliCa iD/QUICPay payment networks. In other words VISA keeps all transaction fees for themselves while marketing the shit out of VISA Touch as the greatest thing since…whenever.

All of the other card brands in Japan have dual mode NFC as standard. Not VISA, they’re playing the long game of eliminating FeliCa payment network competition. This stupid polarizing single flavor NFC position only served to give QR Code payment networks (PayPay, Line Pay, etc.) a huge opportunity that they smartly played. End result: more payment network competition than ever before.

Apple on the other hand has a very simple rule for all Apple Pay Japanese issue cards: they must support FeliCa and all EMV cards are global NFC dual mode. Was this the price for adding FeliCa support to Apple Pay? Perhaps, I think it’s more to do with the Apple Pay vision of removing complex and confusing hardware choices, the Google Pay Japan mess, for standard ‘just works everywhere’ NFC. Has this been successful? Very...just ask Suica.

USA transit fare system evolution

Reece Martin posted an interesting video, So you built the wrong transit system, that examines the American penchant for building cheap light rail systems that don’t make long term sense. Public transit is a waste of money to Americans with money, so cheap is only way to fund and build public transit infrastructure. The problem is this cheap short term thinking costs more money in the long run. It’s a ‘one size fits all’ mentality.

But as Reece points out, systems can evolve from humble beginnings. Many private Japanese rail lines started out as street trams (that evolved from horse trams) but evolved into the heavy duty regional rail lines we have today. Fare system have evolved too, from paper, to mag strip, to IC smartcard and now mobile devices.

Transit fare systems in America suffer from the same short term cheap thinking, on full display on the MTA OMNY system, the world’s first EMV only open + closed loop fare system. When it’s completed in 2023, barring more delays, MTA will have farmed out every aspect of their fare collection and OMNY transit card issue to banks.

Not to rehash points I already made about OMNY, but Reece’s wrong transit system analogy struck a chord. And unlike rail system evolution, once the transit fare system in locked into the bank payment card infrastructure, from technology (EMV) to payment network processing (VISA, mastercard, AMEX, etc.), it will be extremely difficult, if not impossible to change anything later on.

But why is America so short sighted when it comes to public transit, never investing in a long term self-sustaining viable business model? I ran across an interesting take that explains it neatly. The USA will never have a transit platform business because public transit is a welfare and jobs program, not a self-sustaining business model:

Public transportation in the US is generally very bad and very heavily subsidized. It’s cheap because extremely little service is being run, and the government picks up most of the bill.

Public transportation in the US is less of a way normal people get around, and more of a welfare program and jobs program. Even in places where public transportation is a way normal people get around, e.g., NYC, it is run more like a jobs program than an essential public service.

Reddit user Sassywhat

Open loop fare systems are also vulnerable in new ways nobody predicted: imagine the mess if payment networks go down in a cyberwar, à la the Moscow metro when digital wallets and bank payment card networks were suddenly and omniously turned off. In the case of OMNY where, unlike Moscow metro, everything is EMV payment networked…there is no backup in-house payment settlement system, there is no plan b.

In other words not only is OMNY EMV one size fits all, it’s all or nothing.


Related post: Hidden Assumptions