Someday We’ll Be Together

iOS 12.2 beta 6 has dropped with no sign of Smart Octopus support in Apple Pay from beta code spelunkers like Guilherme Rambo. A source close to the Cupertino mothership also indicated the situation in Hong Kong is “complex.” Live by the rumor and pay the price, it looks like the story sources and my judgement were wrong: Smart Octopus won’t be on Apple Pay when the OS 12.2 update is released at the March 25 Apple Special Event. Nevertheless, I stand by what I wrote back in December:


Digital Wallets like Apple Pay and Samsung Pay are the most tightly integrated NFC software and hardware digital wallet platforms out there with integrated FeliCa, but Apple is the only one to implement the necessary Secure Element on their own A Series/S Series hardware with FeliCa Networks keys, and sell the package globally.

Smart Octopus on Google Pay might look nice on paper but it can’t achieve anything of scale yet because of the highly fragmented nature of Android: to date hardware manufacturers have yet to produce an answer to Apple’s global FeliCa iPhone and Apple Watch, even though everybody’s smartphone has a NFC A-B-F chip. Not even Google has pulled it off.

Smart Octopus on Apple Pay isn’t just adding a card to a digital wallet platform, it is also a statement of who ultimately controls, operates and benefits from the public transit gates. It’s more about market politics than technology, in other words another battle in the contactless payment turf wars. The outcome will be fascinating to watch but determines whether Octopus will remain a great transit payment platform for Hong Kong with a future, or not.

I also have a new prediction that we’ll see Apple Pay Smart Octopus with the next major iOS release iOS 13, in 6 months. Take it for what it’s worth, but I feel confident that we can celebrate some good news at that time.

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Another step for global FeliCa

It’s nice that NXP and FeliCa Networks (all things FeliCa mobile owned by Sony, Docomo and JR East) have collaborated on putting EMV, FeliCa and MIFARE on one chip. The NXP PN81 does it all and is certified for FeliCa too and not just NFC A-B-F:

FeliCa Networks and NXP share the vision to provide global travelers and  mobile phone owners in Japan an integrated contactless experience for payment, ticketing, and other popular use cases towards 2020 and beyond,” said Tomoharu Hikita, president and CEO of FeliCa Networks.

It sounds like global FeliCa for any smart device, something which Apple has been selling worldwide since 2017. Let’s hope Android manufacturers can start offering it too with the NXP PN81.

Hankyu Goes ICOCA

Hankyu Corporation announced in January they would sell ICOCA cards for commuter pass use starting March 1. The switchover is interesting on many levels. ICOCA is the JR West transit IC card and PiTaPa is the transit IC card for Kansai area private lines (Hankyu, Keihan, Hanshin, Kintetsu, etc.). They are both FeliCa cards, offer commuter passes and are compatible for transit use under the Japan Transit IC Mutual Use Association project specification.

There is one big difference: ICOCA is prepaid while PiTaPa is a postpaid credit card/transit card hybrid that can never really be mainstream because it has credit checks. ICOCA can be bought by anyone at a ticket machine. The Hankyu/Hanshin switchover to prepaid ICOCA for the masses follows the JR West arrangement that Kintetsu and Keihan already have in place. There is just one last little detail that JR West needs to work out however: get ICOCA on mobile digital wallet platforms like Apple Pay and Google Pay. Super Suica should take care of that in 2021.

Yes, QR Codes Suck for Transit

Here are QR Codes in action at subway transit gates in Beijing.

And here is Suica in action.

Working Backwards from the User

The Suica development starting point was a user problem with magnetic card commuter passes. Old style paper passes were visually inspected at gates and could stay ‘in-wallet’ with a clear plastic opening. Magnetic card commuter passes had to be removed from the wallet and feed through the gate reader. Engineers wanted to recapture the simplicity of paper passes with IC cards.

The development process involved a lot or trail and error but Suica turned out not only to be convenient and fast but also user friendly in the way that people use things, in-wallet or otherwise. This is a classic Steve Jobs design principle: start with the user experience and work backwards to the technology.

Smartphones replicate the in-wallet experience as ‘Express Cards’ on digital wallet platforms like Apple Pay and Google Pay. The user pulls out the device and holds it to the reader. No unlocking or Touch ID/Face ID required.

QR Codes and EMV contactless on smartphones share the same transit problem of old magnetic card passes: they are not ‘in-wallet’. Devices have to be unlocked to open an app or perform a biometric authentication. This problem is compounded by poorly designed transit gate QR and EMV readers that end up forcing users to adapt to the technology and it slows everything way down. This is a design failure that would never meet the requirements of Tokyo stations where a gate has to clear 60 people a minute.

What’s fascinating to me is the assumption by some people in China, Hong Kong and even Japan that the QR Code success in China automatically qualifies it as a global payment standard regardless of the technology and business models already in place. This doesn’t ring true to me, there is something else going on.

China for example has put a lot effort into creating and promoting the China T-Union transit card standard which can be added to MI Pay, Apple Pay and Huawei Pay. Nevertheless there are not many people using China T-Union in the video. The Japanese tweet comments say that recharging China T-Union cards are not very convenient and do not offer the point goodies that AliPay and WeChat Pay do. Bingo. Is it really is that simple?

Technologies that have viable business models attached to them work better in the long run. FeliCa fares better than China T-Union or CEPAS (EZ-Link) because a transit platform like Suica does better job of attaching services and point goodies on the back end. Perhaps if China T-Union had a better business model that offered more recharge reward goodies and services on the backend to compete with QR ecosystems people might use it more, unfortunately business promotion is hard for government run transit authorities.

Joe Odagiri AirPAY Ads

OK, things are heating up in the Japanese cashless payments market ahead of the 10% consumption tax hike with cashless incentives. And things are getting fun. What other country in the world runs TV ads for cashless payment terminals?

Recruit’s AirPay POS system for small stores deftly navigates the entire Japan cashless map and is running an TV ad campaign featuring Joe Odagiri and rich visitors from abroad in various roles with credit cards. The punch line is “Do you take cards?” to which Joe Odagiri the store owner invariably replies, “cash only”. The rich customers walk away and Joe says, “I wish we had AirPay.” It pokes fun at the Japanese penchant for cash.