With iPhone 8 rumors peaking and the keynote date leaking soon, it’s time to add my two cents. I predict Apple will announce FeliCa support for all iPhone 8 and Apple Watch 3 devices worldwide in the iPhone 8 keynote Apple Pay section. Phil Schiller will probably say something like this:
Last year we announced FeliCa and Apple Pay support for our customers in Japan and the response has been incredible. This year we’re happy to announce FeliCa support in every iPhone 8 worldwide and that Apple Pay in Japan is adding support for other major transportation cards like PASMO and ICOCA in addition to Suica. Now all our customers in Japan and visitors from around the world can use their iPhone 8 for riding public transit all across Japan.
The mention will be brief. There may not even be a slide, but a 15 second mention with a slide would pay huge marketing dividends in Japan and costs nothing.
It was just a year ago when JR East dropped the Suica bomb at the NFC Forum Japan meeting. In his presentation, JR East IT/Suica Operations Center manager Hajime Yamada explained JR East’s participation in the Public Transportation Workshop (PTW) starting in 2014, and the NFC ‘Harmonization’ effort by PTW participants to roll all NFC flavors, Type A (Philips) Type B (Motorola) and Type F (Sony) into a single seamless world standard for public transportation transit systems and fare payments.
PTW members agreed to align GSMA and NFC Forum specifications with ISO standards for transportation. The result was an update to the ISO/IEC 10373-6 specification, and GSMA/GCF (Global Certification Forum) TS. 26, TS. 27 specifications. The implications are that starting from April 2017, GCF certification for NFC mobile devices requires NFC Type A/B and Type F support.
Seen in this light Apple adding NFC-F support to iPhone 7 and Apple Watch Series 2 in September 2016 was merely a head start over the competition to get GCF NFC certification in place before the new requirement started in April 2017.
The entire JR East presentation with slides was reported in Japanese by IT Journalist Yasuhiro Koyama and is well worth a read if you have the time and ability. It was the starting point for all Japanese press reporting that iPhone 7 would include FeliCa technology, later picked up by Bloomberg. There is also a similar document in English explaining the new GCF certification testing requirements for NFC devices.
Suica for Anybody from Anywhere
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, (Inbound) can use Mobile Suica.
So when do ‘inbound’ iPhone 7 users from abroad finally get to add Suica to Apple Pay? After all, every iPhone 7 has the same NFC A/B/F chip right?
JR East says there are still a few kinks to work out: specifically how the NFC side and the fare processing/app/data storage sides communicate with each other. There aren’t agreed upon open standards and every platform has their own solution: Apple Pay (Apple A Series Secure Enclave), Android Pay (HCE-F), Samsung Pay, etc.
With Suica already on Apple Pay and Apple controlling both software and hardware, it is simply a matter of when Apple turns on NFC-F for all iPhone 7 devices everywhere. Apple usually does that when rolling out new devices. Like Japanese IT journalist Nobi, my bet is on the upcoming iPhone 7S/ iPhone Pro announcement.
I suspect another reason that Apple has held off doing so is the Apple Pay Suica exclusivity window. With that exclusivity due to run out in September, I think JR East will open up Mobile Suica to Inbound iPhone 7S users, and probably Android Pay users as well.
It’s going to be fun.
A Few Interesting Facts
Japanese station gates are designed to be capable of 60 passengers per minute. To do this the conditions are:
Processing time of fare transaction has to be within 200ms
RF communication distance has to be within 85mm
European station gates are designed to be capable of 30 passengers per minute:
The processing time takes 500ms
RF communication distance has to be within 20mm
The 85mm RF communication distance is achieved with a 1.1A/m (ampere per meter) in Japan vs. the 2.0 A/m strength of the European gates by using slightly larger antennas.
Japanese IT journalists such as Nobi have written that NFC Type F is the reason behind the fast Suica fare transaction processing. This is implied but not explained in the JR East presentation slides. NFC Type F employs symmetrical communication while Type A/B uses asymmetrical communication which may help explain the faster processing. The RF Wireless World page lists NFC Type F as “the faster form of RFID communication,” in comparison with NFC Type A and NFC Type B.
According to Saitama Prefecture police, a group of three Chinese nationals purchased the cigarette cartons using two iPhones over a 10 hour period at a convenience store in Kawaguchi City, Saitama, totaling over 700 transactions between March 26 and 27. The single transaction limit was 20,000 JPY. Massive purchases by visiting Chinese tourists, known as ‘baku-gai’ (explosive buying), has been common and doesn’t raise concerns, though the trend is declining rapidly.
One member of the group was arrested and charged with fraud. Investigators believe the group used stolen credit card credentials and convinced the credit card company to send Apple Pay verification codes to different email addresses claiming the iPhone device owner had changed.
Security experts quoted in the article say that Japanese credit card companies need to be much more stringent authenticating card owners to avoid similar scams in the future.
As with most Japanese police reports details are pretty spare as the investigation is ongoing. It’s not clear from the article how the credit card information was obtained: a case of identity theft or some other means. Fault is clearly with the unnamed credit card company. There is not much Apple can do if credit card companies issue Apple Pay authorization codes without confirming identity.
Update 6/12: The Japan Times ran the story on June 3 from Kyodo New service. The English version is exactly the same as the Sankei Japanese one. It is interesting that the police knew the credit card data had been stolen but the credit card company apparently did not.
One of the current major limitations of Suica Apple Pay is that it cannot be used for Shinkansen travel on the most popular line: the Tokyo~Osaka Tokaido Shinkansen operated by JR Central.
At the launch of JR East Suica Apple Pay service last October, the company said they would work with other JR group companies for full smartphone compatibility by the summer of 2017. In late February, JR Central and JR West issued a press release outlining the upcoming system compatibility in a new app to be called SmartEX (the right hand column in the screenshot below). The announcement moved the interoperability start date from summer to late September.
The only way the SmartEX app can support direct Shinkansen boarding with the major transit IC cards on iPhone is if they are supported in Apple Pay. It’s as simple as that.
The second simple thing
The teaser video advertises the simplicity of adding credit cards and transit IC cards to SmartEX, then using the IC card to touch and go through the Shinkansen ticket gate. Could this mean it only works with physical IC cards? No.
The great thing about Suica Apple Pay is that it is just a Suica card. Suica compatibility means exactly that, for physical Suica cards and for Suica Apple Pay.
Why late September?
The SmartEX release change from summer to late September is interesting too. It fits well with a new iPhone announcement window. Phil Schiller mentioned Apple Pay Japan in the iPhone 7 announcement last September.
Will the addition of all the major Japanese transit IC cards in Apple Pay earn a mention this year as well?
Six months of Suica Apple Pay has worked great for me but a few Japanese users have recently tweeted that Suica screen notifications sometimes stop working with iOS 10.3.1 and 10.3.2. I encountered the issue recently but the fix is simple.
First of all despite all appearances Suica keeps working just fine for transit and purchases. It’s just that Suica sound and screen notifications stop working. Even worse the Suica balance on the screen does not update after Suica Apple Pay recharging or store purchases. Don’t worry, Suica really is working fine and notifications very easy to fix.
Open Wallet and go to the Suica preferences section that you use to recharge Suica. Scroll down and tap: Turn On Help Mode (ヘルプモードをオンにする).
This brings up TouchID verification to turn on Suica help mode. Do that and the screen confirms that Suica help mode is on. That’s it. After a few seconds Suica Apple Pay notifications will be working fine with the correct balance and all transactions properly displayed.
After tapping ‘Turn On Suica Help Mode’ verify with TouchID
After TouchID verification you get confirmation that Suica Help Mode in on. You can close the screen, Suica notifications will be working again.
Suica help mode is a one minute mode designed to help you if Suica is unresponsive and the station gate does not let you through. Help mode forces Suica Apple Pay to soft reset itself and talk with the JR East Mobile Suica server. After turning it on there’s nothing more you need to do, after one minute Suica Apple Pay automatically reverts to normal operating mode.
Hopefully the next iOS update, 10.3.3 will clear up this issue for those few Suica Apple Pay users who have encountered it.
If you are still encountering the problem, restart your iPhone then put it in Suica Help Mode. That will clear up any remaining problems.
I have really enjoyed my AirPods. Nothing beats the convenience of going wireless on a daily Tokyo train commute. No matter how careful you are, earphone wires inevitably catch on a handbag or backpack and your iPhone flies out the pocket onto the floor.
A while ago a very observant friend of mine told me about working out at a new gym, “There was this older guy wearing those new Apple earphone things, they look really convenient.” Then he said, “I don’t think young people listen to music like back in the iPod days, they’re too busy doing the social network thing. The only people buying AirPods are older guys.”
I didn’t pay much attention to his comment at the time. Then I noticed that all the AirPods I saw in the wild are on a gentleman over 50. Just like me. Six months after AirPods went on sale I have yet to see a single young person using them in Tokyo. Is this a Japan thing, a young person thing, or an old man thing?
Apple has always successfully marketed their products to young people. In Japan it looks like that message for AirPods, is falling on deaf ears.
In Japan, where Apple Pay launched last October, more than 0.5 million transit users are completing 20 million Apple Pay transactions per month.
Apple Pay Japan Market Math
Is this a good result or a bad one? Suzuki san does the math: if you take 500,000 users, multiply that by two (a round trip) and factor in one month of 20 work days you get 20 million transactions exactly.
In other words Tim is talking about Suica Apple Pay commuters who use it everyday.
Japanese government figures estimate smartphone share at 76% of the entire mobile phone market. iPhone share is estimated at 60% of that putting Apple’s Japanese iPhone installed base between 40~50 million devices.
Suzuki san estimates the iPhone 7/7 Plus installed base for Japan between 10~15 million devices. Suica Apple Pay commuters are limited to the greater Tokyo area, 1 out of every 4 Japanese, which gives us 2.5~3.5 million Suica Apple Pay ready iPhones in Tokyo.
Suzuki san thinks 500,000 daily Apple Pay users out of 2.5~3.5 million iPhone 7 devices is a pretty good result. I agree. There are many more casual Apple Pay Japan users out there, but Apple wanted a nice simple marketable info nugget for the earnings call. The big question is where does it go from here?
Breaking the 20% Glass Barrier
The Apple Pay Japan ready iPhone installed base will rise as users trade up to the latest and greatest iPhone but the real test will be if Apple Pay breaks the Japanese mobile wallet utilization glass barrier that has stubbornly remained at 20% no matter how many mobile wallet capable mobile devices are sold, regardless of platform. Mobile payments are still too geeky and difficult for most people to bother with.
The arrival of Apple Pay in Japan has already generated excitement, change and opportunity in a static mobile payments market. The JCB QUICPay network has been very aggressive getting new card partners on board the Apple Pay bandwagon, marketing them heavily to steal what they can from NTT Docomo’s iD market lead. It’s great fun reading Japanese twitter user comments about dumping VISA that don’t work with Apple Pay or switching to a QUICPay card to get better mileage out of Apple Pay.
The challenge for Apple Pay Japan will be how much traction it can capture in the two-year run up to the 2020 Tokyo Summer Olympics. It boils down to two essential attack points:
More Partners: make the Apple Pay Japan footprint wide as possible.
Systems integration: make Apple Pay dead simple ‘it just works’ savvy.
Transit cards are the easiest way to capture users because the Suica Apple Payease of use appeal to commuters, taken nation wide, is a slam dunk entry point: users first sign on to use their commuter pass on iPhone then quickly migrate to using the convenience of mobile purchases.
Systems integration will be the trickier of the two. Apple already deploys the full set of NFC flavors (A/B/FeliCa) on iPhone and Apple Watch but limits them geographically: FeliCa in Japan but not other countries, etc. From a technology viewpoint it should not be hard to make NFC transactions ‘just work’ for Apple Pay Japanese users going abroad and vice versa.
Unfortunately as Horace Dediu pointed out, payments infrastructure is complicated and messy with many moving pieces: banks, credit card companies, merchants, point of sale terminal technology, smartphone platforms and last but not least, the customer.
In Japan for example the customer tells the cashier ‘I’ll pay with Suica (or iD, or QUICPay)’, or selects a payment network on the terminal display screen. Then the customer has to bring up the appropriate Apple Pay card and Touch ID verify it. Some terminals take advantage of Suica Apple Pay Express Transit mode which bypasses Touch ID while other terminals require it. Some terminal readers offer a smooth experience, others do not.
This is not a user-friendly and inviting experience because all too often those messy pieces don’t work as a seamless whole.
Breaking the 20% glass barrier means Apple Pay Japan has to offer a better experience out of the box and across the board without rough edges or gotchas that restrict it to the tech savvy crowd. Suzuki san thinks those fancy new Panasonic JT-R600CR terminals going into McDonald’s and Lawson that handle every conceivable payment method and NFC flavor are a big part of the solution.
I think that’s wishful ‘technology can solve anything’ thinking. Payment technology won’t help much if banks, credit card companies and smartphone platforms do not integrate in a much bigger, and international savvy way. EMV and NFC use the same payment infrastructure, wouldn’t it be nice if it all just worked, all the time, everywhere?
The real solution rests with Apple, or the competition, making all those messy payment pieces fit together and work as one seamless whole. The next two years will be very interesting.
One thing Suzuki san points out in his piece that I forgot to mention was the automatic selection functionality of the Panasonic JT-R600CR terminals. From his explanation it sounds like the terminal automatically senses and selects your main Apple Pay card, or the most appropriate one for payment transaction.
I have not tested the new Panasonic terminals yet but hope to soon. It should be a smoother and faster experience than it is now. Suzuki san thinks the Japanese payments infrastructure will see a massive rollout of new much smarter terminals in the lead up to the 2020 Tokyo Olympics. Japanese companies want to capture as much ‘inbound’ customer business as they can.