It’s about time. Somebody from outside Japan finally took in the big picture of the Japanese Transit Platform model and wrote a business outline of it in English. Egon Terplan of the San Francisco Bay Area Planning and Urban Research Association (SPUR) came to Tokyo and liked what he saw: Falling in Love With the Trains of Japan.
By 2017, Japanese trains carried nearly 30 percent of all rail passengers in the world, more than all of Europe. But unlike many European countries, Japanese rail companies are privatized, with for-profit publicly traded companies running separate rail lines all around the country.
JR East, the largest of the JR companies, carries 17 million passengers per day on 12,300 trains. (By comparison, Amtrak carried just 31.3 million passengers during all of 2016, a record year in ridership; the New York City subway averages 5.5 million daily rides and BART, 430,000.) And JR East’s $26 billion in annual revenue includes no government subsidies.
Terplan then lists what he thinks are the major components:
Allow rail operators to become real estate developers to capture the value they bring to the stations.
Turn stations into major destinations.
Build over tracks to create new land opportunities.
Dramatic reductions in travel time between cities can lead to major increases in rail’s market share.
Interoperable rail cards (Suica, etc.) are key to making rail easy to use nationwide.
Essential points all, but Terplan doesn’t explain the importance of how all the different infrastructure pieces not only integrate (Shinkansen, regular lines, subway, buses, station retail, services, Suica, etc.) but also create a whole that is much larger than the sum of parts, and why. Perhaps he is only outlining the model and will return with a deeper analysis later. I certainly hope so because it’s a great transit model for other countries to adapt and adopt. Hong Kong already has a similar system on a smaller scale as does South Korea and Taiwan.
The last component, nationwide interoperable Japan Transit IC prepaid cards for transit and store purchases aka Apple Pay Suica, is the secret sauce binding everything together into a tight slick business model. That is the missing why and it’s just starting: interoperable features like Shinkansen e-ticketing, commuter passes, local loyalty point systems and hosting everything on digital wallets are still weak points. JR East and Sony are busy creating the next generation ‘Super Suica’ format that aims to integrate everything while reducing costs and taking it to the next level.
Global FeliCa iPhone,FeliCa Pixel, Super Suica and all that
Apple Pay Japan arrived just 2 years ago and has clearly disrupted the Japanese contactless payments market in many important and interesting ways. Things can change quickly and the disruption isn’t one way. Here is a timeline:
September 2016 Apple announces FeliCa support for iPhone 7 and Apple Watch 2 Japanese models, Japan Transit IC card e-money use is approximately 5.5 million transactions a month with a 10% YOY growth rate.
October 2016 Apple Pay Japan starts with Apple Pay Suica as the centerpiece.
September 2017 Apple announces iPhone X, iPhone 8 and Apple Watch 3 that have global FeliCa support: anybody coming to Japan can add and use Apple Pay Suica.
October 2018 Google announces Pixel 3 with FeliCa support, a first for Google hardware. Google Pay matches Apple Pay but only on a Pixel 3 JP models further splintering the Android platform between haves and have-nots.
And now because of the success of Apple Pay Suica, JR East and Sony are taking it to the next level developing the next generation Suica container format, which doesn’t have a real name yet (local coop transit smartcard?). I call it Super Suica and it’s due to launch April 2021. Super Suica will change Japanese contactless payments and transplant the Apple Pay Suica transformation from the Suica Tokyo home area to all transit regions nationwide. Everything transit will be on Apple Pay, everybody everywhere can use it for transit and e-money. Google Pay and Osaifu-Keitai will be there too.
With a single seamless NFC standard and certification process in place, JR East roadmap goals are very clear:
Japanese customers with Mobile Suica devices can use their devices for public transportation and transit payments abroad.
Global specification certified NFC devices from abroad can use Mobile Suica.
NFC certification and global FeliCa smartphones are taking care of the hardware side, but NFC transit payments interoperability isn’t there because there hasn’t been a roadmap. Super Suica is the first step to create one. Japanese transit cards have been compatible with each other for transit and e-money since 2013 but important pieces are missing: commuter passes and point systems are still chained to local transit cards and have to be managed locally. You can travel with Apple Pay Suica anywhere, but you can’t add a commuter plan for an area outside of the Suica transit network.
Because of the costs associated with maintaining local data and account management it’s very difficult and expensive for large transit companies to host systems on mobile digital wallets. Nobody outside of JR East has managed to do it. It’s expensive for smaller local transit companies to issue smartcards and impossible to host them on mobile. Super Suica containers will solve these problems and greatly reduce costs not only for plastic card issuance and operation but also for hosting them on mobile digital wallet platforms.
Development is divided between Sony, JR East and JR East Mechatronics (JREM), the JR East subsidiary company that manages Mobile Suica.
Sony: updating FeliCa OS for the new format
JR East: coordinating the deployment effort with the other transit companies
JREM: physical card development, providing background services for issuance and mobile
The press release is terse and light on details but 3 points are very clear:
Support for local commute plans, points, branding and more in addition to the regular stored fare transit and e-money features of current issue cards
Everybody on board
The aim is clear: instead of complicated expensive account management systems that babysit all the extra functions the cloud magically attaches to current transit cards, with every transit company doing it differently, Super Suica will be a universal container that takes care of the extras on the card itself. There will be established protocols and one common format with a new FeliCa OS version to handle everything.
This approach will streamline and simplify the entire Japan Transit IC system process for plastic cards and mobile, significantly lowering costs without sacrificing the great things about Suica: blazing speed and local processing without a network.
Functions that are geeky and complex like setting up auto-charge or purchasing Shinkansen e-tickets will become much easier and accessible. Missing functions like discount tickets, special fares, and regular line express train ticketing will be possible on mobile. JR East has talked about raising the current 20,000 JPY Suica balance limit, Super Suica is the perfect opportunity to finally do it.
The outcome for Japan
The change for Japan is obvious: the success of the Suica transit payment platform in the Tokyo region is made available everywhere. Actually it already is available everywhere but Super Suica will supercharge it. JR East will offer to host everything on mobile so that everybody in Japan can use Apple Pay, Google Pay or Osaifu-Keitai for local transit, purchases, while offering all the local goodies and incentives.
Other big players like JR Central and JR West may not opt-in for hosting on Mobile Suica for political reasons but the incentives are certainly there and the cost of getting somebody else’s cloud service to do it will be much easier and cheaper than it is now. JR East looks eager to go the extra distance to get everybody on Mobile Suica cloud and should make clear that Mobile Suica is only managing containers, not account data.
The outcome outside of Japan
The possibilities outside of Japan are going to be interesting. Could the Hong Kong Octopus system opt for the new format and could it be made cross compatible? It’s nice to think that sister systems like Octopus and Suica could do that some day. Even if that doesn’t happen, the Super Suica container format will offer Octopus the same benefits of lower costs and make it easier to deploy on other digital wallet platforms outside of the currently exclusive Smart Octopus in Samsung Pay.
More than cross compatibility however I think Super Suica will shine a much brighter light on the shortcomings of using ‘Open Loop’ EMV contactless credit card payment networks for transit: non-existent account management, simple fares only, no commute plans, no points that tie in with other transit company services, etc. These are problems that are prohibitively expensive for any transit company to fix on their own and the banking industry payment networks will not.
A handy tip for anyone wanting to get around with Apple Pay without causing a fuss is to authenticate Apple Pay as you approach the gate. Doing it in advance helps remove the awkwardness of holding up other people if your fingerprint or face isn’t recognized first time, for instance.
This is a perfect example of dead-end last century credit card vs. smartcard, open loop vs. closed loop thinking and where it has brought us. Digital wallet platforms like Apple Pay and Google Pay collapse the differences of open loop vs. closed loop and destroy the old arguments while combining different NFC technologies and middleware software into one compelling new whole the creates an entirely new game: Build a transit payment platform instead.
A stored value native transit card on the front end with a credit/debit card on the backend for Apple Pay or Google Pay recharge is the best arrangement that leverages the strengths of both approaches working together instead of the old antagonistic and wasteful A or B arguments. In the long run it’s a win-win for transit companies and the banking industry.
For Asian countries that already have FeliCa transit systems (India, Indonesia, Hong Kong, Vietnam) Super Suica will let them do more. For transit companies in America and Europe, Super Suica will be a great chance to re-examine long-term goals and choose the best mix of technologies in light of the new business opportunities and models that digital wallets and Super Suica roadmap will offer.
One thing is clear: transit companies that stick with the old ways of thinking will miss unique new business opportunities offered by native transit payment platforms hosted on digital wallet platforms, opportunities that build on transit but also extend it into new places.
The new emoji coming with iOS 12.1 will make some people happy but to me are more joyless skin tone, hair color and culturally correct western think. I liked emoji when they were more ‘Manga’ and not Unicode Consortium committee product blah but the Unicode Consortium know they have good thing going and will run it into the ground. Emoji are supposed to be fun, remember? Not tiny anatomically correct versions of reality.
Emoji were way more fun when everybody was a manga princess not a Tim Cook Memoji. Let’s face it do you want anatomically correct culturally Barbie with skin tones and hair textures? Of course not, we all want the fabulous Cher Barbie with the Bob Mackie outfit. It’s all Cosplay anyway.
JR East created special edition Suica cards to commemorate the 2013 Transit IC interoperability startup and Tokyo Station Restoration
Unfortunately special edition Suica cards turn into plain old Suica cards in Wallet. At least you get the deposit back
Some people collect baseball cards, other people collect Suica cards. Most of the Suica cards pictured here are commemoration limited edition Suica from the 2013 Transit IC interoperability startup. The beautiful Tokyo Station 100th Anniversary limited edition Suica was eagerly sought after in 2014 with long lines and frayed tempers at the fully restored Tokyo Station that year.
This particular collector decided he wanted his deposit money back and loaded all 8 Suica cards into Apple Pay Wallet. He might have gotten a better price selling them on Yahoo Japan Auction but at least he got his deposit money back.
JR East and Sony announced co-development of a ‘national’ super Suica card that will replace local Japanese transit card variations such as ICOCA, TOICA, SUGOCA, Kitaca, PASMO, manaca, Nimoca, Hayaken and others into a single card that does it all. JR East and Sony plan to have the card in circulation starting April 2021. Too late for the 2020 Summer Tokyo Olympics party certainly, but great news for transit customers nationwide nevertheless. The clouds of uncertainty have parted, the transit platform future in Japan shines bright.
Japanese transit cards are already compatible with each other for transit and e-money purchases but commuter passes and point systems are still tied to local transit systems and not directly managed or stored via the current transit card architecture. You can use Apple Pay Suica in Nagoya and Osaka, but you can’t add a Suica Commuter Plan for an area outside of the JR East rail network. Also it is difficult if not impossible for smaller transit companies to host local transit cards on mobile. The new super Suica card will solve these problems and reduce costs for everybody. I suspect the current ¥20,000 Suica Card balance limit will also be raised to ¥40,000 or more for Japan-wide ‘Touch and Go Shinkansen’ service.
The new card will likely resemble the recently released Mizuho Suica: a basic super Suica card with localized branding, commuter plans and point systems. The Mobile Suica cloud infrastructure is already in place so everything will be hosted on that but there is much backend work for JR East to do for a 2021 launch. For it’s part Sony has to update the FeliCa middleware stack to make it all work on the new card architecture then deliver it to FeliCa licensees like Apple so they can incorporate it in iOS and watchOS.
It will be great to have a single Apple Pay ‘Super Suica’ card that can do it all, from ‘Touch and Go’ Shinkansen to commuter plans and point systems nationwide. There is no doubt in my mind this is the disruption that Apple Pay has brought to Japan. The market implications are enormous. It is the Apple Pay Suica Tokyo area growth outlined in the Apple Pay Japan One Year Mark replicated all over Japan. I don’t know about you but I can hardly wait for the next stage of Apple Pay Super Suica to arrive.