Blame the Apple Pay Ventra delay on open loop

Washington DC SmarTrip and Greater Los Angeles TAP transit cards both launched on Apple Pay the first week of September within days of each other. They upstaged Apple Pay Ventra which was announced as ‘coming soon’ way back in March 2019 but has yet to launch. Chicago Ventra users are understandably frustrated with the ‘coming soon’ Apple Pay Ventra, especially when CTA celebrates the Apple Pay SmarTrip rollout with another Ventra ‘coming soon’ ad.

All three fare systems are managed by Cubic Transportation Systems who also run the London Oyster and Sydney Opal systems. Cubic systems all use the same MIFARE smartcard technology but the interesting thing about SmarTrip and TAP is: (1) they are the first Cubic managed digital wallet transit cards, (2) neither system has implemented open loop fare payments for tap and go credit cards.

Ventra, Oyster and Opal all have open loop, and as of this writing Cubic has yet to deliver those transit cards on digital wallets. Why?

The SmarTrip/TAP Apple Pay launch gave us the answer that nobody wants to discuss: open loop support adds a layer of complexity and cost that stymies the support of native digital transit cards. Complexity and higher cost means fewer choices and delays, it’s as simple as that.

Open Loop is sold as the cost effective future of transit ticketing but it’s had a surprisingly rocky time in the American market. The failure is pinned on transit companies but I think credit companies are to blame. The arguments for open loop are plastic era constructs that ignore how mobile digital wallet platforms and mobile apps have changed everything. For example the oft cited open loop benefit of plastic smartcard issue cost savings completely overlooks the cost savings of digital transit cards on smartphones.

It’s high time for the credit card industry to rewrite the open loop marketing script for the mobile era, but they don’t want to do that. Expect more of the same. In the meantime, let’s hope the SmarTrip and TAP Apple Pay rollout is a sign that Chicago will be getting Apple Pay Ventra real soon.

Goodbye FeliCa Octopus, save the last tap for me

In the 2019 Apple Pay Octopus saga one thing was clear: Octopus was living on borrowed time. On the eve of the Apple Pay Octopus launch I wrote:

Octopus Cards Limited (OCL) has been slow extending the service to include mobile. Instead of putting early effort into digital wallet support for Apple Pay/Google Pay/Samsung Pay, OCL wasted time and resources developing the niche Mobile SIM product which didn’t pan out. This lag coupled with the rise of AliPay and WeChat Pay QR Code payment empires put enormous pressure on OCL to do something…

With so much traffic and business from the mainland, OCL owner MTR is looking to add QR Code Open Loop transit support (paywalled link) at some point. There is also the pressure of creating a Greater Bay Area transit card, and pressure from credit cards and banks. Every player wants a piece of the action…MTR gates will eventually look like the ones in Guangzhou with PBOC/FeliCa/QR Code readers supporting Octopus, China T-Union, AliPay/WeChat Pay…At which point I say OCL doesn’t have a viable transit platform business anymore.

Mainland China dumped the MIFARE based Beijing and Shanghai cards for their own slower PBOC 2.3/3.0 China T-Union standard, I don’t think it’s a stretch to see the same thing happening to Hong Kong Octopus at some point…Supporters will undoubtably point out the technical merits of China using a single transit standard but that’s just a red herring. The deciding factors will be good old money and politics: is it more profitable to keep Octopus in place or junk it in favor of QR and China T-Union, and who benefits from it all?

Out of Time

I thought the success of Apple Pay Octopus bought it some time, but on August 28 the South China Morning Post published a story where OCL CEO Sunny Cheung says they will join the China T-Union initiative for seamless transit integration between Hong Kong and China. He to goes out of his way a few times to say how ‘old’ NFC technology is:

Cheung said internet users’ criticism of Octopus being a tech laggard died down in June after people were allowed to add their Octopus account to Apple Wallet on their iPhones. Cheung, who admitted he was stung by the criticism, regarded Octopus’ breakthrough on the iPhone as one of the best times of his stint with the company. “This was one of my biggest challenges,” he said. “The breakthrough helped refresh Octopus’ image even though it is still using NFC technology.”

From Hong Kong’s Octopus aims to spread tentacles with contactless card for paying fares in mainland China

I guess Sunny thinks that QR Codes are cutting edge. He is retiring and doesn’t have to deal with the fallout of his misguided OCL management or care about criticism anymore.

Octopus can certainly be ‘dual mode’ with separate NFC A + CYN China T-Union purse and NFC F + HKD Octopus purse in one card, if OCL comes up with a new card architecture. But that’s an expensive undertaking when mainland China has been ruthlessly weeding out all MIFARE and FeliCa transit cards and replacing them with the slower PBOC 2.0/3.0 China T-Union standard, aka the supermarket checkout spec. It’s only a matter of time before Octopus gets the same brain lobotomy.

There is also the plastic card issue business angle to consider. Read FeliCa Dude’s Octopus on iPhone 7 post paying special attention to the Octopus plastic card issue steps he outlines. I’m sure the Hong Kong powers that be don’t want that profitable franchise to stay with Sony forever. They will work to keep it local which is exactly what the China T-Union PBOC 2.0 spec allows OCL to do.

We all know at this point that ‘one country two systems’ is just an illusion. It may not come soon but as transit gates and store readers are gradually replaced with newer models over the next few years, those models will all have dual mode support. And when the time is ready, OCL will turn off FeliCa. Until then, enjoy it while it lasts.

iPhone SE too popular in Japan?

Yes, as crazy as that sounds, but according to Kenta Yamaguchi’s piece on ASCII that’s exactly what is happening. The point of his story is that starting today, second brand carriers Y! mobile and UQ Mobile are selling iPhone SE instead of iPhone 8. Until yesterday they only offered the budget Apple Pay Suica capable iPhone 7 and normally they would offer iPhone 8, but iPhone 8 is nowhere to be seen in the budget lineup. Instead they are offering iPhone SE only 4 months after it went on sale at first tier carriers.

The big loser here is Rakuten Mobile who do not offer iPhone SE. Apple fully understands the ‘Face ID sucks in the face mask COVID era’ market opportunity, aka unfortunate success, that is the A13 Touch ID powered iPhone SE. Apple also wants many background NFC tag reading capable iPhones out there for iOS 14 App clips, so iPhone SE is going on sale everywhere.

Yamaguchi san says the SE is so popular that major carriers are bitching it will slowdown the 5G migration in Japan…while still selling as many iPhone SE units as they can. 5G will just have to wait until Apple comes up with a budget 5G Touch ID iPhone SE.

Hama Pay adds dual NFC/QR as iOS 14 Apple Pay QR payments loom

The recent Bank of Yokohama Hama Pay app update created some buzz with the addition of an Apple Pay iD Prepaid card option. It’s similar to the Toyota Wallet approach: the bank app links the user’s bank account to an open front end bank payment service with QR code payment for debit and credit and NFC payment for prepaid.

The difference with the Hama Pay prepaid card is that VISA JP issues the iD card which means it cannot be used internationally the same way that the Toyota Wallet Mastercard iD card can; Mastercard supports iOS NFC switching, VISA JP does not.

Another weird thing: the Hama Pay ad blurb uses the ‘Touch Payment’ branding phrase with iD. Up until now VISA JP reserved that exclusively for EMV contactless card issue but not for FeliCa cards, which of course iD is. Does this mean VISA JP will finally sign with Apple Pay? Probably not.

The Toyota Wallet also uses a QR+NFC frontend

IT journalists approach the story as a NFC vs QR dilemma for banks, but I don’t think this captures the whole story. iOS 14 Apple Pay is adding QR code payments for the first time and this means that QR Code Wallet payments don’t need to launch an app, they will work directly from the lock screen just like any Apple Pay card.

This represents a big evolution of Apple Pay from NFC only to an open front end approach that includes NFC, Code payments and Ultra Wideband. It will be very interesting to see how bank apps evolve in the iOS 14 era as we move away from the plastic era ‘A vs B’ mind set to the bewildering variety of ‘A~Z take your pick’ era of mobile payments. We still have the Apple Pay/Face ID with face mask passcode nonsense…but that’s another post for another day.

iOS 14 Apple Pay is adding Ultra Wideband and QR into the mix

Apple Pay monopoly, are we really comparing Apples with Apples?

Ruimin Yang has written a wonderfully detailed and thoughtful post, “Apple Pay monopoly, are we really comparing ‘Apples’ with ‘Apples?“, that outlines the entire Apple Pay system architecture, how it compares to other digital wallet platforms, (Google Pay, Samsung Pay) and what ‘open vs closed’ means in whole ‘Apple Pay is a monopoly’ debate. Worth your time if you have any interest in digital payments. It’s the kind of piece I wish I had the discipline and chops to write.

The short take: this is European business politics in the age of digital wallet wars. Mobile payments and digital wallets have disrupted everything and traditional players, banks and card companies i.e. the real gatekeepers, are doing everything they can to keep the upper hand and force their own branding on Apple’s platform. In the European tradition, regulation is invariably the preferred method for keeping the status quo.