A reader asked me why I didn’t mention smartwatches like Apple Watch Series 3 along with smartphones as the perfect match for transit platforms like Suica that are on Apple Pay. Apple Watch is a very popular choice for using Apple Pay Suica in Japan but there is one big drawback: you can’t load Suica directly into Apple Watch, you need an iPhone.
Apple Watch is a hit product but not revolutionary, not yet. Fitness and phone functions are extremely handy, necessary for some but not a must have for the many. An Apple Watch that can directly load a Suica card is just that, a must have device. It’s the kind of product that school systems built programs around so the parents can get one at a discount for their kids who ride the train or bus to school everyday. Pre loaded with Suica school commuter passes or course. And because Suica is stored value, parents control the allowance.
It’s not for kids either. Elderly parents who don’t want a fancy smartphone or operate one can just use a preloaded Apple Watch with Apple Pay Suica given to them by their children. The phone function is the necessary backup when one is needed.
If Apple gets there first, they will sell a ton of Apple Watches in markets like Japan where Apple Pay is matched with transit platforms. There is nothing better than transit for driving devices up the Golden uptake path.
Transit is a kind of holy grail for contactless payments, it’s the biggest driver, the golden uptake path to bigger things. That’s why the credit card industry promotes NFC Pay/EMV contactless on transit systems which have traditionally been closed ticket systems.
NFC Pay on transit achieves two goals for credit card companies: it increases credit card use while capturing processing fees from transit operators under the guise of saving them money. The credit card industry benefits from all that ticketing infrastructure without having to invest anything themselves. Think of it as putting the fox in charge of managing the chicken coop. From the American Express “Contactless in Transit” PDF:
How does the American Express transit solution help Merchants optimize payments in the transit industry? It reduces the cost of handling cash and maintaining proprietary fare systems.
Visa and Mastercard make similar claims. This is an interesting contradiction because lower cost internal payment processing is cited as the advantage for closed loop stored value smartcard systems.
Industry experts and journalists such as Junya Suzuki like to discuss transit payment systems as being a battle between “Open Loop vs. Closed Loop” contactless payments. EMV contactless is portrayed as being open “good” vs. Stored-value/prepaid transit SmartCards (Suica, Oyster, etc) as closed “bad”. This is entertaining but the whole debate is a setup: smartphones destroy the distinctions between the two. Digital wallet cards like Apple Pay Suica and Smart Octopus on Samsung Pay merge ‘open’ and ‘closed’ into a seamless whole that’s more convenient flexible and powerful than either one on its own.
JR East does a good job of creating loyalty point programs for JR East area merchants tying them into the Suica e-money network. Other Japanese transit companies do the same for their regional Transit IC cards. When Hong Kong officials complain that the city is missing the contactless payments QR code gold rush in mainland China because of the success of Octopus, that only proves how deep the Japanese/Hong Kong IC transit card model has penetrated beyond transit into payments and the general fabric of daily life.
When a smartcard system achieves the level of success and everyday use like Suica or Octopus it isn’t just a smartcard system anymore, it’s a platform.
Keeping it Closed and Building a Platform
What’s fascinating but rarely discussed is that Suica and Octopus are the only transit smartcard systems that have built transit and e-money contactless payment economies of scale, in other words a platform. They are the only native transit stored-value smartcard systems hosted on smartphone payment platforms like Apple Pay and Samsung Pay. And they are both based on FeliCa. In fact when you compare Suica and Octopus with other transit cards, their success is completely at odds with what western experts call success:
The systems are closed loop stored-value SmartCards
The systems are based on “non-standard” FeliCa
They limit credit cards to a backup role for recharging
For these reasons western experts, especially in the UK, dismiss Japan and Hong Kong as ‘outliners’ but that misses the point. Success deserves attention and study, not highbrow ridicule camouflaged as analysis. As said before, Japan is the world’s greatest guinea pig test market, a unique place to identify and analyze new tech trends, and how to adapt them for use in other markets.
JR East and Octopus Holdings Limited have also evolved their platforms adding new services and features. Technology aside, there are essential core concepts that can be applied to any closed transit smartcard system for long term benefits that build a transit platform not just a ticketing system.
Keep it Closed
Transition from transit only to transit + e-money use (Suica, Octopus, EZ-Link. etc)
Nationwide transit smartcard interoperability
A matching mobile service to create and manage online customer accounts and attach credit cards for over the air recharging via smartphone apps (Mobile Suica, Smart Octopus)
Native card digital wallet support: Apple Pay Suica, Smart Octopus on Samsung Pay, etc.
Promote transit region and local retail with loyalty points and campaigns linked to smartcard + credit card combinations
These concepts transform a transit smartcard system into a platform on which transit operators can build all kinds of services and new infrastructure tying transit and retail together in new powerful ways. Reimagine Oyster or NYC MetroCard as transit platforms and the possibilities are endlessly exciting. The transit smartcard system positioned as a platform is the essential concept most people don’t see or understand. They only see a ticketing system. Visitors to Japan can see the transit smartcard as platform in action where Apple Pay is taking it to the next level.
The Open vs. Closed Debate is Over
Apple Pay Suica is a unique matching of a transit smartcard platform hosted on a major digital wallet platform, the most successful matchup in the world right now that deserves a case study. The standout feature of Apple Pay Suica is that the huge and growing list of Apple Pay credit cards from around the world simply work for recharging Apple Pay Suica on the go. Anyone from around the world with a global NFC iPhone X / 8 / Apple Watch 3 can simply add Suica and use it in Japan.
JR East ties in all kinds of local retail partner points and promotions which in turn drive customers to Apple Pay Suica and more credit card use. Apple Pay Suica in turn is driving Suica use and general Apple Pay use far more than credit cards on their own.
It’s this mix and match flexibility of the Apple Pay + Suica approach that neatly collapses the open closed debate. Customers use the card they want to earn the loyalty points that work best for them with loyalty points from both transit and credit sides. Recharging my Apple Pay Suica with a BIC CAMERA View CARD (JCB) for a year earned me over ¥15,000 worth of BIC CAMERA store points. I never purchase iPhone cases with money anymore, I use points. Apple Pay Suica and credit cards benefit each other and drive use of both.
This works in many different configurations which is the appeal for customers, the approach benefits both the transit operator and the credit card companies letting each focus on building their own platforms instead of wasting time and resources on turf wars. It’s an intriguing win-win model that can be adapted and applied to other transit markets.
One thing is clear: for smartphones more so than it was with plastic smartcards, transit is the golden uptake path for contactless payments but the combination is most successful when a transit platform matches up with a smartphone one.
JR East is busy gearing up for the April 1 Touch and Go Shinkansen service launch. With just Apple Pay Suica, Mobile Suica or any Transit IC card you simply board any JR East Shinkansen within the Touch and Go region. No tickets or reservations necessary.
In order to use Touch and Go you have to register your Apple Pay Suica at the nearest JR station smartphone Charge machine like the ones pictured below. Put your iPhone in the Charge bin, on the screen menu there is a new Touch and Go button. Tap and follow the screens to register your Apple Pay Suica.
Newly installed Suica smart-charge machines at JR Koenji station. Recharge Apple Pay Suica with cash/
Once you are registered you can enter any station then transfer and ride at any of the Touch and Go Shinkansen stations. Remember that Touch and Go is limited to non-reserved seats. The maximum one way Touch and Go fare is ¥5,150
Touch and Go is the first step JR East is taking for full Touch and Go Shinkansen covering all stations anticipated for 2019. The current ¥20,000 daily Suica limit is expected to be raised at the same time with all the other Transit IC cards expected to join as well for full compatibility.
The text strings along with UI tweaks in the Apple Pay Wallet ‘Card Type’ screen in iOS 11.3 b4 also suggest Apple might be revamping Apple Pay behind the scenes a bit to make it easier to support native stored value transit cards.
Unless the transit operator has their stored value smartcard system matched with a cloud service like JR East Mobile Suica, it’s difficult to add Apple Pay support. Just ask PASMO.
Hong Kong’s Smart Octopus card is the only other native stored value transit smartcard system on a smartphone that I can think of and just like Suica super fast FeliCa to boot, though I suspect Samsung Pay is supplying most of the cloud service at this point.
As you can see from the Apple Pay transit page above, stored value transit card systems without matching cloud services is the reason most Apple Pay transit support is the slow cumbersome credit card EMV contactless variety.
Credit cards at the transit gate even on a smartphone are not a good thing when the transit operator has to move massive amounts of people through a limited number of gates in a limited amount of time. On top of that transit operators also have to fork over credit card transaction fees.
When speed is essential, native stored fare transit cards always win the day but only when stored fare is combined with a credit card backend on a smartphone like iPhone Apple Pay Suica or Smart Octopus on Samsung Pay, does the magic really happen. Only then do customers enjoy the best and most convenient transit user experience.
Based on limited feedback I suspect this is affecting iPhone X users with Apple Pay Suica Commuter passes. The commuter pass start point or the end point gate flashes an error and the issue seems limited to JR East gates. Non-JR East gates on an Apple Pay Suica Commuter pass are not flashing errors.
I spent a day getting on and off every station on my commuter run and after many cups of Beck’s Coffee along the way, managed to capture a sysdiagnose file of the error flicker gate issue. I reported it on Apple Bug Reporter #36424202. They are investigating. I am opening up comments in case readers would like to share any Apple Pay Suica issues they are experiencing with iOS 11.2.5（日本語も英語もオーケイ！）
If you comment please include device (iPhone X, iPhone, etc.), Suica type (commuter or regular) and station name (Asagaya, Shimbashi, etc) where gate errors are occurring.