Apple’s decision to offer Apple Pay EMV style Express Transit as a default iOS 13 feature on the work-in-progress that is MTA OMNY may not have been a smart idea after all. Those manual swipe MetroCards will be around for a few years, and with Cubic Transportation running the show it is anybody’s guess when OMNY, the system and the MIFARE MetroCard replacement, will completely in place and running smoothly.
For every tweet saying Express Transit is great, there are plenty of complaints of unwanted OMNY charges because iPhone users didn’t know Express Transit was turned on. The thing is iPhone and Apple Watch have to be damn close for a read. Unless the device is in a pants or coat pocket that brushes on the OMNY reader, I don’t see how accidental reads can happen. Nevertheless Apple would have happier New York City customers leaving Express Transit off by default…at least until OMNY is completed and running smoothly everywhere…whenever that is.
The endless push pull of ‘this contactless payment works great for me’ that drives somebody else crazy is endless fascinating. We have more choices than ever: digital wallets, plastic cards, face recognition, NFC, QR Codes, etc. 5G and UWB promise to mix things up even more.
Ultra Wide Band enhanced FeliCa and MIFARE Apple CarKey? The evolution of EMV, FeliCa, MIFARE and other similar protocols as they transition from plastic smartcards to digital wallets devices opens up opportunities to include other radio technologies like Ultra Wide Band and Bluetooth in addition to NFC. Ultra Wide Band Touchless FeliCa on display at the Docomo Open House was all about cars, not Touchless walkthrough transit gates that will appear in a few years.
Touchless FeliCa makes great sense as a ‘NFC car key’ that utilizes UWB for operation at greater distance and better accuracy when needed. Touchless makes even more sense as a ‘keep phone in pocket’ touchless payment method for drive thru purchases. The addition of UWB into the mix makes smartcard protocols much more useful than just NFC. I would certainly welcome a smartphone UWB powered Touchless FeliCa replacement that ditches the need for automobile ETC cards and readers on Japanese expressways.
How UWB enhanced FeliCa would fit with Apple’s new CarKey feature said to be coming with iOS 13.4 is unknown but iPhone already supports FeliCa. UWB touchless support for iPhone 11 and later models is a logical evolution. Sony and Docomo are developing the technology with NXP which certainly means that MIFARE will also support UWB enhancements. The long history of FeliCa and MIFARE as keycard solution providers is a natural fit with Apple CarKey. NFC is the only protocol that has been discovered in iOS 13.4 beta CarKey framework so far but I would not be surprised if UWB code references turn up at some point.
The basic promise of 5G is that IT system designers finally achieve a nirvana of everywhere, always available, big pipe central processing without wires, the big cloud. The original Suica card design effort back in the 1980’s had to leverage local processing because central processing wasn’t up to the task of handling massive transaction volumes of a Tokyo-Shinjuku-Ikebukuro station at peak rush hour. This is why Suica cards are stored value by design, the FeliCa technology behind the card design delivers 200 ms and faster transaction times for local processing at the transit gate. What happens when 5G promises, in theory, to deliver 200 ms central processing?
Kill mag strip paper tickets first then Suica? As Junya Suzuki points out in his article ‘Is QR the future of Suica?‘, transit QR Codes on the complex Japanese transit network only need be a unique local passkey with everything else, verification, transaction, etc., done in the 5G cloud. The same concept applies for facial recognition systems where the registered face is the unique local passkey. With the power and speed of 5G, Suzuki san argues that the need for Suica-like local processing falls away. In his scenario all Suica needs to be is a unique passkey that can lose stored value functions.
However the old Tokyo-Shinjuku-Ikebukuro station peak rush hour central processing crunch problem remains. I’m not convinced super fast 5G enabled cloud processing is going to solve that problem any better or cheaper than Suica does now, and reliability is a complete unknown. We also have the next generation ‘Super Suica’ format and FeliCa OS coming in the next 12 months, the design goals here include a flexible, modular cloud friendly architecture and lower costs. Next generation Suica coupled with a flexible local processing~cloud processing backend may be a compelling solution that finally delivers a practical inexpensive Suica infrastructure to the little end of the line station which only gets a few trains or buses a day.
JR East, Hanshin and Osaka Metro are testing QR Codes and facial recognition ID ticketing to replace mag strip paper. As Junya Suzuki points out, mechanical paper ticket transit gates are more expensive to install and maintain than IC transit card gates but the real expense is mag strip paper recycling costs. Mundane but not surprising. The more important long term question is this: do transit companies keep the current more expensive cash base paper ticket fare vs less expensive IC card fare structures in place, or do away with it when QR Codes replace mag strip tickets? I don’t think we’ll see an answer to that question for a few years.
There is no doubt that 5G will enable new payment possibilities, and a lot of debate. But I don’t see 5G cloud completely upending and replacing the need for local processing and stored value cards. Both are evolving, both have their place. It doesn’t have to be, and should not be a one size fits all solution. Each approach has strengths that can be complementary and build a better stronger system.
For me it comes down to one simple thing. My Apple Watch can be buried under multiple sleeve layers but Apple Pay Suica works great going through rush hour transit gates every time. It’s the best argument for UWB enhanced FeliCa and MIFARE touchless transit gates and stored value local processing I can think of. QR can never match that, nor can face recognition…think face masks during an epidemic or pollen season.
In the next installment I hope to explore 5G and the evolution of digital wallets.
Social media is great for exchanging bits of information but terrible when it comes to conveying context. ‘Most of my friends’ and ‘outside of greater Tokyo’ are poor generalizations and not very useful because they belong to specific, and unexplained, use cases. I often find that people coming to Japan from large continents assume the country is small, which it’s not, and that all Japanese do everything the same, which they don’t.
It’s probably true that I place too much importance on Suica, but that’s because I use it so much. I live in Tokyo, my workplace sponsored commute pass is Suica, most of my daily purchases are with Suica, most of my points and Cashless rebates are Suica. I am plugged into Apple Pay Suica with a View/JCB card setup with auto-charge.
My Suica life is good but what about people living outside the Suica commute region, or inbound longer-than-short-term visitors without Apple Pay cards? The Apple Pay country list is short with many Latin America and Asia Pacific regions still missing, Mexico and India for example. No Apple Pay credit/debit card means Apple Pay Suica is a side grade because it’s still tethered to cash only station recharge kiosks and 7 Eleven ATMs.
Credit card recharge makes all the difference. A true upgrade from plastic Suica that is strictly one way. Once there you never want to going back. It’s the upgrade that will free users from huge lines at station recharge kiosks during the Olympics, and just plain common sense at huge crowd events like Tokyo Comic Con. The Suica + Rakuten alliance and Super Suica will bring massive changes to Japanese transit card universe but the majority of benefits will only apply to mobile use.
I don’t care if people stick with plastic Suica or migrate to Mobile Suica on Apple Pay/Google Pay/Osaifu Keitai. Plastic transit cards are small, convenient, don’t require a battery, but they come with limitations and issuance is a major cost factor for operators. All I care about is that people have hardware choices and the opportunity to go mobile with their local region transit card. Having options is a good thing, let people decide for themselves.
In Japan, iPhone purchases were traditionally subsidized, bundled with carrier contracts. Today, local regulations have significantly restricted those subsidies as well as related competition. We estimate less than half of iPhones sold in Japan in Q1 this year were sold via subsidy.
One year later Apple announced record earnings for Q1 2020 but Japan iPhone sales with down 10% y/y. Luca Maestri only explained the situation at the end of the earnings call, answering the very last analyst question:
So Japan was down 10 percent during the December quarter. It was primarily due to iPhone performance, which was challenged because there were some regulatory changes that took effect on the 1st of October, where essentially the regulators decoupled the mobile phone pricing from the two year contracts and they’re capping the maximum amount of carrier discounts that can can be made. At the same time, I would say that within a more difficult macro environment, iPhone did incredibly well during the quarter. Six of the top seven selling smartphone models in Japan during the December quarter were iPhones. So it was a very strong performance by iPhone in a difficult environment. Also in Japan, we had very strong double digit growth from services, stronger than company average, and very strong double digit growth in wearables, also stronger than company average. So we feel very good. You know, Japan is is a country where historically we’ve had great success. The customers are very loyal and very engaged. And we have a very strong position there and we feel we have a very good momentum.
I don’t think Japanese iPhone customers will stay loyal and engaged if Apple sticks with the same old sales strategies now that the era of carrier bundling is over. A new approach is needed. Maestri alluded to one clear advantage remaining for Apple in the Japanese market: Apple Pay Suica on Apple Watch, an advantage no other device manufacturer has matched yet. That advantage along with the golden opportunity of the Tokyo Olympics this year are market opportunities which Apple is not taking advantage of.
The recently announced Mobile PASMO has some serious limitations lucidly explained in FeliCa Dude’s ‘Mobile PASMO – something we shouldn’t need‘ reddit post. It shines a light on the unfortunate petty politics of Japanese business culture, a catch-22 that ends up killing the very opportunities Japanese companies work to create. Mimicchii is a good Japanese word for it: so obsessively stuck on pointless small details that one completely misses the big opportunity. The PASMO association knows they will loose out, eventually, but hang on to their one and only advantage, commute passes, in the hope they gain a better losers bargain in the end. But how much opportunity is lost by then?
As FeliCa Dude points out, Mobile PASMO is a pointless waste of money and system resources to replicate what Mobile Suica already does:
PASMO is inferior to Suica in many respects, the idea of deploying Mobile PASMO and removing the user’s ability to choose Mobile Suica is fairly short-sighted. Such a development likely cost many hours and much money, but is effectively a boondoggle and a monument to the stubborn failure of JR and the PASMO Association to sort out a way to issue commuter passes on each other’s cards.
Taken to an extreme each transit card player would build its own mobile service but this is impossible in an era of shrinking ridership and resources.
The next generation 2 cards in 1 Suica due in 2021 aims to fix the current state of affairs. Architecturally I expect the problems will be solved, but corporate politics are another matter. JR East will have to offer enough cost saving incentives and flexible extras for the other major transit card players to host their service assets on Mobile Suica: commute plans, Shinkansen eTickets and more. It’s certainly in everybody’s best interest to do so. Time to put aside the mimicchii politics and duplication. If Japanese transit companies can’t come together to build the future, everybody loses.