Go for it Tim! It will undoubtedly help Apple sell more global FeliCa iPhones because Smart Octopus on Apple Pay is a great marketing angle for the iPhone XR/XS models with Express Card power reserve and bulletproofed FeliCa performance. I have yet to experience a single Apple Pay Suica gate error from my iPhone XS with daily use since the launch date.
It occurred to me after posting the above that Apple has introduced transit cards and the technology behind them with larger point releases: iOS 10.1 for Suica (FeliCa) and iOS 11.3 for Beijing and Shanghai Transit cards (Apple flavored PBOC 2.0 ED/EP). In this scenario iOS 12.2 is the logical starting point for Smart Octopus on Apple Pay. However, Octopus is FeliCa which has been part of Apple Pay for over 2 years, Apple has ample engineering and testing experience with the technology to add Smart Octopus with a smaller point release, or none at all which was the case with contactless student ID cards.
iOS 12/watchOS 5 Suica performance continues to be a very mixed bag for many as Apple closes in on the iOS 12.1.3 update. There are no showstoppers but glitches are constant enough that there’s even an Reddit thread on the subject, a first. Suica performance glitches fall in 4 basic patterns:
Suica Express Card error flicker: occasional error flicker at transit gates with iPhone 7, iPhone 8, iPhone X (Rev. B) and Apple Watch 2~4. This is a completely different issue from the iPhone X NFC hardware defect. There is no workaround and will likely be fixed in an iOS update at some point…we hope.
Dead Suica Notifications/No Suica Balance Update: Suica Notifications stop working and Suica Balance fails to update at transit gates, store readers and Suica recharges. This affects iPhone 7, iPhone 8, iPhone X (Rev. B) and Apple Watch 2~4 but is easy to fix by putting Suica in Service Mode for a few seconds.
Slow or unresponsive Suica Recharge: this is probably more of a backend system issue between Apple Pay iCloud and Mobile Suica than iOS 12 but Apple Pay Suica recharge fails half of the time on the first attempt. This affects all devices and there is no work around except to try again. The Mobile Suica maintenance this month (January 2019) might help.
Express Card power reserve mode kicks in with iOS up and running. This only affects iPhone XS and iPhone XR. Express Card power reserve mode kicks in for some reason when it should not. Suica still works fine but the Apple Pay Suica UI stops working. No notifications, no balance update, nada. Service Mode does not revive Suica notifications but the fix is simple: restart iPhone and all is good.
Happy New Year! May 2019 be a great year for everybody. It will certainly be a very interesting one for contactless payments and Apple Pay: now that Apple has officially acknowledged that smartphone sales have peaked out, expanding services like Apple Pay and growing service revenue, is more important than ever. Contactless payments in Japan will be fascinating to watch as various payment networks and technologies vie for market share in an already crowded market that is heating up before the 2020 Tokyo Olympics.
If you don’t know anything about Japanese contactless payments, here is a handy intro presentation video Going Cashless in Japan made by Michael Sunderland during his internship at Tokyo FinTech Association. It’s not fancy or deep but covers the basics well such as why cash is so important in Japan. One important observation is that every country has its own money culture, so there will never be a ‘one size fits all’ solution. As I have always said, people don’t go cashless and use contactless payments like Apple Pay for buying a couch or a TV, they start using Apple Pay for coffee, sandwiches and train tickets, then migrate up from there. Here are some trends to keep an eye on in 2019, a year that may see some real progress in going cashless.
The 10% Consumption Tax The #1 issue this year for Japan is the October 1 consumption tax hike from 8% to 10%. The Japanese government is still working on the details but the shape of it looks messy and stimulating. It has the potential to kickstart a cash to cashless transformation leading up the 2020 Tokyo Olympics and beyond. There are 2 main components of the package:
Point rebates for purchases made with cashless payment effectively reducing the tax down to 5% depending on the type of store. For example a customer who purchases items with Apple Pay Suica would pay the 10% consumption tax at the cash register but receive 5% back as JRE POINT.
Subsidies to smaller businesses and merchants to subsidize contactless payment equipment (readers, POS systems, etc) leading up to the 2020 Olympics.
JiJi News reported a preliminary list of 14 companies supposedly under consideration by the Ministry of Economy, Trade and Industry (METI) to carry out the point rebate program with more to come. Here is the initial list with comments for each section.
Credit Cards Mitsubishi UFJ NICOS Sumitomo Mitsui Card Co UC CARD Co JCB
Trend: The Kyash Visa prepaid card was easily the most innovative product from the credit card side in 2018 in a market already full of prepaid cards, the biggest advantage being person to person transfers that other mainstream prepaid cards do not, as yet, offer. Meanwhile Visa JP is busy sending mixed signals: they offer dual function EMV contactless/FeliCa plastic cards but still refuse to provide NFC switching services on Apple Pay and Google Pay for outbound Visa card users, a service that Mastercard, AMEX and JCB are providing. 2019 will probably be a holding pattern but could see some big gains with NFC Pay (EMV contactless) with major retail chains. Apple Pay can gain some traction by adding JCB branded Line Pay prepaid cards that are available in convenience stores and popular with younger customers.
Trend: Unless Apple Pay finally offers the remaining top-tier prepaid cards that are already on Google Pay (WAON, nanaco, Edy) there won’t be much action. JR East will roll out a Shinkansen e-ticket service for all Transit IC cards in April, the JR East version of SmartEX. Outside of that I don’t see anything new this year or even 2020. At least not until the Super Suica format arrives in early 2021 which will unify all the Japan Transit IC cards and get them on mobile.
QR Codes Origami Pay Line Pay PayPay
Trend: Everybody and their uncle setup a QR Code payment system in 2018, creating smartphone apps and frantically building payment platforms like prospectors in a gold rush, all based on capturing merchants supposedly attracted by the allure of low transaction fees and minimal hardware investment. This will continue in 2019 and Japan will have “a QR Code payment app for that” for just about everything from convenience stores (FamiPay) to vending machines. Like prospectors of old the majority will end up bust. The real question is will Japanese customers actually use QR Codes again. The PayPay security meltdown poisoned the well already and merchants aren’t happy either: PayPay has mistakenly (?) listed business as accepting PayPay when they don’t, leaving customers irate with merchants when they really should be angry with PayPay. It’s a new form of blackmail. Last but not least don’t expect METI to add Chinese QR Code AliPay or WeChat Pay to the point rebate list.
Trend: Subsidized payment terminal hardware for smaller businesses is a good start but real change will require the right balance of lower processing rates and ease of integration/operation. Right now there are far too many POS systems that require double entry, once for the cash register, once for the cashless payment terminal. This must be eliminated and the entire transaction process ruthlessly streamlined for smaller businesses. Rakuten, Coiney, Flight Holdings, J-Mups and many others are marketing low-cost, easy to use payment terminals but they need to do a better job of making everything work together as a seamless whole.
Apple Pay Apple can grow Apple Pay use in Japan by filling the gaps in the top-tier prepaid card lineup: WAON, nanaco, EDY, and work to get 2nd tier prepaid cards like Dotour onboard which don’t exist on digital wallets yet. Cards like Dotour would play very well as one year exclusive deals. There are big opportunities with Value Added Service (VAS) reward cards beyond Ponta as well such as T-Point and JRE POINT. Google Pay is well ahead of Apple in the reward cards area and they need to catch up.
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.
No sooner than Apple issued the iOS 12.1.2 update that JR East pushed out a Suica system notice in their iOS Suica App: When Suica Balance Fails to Update. I guess this really means that Apple still hasn’t fixed iOS 12 Apple Pay Suica performance issues for everybody. My experience with iOS 12.1.2 on iPhone XS has been good so far but it takes time to find out what Suica performance on any iOS release really is. Whatever the case may be, fixing dead Suica notifications and a lost Suica Balance is very simple.
Put Suica in Service Mode and let your device sit for 10~15 seconds, then quit Apple Pay or simply put the screen to sleep. A Suica Notification will then appear with the updated Suica balance. Let’s hope that Apple’s New Year resolution list includes quickly fixing Apple Pay Suica performance issues.