The VISA JP Apple Pay announcement and digital banking wars

MacRumors: Customers with Visa cards…will be able to add their card to their Wallet on iPhone and Apple Watch.

Me: I like MacRumors but the writer here has no idea what the story is or that users have been using these cards in Apple Pay all along for store purchases.

MacRumors: Hey! Could you elaborate on what you mean? Visa cards issued by those banks now have Apple Pay, correct?

Sure Sami, here’s the elaborate story. Do you know FeliCa? It’s the Sony created NFC standard that has been around a long time, long before EMV grafted NFC into contactless credit cards. When mobile payments launched in Japan back in 2004, Mobile FeliCa was the only technology that worked. So mobile payments for all major credit cards and Suica were built on Mobile FeliCa, the contactless payments infrastructure in Japan grew from that.

Fast forward to 2016. Phil Schiller announced FeliCa for iPhone 7 at the keynote and the launch of Apple Pay in Japan. VISA Japan didn’t sign an agreement with Apple but it didn’t matter much because VISA JP cards were available for Apple Pay thanks to previous Mobile FeliCa agreements covering the iD and QUICPay networks for store payments. The other card companies (Mastercard JP, JCB, American Express JP) signed with Apple.

It was a big success. But the Mobile FeliCa agreements only covered store purchases, they didn’t cover things like in-app purchases. Even though many Japanese users added their VISA cards to Apple Pay they couldn’t use them to recharge Suica cards because in app purchases were not supported.

Fast forward to 2020. VISA JP is a major sponsor of the Tokyo Olympics showering sponsorship money to promote ‘VISA Touch’ EMV contactless cards. They want customers to use VISA Touch at stores, not iD and QUICPay because the margins are nicer and EMV contactless is a world standard except for places like Japan (FeliCa) and China (PBOC). Most of the POS equipment in Japanese stores is multi-protocol ready so the customer NFC flavor is a moot point. For whatever reason, let’s say marketshare, VISA JP finally signed on with Apple Pay.

What changed for all those VISA JP cards already working in Apple Pay Wallet these past few years? A VISA logo, in-app payments, dual mode NFC and Payment card Express Transit:

Did you get that Sami? Hello, anybody there?

Digital Banking Wars
Seriously though, it’s sad when tech writers don’t understand the technology in the stories they write. All major Apple sites ran the same wrong story. It should have been: Visa JP Cards now fully support Apple Pay. I think journalists do everybody a great service when explaining complex stories and connecting the dots in easy to understand ways. Nobody cares, which is a shame because there were other major things going on behind the VISA JP Apple Pay announcement that even the Japanese tech media missed: the very same day, NTT Docomo and MUFG announced a joint digital banking venture.

Let’s take a closer look at that VISA JP Apple Pay announcement, specifically the issuer launch list: APLUS, Cedyna (SMBC Financial), SMBC, Docomo, MICARD, Saison, JACCS, Rakuten. Do you see MUFG? Nope. MUFG brand VISA cards will join at some point, probably, but VISA has put all their eggs in the SMBC basket, the companies are not on the friendliest of terms.

NTT Docomo and SMBC/VISA group feuded for years and called a stalemate. It was only a matter of time before NTT Docomo kicked SMBC to the curb, which they did yesterday with the MUFG joint announcement. Docomo and MUFG are going to leverage dPoint into an economic zone to rival Rakuten and SMBC/VISA V Point. It’s as simple as that. And here you thought that VISA JP announcement was only about Apple Pay. Think again, the economic zone mobile digital banking wars are just getting started.

One last bit: if you want to know the reason why it took so long for VISA JP to sign with Apple go to the SMBC V Point App page and look at the Apple Pay • Google Pay section. ApplePay is dual mode, Google Pay is EMV only. It was the power play we suspected all along: VISA wanted to kill FeliCa, Apple stuck to its NFC switching dual mode guns.

UPDATE: with the official participation of VISA JP on Apple Pay on May 11, VISA instituted some merchant category changes that reduce reward points for some foreign issue VISA cards using Apple Pay Suica.

A great reality check

I was pleasantly surprised to find some hits coming from a website called limitless possibility, followed the link and discovered a great podcast by Luc-Olivier Dumais-Blais and Yanik Magnan on Japanese transit IC cards, Suica 2 in 1, the new features of FeliCa Standard SD2, Ultra Wideband Touchless and more…things I’ve been writing about for a while that never get any traffic.

Yanik does a much better job of summarizing the transit technology landscape than my messy collection of posts. I wholeheartedly agree that UWB Touchless is the perfect opportunity for Japanese Transit IC members to put aside political differences and merge, or at least ‘harmonize’ their data formats for a real all in one Super Suica. We shall see. There are things coming down the pike such as multi-secure element domain/multi-protocol Mobile FeliCa that might have transit implications. And I thank Yanik for his constructive criticism of my ‘Super Suica’ coverage. It’s very helpful and rare that anybody takes the time these days.

Extra bonus: their discussion of the Japan QR Code payment mess and a sendup of PayPay ‘gamification’ campaigns using the Canadian Tim Hortons roll up the rim thing is hilarious and spot on.

T-POINT? We don’t need no stinkin’ T-POINT

In the ephemeral COVID era we live in assurance don’t come easy, especially with JP cashless market data. Half the fun is taking the crumbs you find, a 1000 person web survey here and there, and seeing what trends you can tease out of it.

First of all the usual disclaimer: cashless use is highly regional, depending on transit use and many other factors like age group, shopping habits, and reward points. It’s this last item that makes the CreditCard no Yomimono survey so interesting.

Reward points are the dangling carrot all Japanese cashless players use to drive card use. New comers like PayPay use them shamelessly to capture customers and build their platform. Japanese customers love to play the ‘what combo gets me the most points’ game but they are also notoriously cold shoulder when they feel gypped. And once they drop something, they never come back.

The survey skips over regional point systems like JRE POINT (though I think that’s debatable considering Mobile Suica on Apple Pay/Google Pay/Osaifu Keitai), and examines ‘national’ point systems: d POINT, T-POINT, Rakuten POINT and PONTA with a simple question. Which one do you use? 2,271 people said:

  • Rakuten POINT: 59.9%
  • d POINT: 18.4%
  • T-POINT: 14.4%
  • PONTA: 7.3%

It’s clear to see why JR East cut that special deal for Rakuten Pay Suica: the different online Rakuten businesses for shopping, travel, etc. mesh well and there are a lot of people invested in Rakuten POINT. The deal puts Super Suica in a good 2021 launch position for new local transit partners, MaaS NFC Tag Suica and more as the platform grows.

It’s a bittersweet deal however for JRE POINT. It’s a real shame and missed opportunity that the major IC transit cards (Suica, ICOCA, TOICA, etc.) are compatible for transit and eMoney, but not for points. Even if they all kept their own point branding and simply offered 1=1 point exchanges, people would use them more.

The decline of T-POINT is not surprising, dropping from 60% in a 2015 survey. Culture Convenience Club (CCC) and SoftBank ran T-POINT into the ground and it’s not coming back. It’s only a matter of time before SoftBank kisses T-POINT (and CCC) goodbye and unveils PayPay POINT.

PONTA is another major that has not gained much traction so far but this might change with the recent LAWSON Bank PONTA Plus branded credit card push. All of the point systems need to add Apple VAS and Google SmartPay support and drive acceptance on the merchant POS level. The less we have to deal with separate plastic point cards, all the better.

NTT Flet’s fails in the Covid traffic crunch

NTT FLET’S internet service has been around forever in many configurations, the latest being Flet’s Hikari ‘optical fiber’. I call it flexible fiber because NTT uses the term Hikari when they should not. My Hikari only comes into the apartment building junction box then branches into each apartment with good old cooper wire phone lines and a VDSL modem. NTT calls that Hikari, I don’t.

PPPoE/IPv4 traffic has been tapped out in Tokyo since at least 2017. When I first upgraded from PPPoE/IPv4 to IPoE/IPv6, I saw a pleasant bump in speed with none of the night time internet traffic meltdowns when using PPPoE.

I thought my problems were solved but over time IPoE/IPv6 download speed has slowed down while iPhone NTT Docomo 4G LTE speed has skyrocketed past NTT Flet’s:

A year ago Twitter user shao, who posts wonderful network and payment tech tweets with the deep tech background to back them up, noted that the Japanese Internet Provider Association was in a collective hissy fit with NTT. IPoE/IPv6 junction points to NTT main lines where tapping out and providers needed more junction points, they also wanted IPoE access pricing brought in line with PPPoE and better traffic control. NTT gave internet providers the cold shoulder with ‘we’ll consider it if you do the work.’ The result of that is NTT East/West Flet’s service is seriously slowing down in face of stay home telework, bored kids streaming content and too much online shopping.

As shao notes 4G and KDDI au Hikari nuro service are, so far, unaffected. The strange thing here is that KDDI is simply renting NTT dark fiber for nuro. So yes, NTT has the capacity, but doesn’t seem inclined to put in the effort to share it unless providers do the work, and also pay up. To be fair I think one of the problems is hinted at in a recent annual NTT financial report: a shortage of field engineers and technicians. Somehow it seems fitting that the human problem of Covid is also the human problem of slow internet speeds.

Rethinking Face ID in the Face Mask Touchless Era (Updated)

When iPhone X came out in November 2017, IT journalist Tsutsumu Ishikawa named Suica the Apple Pay winner. What he really meant to say was that Suica Express Transit was the only easy way to use Face ID Apple Pay. It took me a long time to get used to Face ID Apple Pay but now with the COVDID-19 crisis and regulation face masks, the choices are back at square one: (1) yank down the face mask to Face ID anything, (2) use a passcode instead, (3) use Apple Pay Suica set with Express Transit. Yeah, the last one. More people have Express Transit now in China, TfL-land and little bits of the MTA OMNY system but nobody has it for purchases. Except Apple Pay Suica, still the only Express Transit card for contactless payments at stores.

In the sudden era of face masks and plastic curtained checkout areas, dealing with Face ID as little as possible, and using Apple Pay Suica as much as possible, makes life easier and safer: experts in Japan instruct people not to touch face mask surfaces and you don’t want to be yanking down a face mask to use Face ID Apple Pay at close proximity checkout. The interim solution is Apple Pay on Apple Watch which does not use Face/Touch ID at all. But there is that social distance problem: your arm has to reach the reader. That’s the thing about NFC, it’s close proximity technology. So are QR Codes.

The Touchless Distance
When I first saw the NTT Docomo Ultra Wideband Touchless Mobile FeliCa demo I though why would anybody want to pay a few feet away from the reader? Outside of paying while sitting in the drive thru I could not think of a reason. After living with Face ID, face masks and COVID-19 social distancing, I see the reason now at every checkout at every store. I want it. You will too (the 1:20 mark):

And for cars too, CarKey will work like this at some point (0:13 mark):

Touchless Transit Gate vs Facial Recognition
The COVID-19 crisis upends another Face ID related technology fantasy: facial recognition transit gates. NEC is working on face recognition that works with face masks. If anybody can deliver viable face recognition with face masks NEC will certainly be one of the first, but there are cost, performance and privacy issues to consider for transit gates: how fast is the transaction speed, how well does it scale for commuter rush, how do you register faces? Who controls all that transit gate face data and is it stored domestically or data farmed out internationally?

Mobile FeliCa and MIFARE Touchless is the same device level security model we have now with Apple Pay Suica and Student ID, and what we will have with CarKey and shared ‘keys’. UWB is a new hardware layer on top of what already exists, it bridges the NFC infrastructure and contactless payment methods we have now and extends it to the future instead of junking it.

Osaka Metro plans to have face recognition transit gates deployed in time for Osaka Expo 2025. It’s a risky transition plan. Touchless transit gates are the safer bet. Sony, Docomo, NXP, JR East, JREM are doing the necessary hardware and software development with the same embedded secure element security and local processing architecture we have now. Osaka Metro can buy the finished goods from them instead of reinventing the wheel.

Fixing Face ID Shortcomings
On the smartphone side Apple already has the Ultra Wideband U1 chip in iPhone 11. The next step is Apple Pay support as outlined in the iOS 14 Apple Pay post. I hope Apple uses the opportunity of adding UWB Touchless Apple Pay to enhance Face ID with improved technology and controls. Express Card/Express Transit is the Apple Pay method to bypass Face/Touch ID for transit, purchases (Suica) and ID door access (Student ID and CarKey). Extending the Express Card/Express Transit model as much as possible, while keeping the high level of security, is one practical way Apple Pay can address some of the Face ID in face mask era pain points.

Longer term, Face ID has to evolve to securely read faces with face masks reliably. If Face ID cannot be secure, intuitive and face mask user friendly, I don’t see a future for it, or being the iPhone model that customers want to buy. This is why iPhone SE is looking like Apple’s most important product launch of 2020.

Last but not least I don’t see Open Loop transit ever working with Touchless technology. Open Loop will likely remain a NFC only service because EMVCo partners are invested in lower common hardware standards like ISO14443 and plastic cards and probably loath to update them. Certainly they don’t want to lose the plastic card issue business because it’s more profitable than issuing digital ones. EMVCo certainly didn’t see the current situation coming, nor did Apple of course. But then again who did?


UPDATES

iOS 13.5 Face ID tweak
iOS 13.5 beta 3 has a Face ID tweak: when it detects a face mask it no longer delays the swipe up Passcode pop up with a 2nd read attempt, it goes straight to Passcode pop up. This small tweak remove a tiny bit of Face ID with face mask stress, but tiny things add up when unlocking iPhone many times a day. But for me Passcode pop up was only one stumbling block, a second bigger stumbling block is Passcode entry via the numeric keyboard.

There is a curious lag between what your fingers are tapping, the feedback click sound and what tap the iPhone actually registers. If you closely inspect the visual tap feedback, it flashes white then fades slowly, while the click just clicks.Taken all together, my brain wants to type fast and tells me the my 2 thumb input is going fast, but the iPhone Passcode numeric keyboard wants me to type slow with 1 thumb. Perhaps it’s just me but I only get correct passcode entry 50% of the time unless I slow way down and type with 1 thumb.

Overall the Face ID with face mask tweak seems more for iPhone unlock, it’s much less useful for Apple Pay. I hope Apple continues to tweak Face ID before iOS 13.5 ships but the reality is Apple can’t do very much in a short time.

John Gruber had an interesting observation regarding another iOS 13.5 beta 3 tweak, this one for Group FaceTime:

methinks a lot of folks at Apple (executives included) are using group FaceTime chats more than ever before lately, and have realized that in practice, especially in larger groups, it’s not a good experience.

Daring Fireball: ANOTHER IOS 13.5 BETA TWEAK: AN OPTION TO DISABLE ‘AUTOMATIC PROMINENCE’ FOR THE CURRENT SPEAKER’S TILE IN GROUP FACETIME

Unfortunately it’s the same for Face ID: Apple is only addressing it because Apple execs are wearing face masks. It’s very frustrating that Apple is only dealing with the Face ID with face mask issue now that it’s on their face. Customers in Asia have been wrestling with it since iPhone X day one November 2017. At any rate I hope Apple puts the experience to good use for a better future version of Face ID.

The return of Touch ID?
The release of iPhone SE and iPad Air with Touch ID on the power button has some tech bloggers speculating if this means a dual biometric approach for future iPhone models. I don’t think so.