iPhone SE: Unfortunate Success

iPhone SE is here and perfectly matches the essential points outlined in October:

  • NFC background tag reading in place for new Apple Pay features going forward.
  • Touch ID that removes the Face ID face mask problem in markets like China and Japan, this issue has been constant blind spot in the western tech press, until now.
  • A13 Bionic for superior battery performance and Express Card with power reserve
  • Cheaper battery friendly Haptic Touch instead of the more expensive battery hungry iPhone 8 3D Touch.

And the budget price. The iPhone market position in Japan stalled with iPhone XS/XR as government pressure took away carrier rebates that had driven iPhone sales. The Japan market, like markets everywhere, was ripe for an updated entry level iPhone, but the Touch ID plus A13 Bionic combination is especially potent right now because of the face mask situation in the COVID-19 crisis, and social distancing driving people away from hard cash towards contactless payment use. Touch ID is still the best and stress free experience for using Apple Pay on iPhone. The secret sauce is A13 Bionic that delivers superior Suica Express Transit performance along with power reserve, and much more.

So what kind of user is the new iPhone SE aimed at? The Apple Store trade-in page suggests a big divide at the iPhone 7 Plus point, there is more resale demand for Apple Pay Japan compatible devices.

The challenge for Apple and carriers in Japan is getting pre-Apple Pay Japan iPhone users to upgrade. Many iPhone 6/6S users took the opportunity to get a cheap battery upgrade from Apple during the iPhone performance throttling brouhaha. A big reason why these users have been hesitant to upgrade is the Face ID with face mask issue. This is the dominate issue now for Face ID iPhone users, my own observation is that many people in Japan just turn it off and use passcodes.

Now that iPhone SE solves that problem with top tier Apple Pay Japan features and performance it will be very interesting to see how it plays out. We are already seeing signs that contactless payment use is growing in Japan because of COVID-19 social distance issues. As Tomo Hagiwara of Aquabit Spirals puts it…unfortunate success, behavioral transformation in action. This could be the most important Apple product launch in 2020.

iPhone SE will be a very big unfortunate success.

The iPhone SE NFC Tag Apple Pay Equation

I’ve always said the iPhone SE2 hits the iPhone sweet spot in Asia, especially now. An affordable entry level device with face mask friendly Touch ID and Bionic powered Secure Element + global NFC: Express Cards with power reserve and Background NFC tag reading. It was almost a year ago when Jennifer Bailey unveiled NFC Tag Apple Pay. Steve Moser of MacRumors tweeted the essential features: tap and Apple Pay without an app or signing up for an account. Apple has not said a word since.

I think part of the problem for Apple is pictured in the slides accompanying Moser’s tweet, the ‘Pay with Apple Pay in app’ one. The allure of background NFC tag reading is that it’s almost ‘Express card lite’; as long as the screen is on, even locked, iPhone natively reads a NFC tag and does something like activate loaded and ready Apple Pay. The trouble is, only Bionic chip iPhone models do this. Non-Bionic iPhone models have to use an app to read NFC tags. Think quick, would you fire up an app, sign in, and read a NFC tag just to buy cheap coffee? Probably not.

My take is the entry level non-Bionic iPhone 8 is holding up NFC Tag Apple Pay. Apple Pay needs the entire iPhone lineup to be Bionic and app free, an entry level A13 Bionic iPhone SE2 solves this problem. It’s a perfect iPhone for the Japanese market in these face mask mandatory times where Face ID doesn’t work, and a nice match for the recently announced JCB NFC tag payment service that uses SmartPlate software. It probably won’t doesn’t have a U1 chip that would let iPhone SE2 have a longer service life as UWB Touchless joins NFC in iOS 14 Apple Pay. Nevertheless the iPhone SE2 with Bionic NFC will be more than ample, it will do very well.

Update: one thing I forgot to mention is the Sign in with Apple requirement that goes hand in hand with Background NFC tag reading. The current deadline is June 30.

Update 2: iPhone SE is here

Sony, JR East, DNP, Aquabit Spirals team up for NFC tag payments

The JR East, Sony, DNP, AquaBit Spirals tie-up for NFC Tag payments

AquaBit Spirals CEO Tomo Hagiwara took up my challenge earlier this year to raise the Japanese Softcream Cashless Index (SCI) to ‘over 5’ in time for the Tokyo Olympics. I figure if mundane softcream stalls are cashless, Japan is truly cashless. Today his company is teaming up with industry heavyweights JR East, Sony and DNP to deliver on that promise and bring inexpensive MaaS (Mobility as a Service) NFC tag payments (via AquaBits SmartPlate) to the masses, and the masses of merchants who don’t want to shell out for NFC reader checkout hardware. It’s the first real NFC challenge to inexpensive, infrastructure light QR Code payment schemes that leverage the established base of mobile networks and smartphones. Small businesses only need to sign up for an online payment service and put a NFC tag sticker on the checkout counter.

Since all NFC flavors (NFC A-B-F) are required for smartphone NFC certification, Read/Write FeliCa tags work on any smartphone with NFC-F even if FeliCa transactions keys for card emulation (Suica, iD, QUICPay, etc.) are not installed. Translation: inbound Android devices can use NFC tag FeliCa payments even if they can’t use Suica.

The one remaining question on the Apple side of the equation is what NFC tag integration Apple Pay has in store. Jennifer Bailey announced NFC tag Apple Pay testing back in May without a delivery date, and no details since. Ideally an NFC tag integrated Apple Pay would use Sign in with Apple to streamline or eliminate 3rd party payments service account signup within an app, and without an app via background NFC tag reading. The more ‘it just works’ integration, the better. Nobody wants to signup for a PayPay-like service on the spot just to buy hotdogs and beer at a stadium game, or softcream.

Update: JR East issued an English language press release

What does open Apple Pay NFC really mean?

The German law to force Apple to open it’s “NFC chip” is a confusing one. Why does an EU country with one of the lowest cashless usage rates single out one company’s NFC product in a last minute rider to an anti-money laundering bill? That’s not banking policy, it is politics. Details are few but let’s take a look at what it could mean because when it comes to NFC technology, details are everything.

Background stuff
The so called Apple ‘NFC chip’ is not a chip at all but a hardware/software sandwich. The Apple Pay ecosystem as described in iOS Security 12.3 is composed of: Secure Element, NFC Controller, Wallet, Secure Enclave and Apple Pay Servers. On one end is the NFC chip controller front end that handles NFC A-B-F communication but does not process transactions, on the other end there is the Secure Enclave that oversees things by authorizing transactions. The fun stuff happens in the Secure Element middle where the EMV/FeliCa/MIFARE/PBOC transaction technologies perform their magic with Java Card applets.

The A/S Series Secure Enclave and Secure Element are the black box areas of Apple Pay. The iOS Security 12.3 documentation suggests the Secure Element is a separate chip, but Apple’s custom implementation of the FeliCa Secure Element, and the apparent ability of Apple to update Secure Element applets to support new services like MIFARE in iOS 12 suggests something else, but it is anybody’s guess. Apple would like to keep it that way.

So what does ‘open NFC’ really mean?
It’s helpful to look at the issue from the 3 NFC modes: Card Emulation, Read/Write, Peer to Peer.

Peer to Peer
Apple has never used NFC Peer to Peer and I don’t think this is a consideration in the ‘open NFC’ debate.

Read/Write
This was a limitation up until iOS 12, but everything changed when iOS 13 Core NFC gained Read/Write support for NDEF, FeliCa, MIFARE, ISO 7816 and ISO 15693. Developers can do all the NFC Read/Write operations they want to in their apps, I don’t think this is a consideration in the ‘open NFC’ debate.

Card Emulation
Apple limits NFC Card Emulation to Apple Pay Wallet with NDA PASSKit NFC Certificates. This is what the ‘open NFC’ debate is all about. I imagine that German banks and other players want to bypass the PASSKit NFC Certificate controlled Apple Pay ecosystem. Instead, they want open access to the parts they want, like Secure Element, NFC Controller, Secure Enclave, and ignore the parts they don’t want like Wallet and Apple Pay Servers. They want the right to pick and choose.

The success of Apple Pay has been founded on the ease of use and high level of integration from a massive investment in the A/S Series Secure Enclave and other in-house implementations such as global FeliCa, etc. Outside players forcing Apple to open up the Apple Pay ecosystem represent not only a security risk to Apple but also a reduced return on investment. One commentator on MacRumors said it’s like Apple took the time and expense to build a first class restaurant and outsiders are demanding the right to use Apple’s kitchen to cook their own food to serve their own customers in Apple’s restaurant. It’s a fair analogy.

The NDA PASSKit NFC Certificate gate entrance rubs bank players the wrong way as they are used to dictating terms, not accepting them. The Swiss TWINT banking and payment app for example is a QR Code based Wallet replacement that wanted the ability to switch NFC off, and got it.

My own WWDC19 Apple Pay Wish List did include a wish for easier NFC Card Emulation, but nothing appeared. It’s certainly in Apple’s best interest to make it as easy as possible for 3rd party developers to add reward cards, passes, ID cards, transit cards, etc. to Wallet. However given that the EU is hardly what I call a level playing field, the fact that bank players and politics go hand in hand in every nation, and the fact we don’t know the technical details of what the German law is asking Apple to do, all we can do is guess. In general, I think Europe will be a long rough ride for Apple Pay. At least until EU bank players get deals, and branding, they are happy with.

No global NFC evolution for Pixel 4?

iFixit posted a teardown of the Pixel 4 and we have a new NFC chip: STMicroelectronics ST54J NFC controller. This replaces the NXP PN81 used in Pixel 3 but still has a embedded secure element (eSE) that supports all the global NFC technologies: NFC A-B-F/EMV/FeliCa/MIFARE.

NFC Forum device certification requires NFC A-B-F hardware support, but Google went the cheap route again with the extra step of not installing FeliCa transaction keys in non-JP Pixel 4 models. This means only Pixel JP models are global NFC devices, users with non JP models cannot add and use the Japanese Suica transit card or Hong Kong Octopus. iPhone and Apple Watch have global NFC as a standard feature on all worldwide models since iPhone 8/X and Apple Watch Series 3.

Pixel 3 was step towards global NFC with the Japanese models. The Pixel 3 Global NFC Evolution post examined the possibility of Google creating their own ‘in house’ embedded secure element (eSE) for all NFC transactions technologies implemented on their own Secure Enclave Pixel platform. I was wrong and made some bad assumptions:

  • Apple was already doing global NFC transactions on the A/S Series Secure Enclave, so Google would try to do the same with their Titan chip.
  • The Pixel Phone hardware page states: if you purchased your Pixel 4, 3a or 3 phone in Japan, a FeliCa chip is located in the same area as the NFC. The wording suggests a separate FeliCa chip for JP Pixel models but this is not the case.

FeliCa Dude was very considerate of my Pixel global NFC fantasy even though it made no sense at all cost-wise or software-wise having an extra NFC FeliCa chip and multiple eSE just for JP models. He extensively tested a Pixel 3 JP model, a single global NFC NXP PN81B chip was the only answer.

The iFixit teardown confirms that Pixel 4 simply repeats last year’s Pixel 3 strategy of having global NFC hardware but only buying FeliCa transaction keys for JP models. It’s a weird strategy because the whole point of the NXP PN81 and ST54J chips is to provide customers with a convenient off the shelf global NFC package with all the hardware (NFC A-B-F) and software (EMV/FeliCa/MIFARE) ready to go.

The Pixel 4 looks like a great device but the NFC story angle remains a disappointment. As I have said before, the Android equivalent of global NFC iPhone and Apple Watch has yet to appear.

UPDATE
FeliCa Dude posted a deep dive into the Pixel 4 ST54J NFC chip and comes up with some fascinating analysis. He points out there were three model classes for Pixel 3:

  • Devices with eSIM functionality and without Mobile FeliCa
  • Devices without eSIM functionality and without Mobile FeliCa: the carrier-neutered model with a locked bootloader.
  • Devices without eSIM functionality and with Mobile FeliCa (the G013B/G013D models)

Pixel 4 delivers eSIM and FeliCa together to the Japanese market for the first time and this appears to be a reason behind Google choosing the ST54J that has eSIM + global NFC eSE on a single die. FeliCa Dude does not have a Pixel 4 yet so there is more analysis to do, but the important point is this:

if the Japanese SKUs of the Pixel 4 are indeed based on the ST54J, then there should be no technical reason why such <Mobile FeliCa> functionality can’t be delivered OTA <over the air update> to the ROW <rest of world> SKUs should Google desire to provide that service

The Pixel 4, the ST54J and Mobile FeliCa

It would be nice indeed if Google left the door open for adding Mobile FeliCa later to all non JP Pixel 4 models with a software update, especially for markets like Hong Kong that can use it. Whether Google will actually do that is another matter entirely.