Assumptions

Social media is great for exchanging bits of information but terrible when it comes to conveying context. ‘Most of my friends’ and ‘outside of greater Tokyo’ are poor generalizations and not very useful because they belong to specific, and unexplained, use cases. I often find that people coming to Japan from large continents assume the country is small, which it’s not, and that all Japanese do everything the same, which they don’t.

It’s probably true that I place too much importance on Suica, but that’s because I use it so much. I live in Tokyo, my workplace sponsored commute pass is Suica, most of my daily purchases are with Suica, most of my points and Cashless rebates are Suica. I am plugged into Apple Pay Suica with a View/JCB card setup with auto-charge.

My Suica life is good but what about people living outside the Suica commute region, or inbound longer-than-short-term visitors without Apple Pay cards? The Apple Pay country list is short with many Latin America and Asia Pacific regions still missing, Mexico and India for example. No Apple Pay credit/debit card means Apple Pay Suica is a side grade because it’s still tethered to cash only station recharge kiosks and 7 Eleven ATMs.

Credit card recharge makes all the difference. A true upgrade from plastic Suica that is strictly one way. Once there you never want to going back. It’s the upgrade that will free users from huge lines at station recharge kiosks during the Olympics, and just plain common sense at huge crowd events like Tokyo Comic Con. The Suica + Rakuten alliance and Super Suica will bring massive changes to Japanese transit card universe but the majority of benefits will only apply to mobile use.

I don’t care if people stick with plastic Suica or migrate to Mobile Suica on Apple Pay/Google Pay/Osaifu Keitai. Plastic transit cards are small, convenient, don’t require a battery, but they come with limitations and issuance is a major cost factor for operators. All I care about is that people have hardware choices and the opportunity to go mobile with their local region transit card. Having options is a good thing, let people decide for themselves.

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What will Apple do about the 10% iPhone sales drop in Japan?

The writing was on the wall when Docomo dropped the price of iPhone XR shortly after it went on sale. Shortly after that Tim Cook explained the Japanese market situation in the 1Q 2019 earnings call:

In Japan, iPhone purchases were traditionally subsidized, bundled with carrier contracts. Today, local regulations have significantly restricted those subsidies as well as related competition. We estimate less than half of iPhones sold in Japan in Q1 this year were sold via subsidy.

One year later Apple announced record earnings for Q1 2020 but Japan iPhone sales with down 10% y/y. Luca Maestri only explained the situation at the end of the earnings call, answering the very last analyst question:

So Japan was down 10 percent during the December quarter. It was primarily due to iPhone performance, which was challenged because there were some regulatory changes that took effect on the 1st of October, where essentially the regulators decoupled the mobile phone pricing from the two year contracts and they’re capping the maximum amount of carrier discounts that can can be made. At the same time, I would say that within a more difficult macro environment, iPhone did incredibly well during the quarter. Six of the top seven selling smartphone models in Japan during the December quarter were iPhones. So it was a very strong performance by iPhone in a difficult environment. Also in Japan, we had very strong double digit growth from services, stronger than company average, and very strong double digit growth in wearables, also stronger than company average. So we feel very good. You know, Japan is is a country where historically we’ve had great success. The customers are very loyal and very engaged. And we have a very strong position there and we feel we have a very good momentum.

Six Colors

I don’t think Japanese iPhone customers will stay loyal and engaged if Apple sticks with the same old sales strategies now that the era of carrier bundling is over. A new approach is needed. Maestri alluded to one clear advantage remaining for Apple in the Japanese market: Apple Pay Suica on Apple Watch, an advantage no other device manufacturer has matched yet. That advantage along with the golden opportunity of the Tokyo Olympics this year are market opportunities which Apple is not taking advantage of.

I said it before: Apple Pay Suica on global NFC iPhone/Apple Watch is a great way for inbound visitors to get around town during the Tokyo Olympic games this summer and Google Pay Suica is still not available for inbound Android users. It’s weird Apple isn’t marketing that.

The Mobile PASMO Super Suica Challenge

The recently announced Mobile PASMO has some serious limitations lucidly explained in FeliCa Dude’s ‘Mobile PASMO – something we shouldn’t need‘ reddit post. It shines a light on the unfortunate petty politics of Japanese business culture, a catch-22 that ends up killing the very opportunities Japanese companies work to create. Mimicchii is a good Japanese word for it: so obsessively stuck on pointless small details that one completely misses the big opportunity. The PASMO association knows they will loose out, eventually, but hang on to their one and only advantage, commute passes, in the hope they gain a better losers bargain in the end. But how much opportunity is lost by then?

As FeliCa Dude points out, Mobile PASMO is a pointless waste of money and system resources to replicate what Mobile Suica already does:

PASMO is inferior to Suica in many respects, the idea of deploying Mobile PASMO and removing the user’s ability to choose Mobile Suica is fairly short-sighted. Such a development likely cost many hours and much money, but is effectively a boondoggle and a monument to the stubborn failure of JR and the PASMO Association to sort out a way to issue commuter passes on each other’s cards.

Taken to an extreme each transit card player would build its own mobile service but this is impossible in an era of shrinking ridership and resources.

Come together into one mobile service please…

The next generation 2 cards in 1 Suica due in 2021 aims to fix the current state of affairs. Architecturally I expect the problems will be solved, but corporate politics are another matter. JR East will have to offer enough cost saving incentives and flexible extras for the other major transit card players to host their service assets on Mobile Suica: commute plans, Shinkansen eTickets and more. It’s certainly in everybody’s best interest to do so. Time to put aside the mimicchii politics and duplication. If Japanese transit companies can’t come together to build the future, everybody loses.

Location aware Apple Pay Suica fixes the region setting problem

Changing the iPhone region to add Apple Pay Suica confuses a lot of users. Many are not familiar with region settings and what they do, and it’s far too easy to think that a Japan region setting is a requirement to use Apple Pay Suica, which is not the case. When it comes to iOS 13 Apple Pay and NFC switching, the region is a simple filter so that user only sees Apple Pay card options for a given region, not the whole Apple Pay world. In this situation region setting becomes a stumbling block, most inbound iPhone users are probably not even aware that they can add and use a deeply useful Japanese contactless digital transit card with a few finger flicks.

This is a problem because the current iOS Region preference setting mixes 2 different job functions. Twitter user Zetton neatly explained the issue: the iOS Region setting defines the cultural space the user lives in and how iPhone treats some data, but Apple Pay uses regions in a different way to show available location options. It is this user cultural space vs current location option dichotomy force fitted into a single region setting, that confuses users. This is why JR East created the one time use SuicaEng app that completely dispenses with region settings for adding Suica to Apple Pay. iOS 13 rolled direct Suica card creation into Wallet, look ma no apps, but the ‘change region setting to Japan’ to add Suica downside was still there. Until now.

There are signs that Apple is working around the region problem by presenting location aware ‘add Suica’ Wallet notifications. It’s not universal and impossible to test if you already have Suica, but it seems the separate ‘add Suica’ option also appears in Wallet based on user location in Japan, regardless of region setting.

I suspect the add Apple Pay Suica location prompt is a backend feature in testing phase. It’s a smart move because Apple Pay Suica on global NFC iPhone and Apple Watch is going to be the best way for inbound visitors to get around town during the Tokyo Olympic games this summer and Google Pay Suica is still not available for inbound Android users. Ditto the recently announced Android only Mobile PASMO. Apple has a golden marketing opportunity in Japan that won’t happen again, they should make the best of it. The sooner Apple completely retires the ‘device region set to Japan‘ requirement for adding Suica, the better

The Mobile PASMO announcement

Mobile PASMO was announced for Osaifu Keitai compatible Android devices running Android 6 or later, the service due to start in late March. There was speculation the service would launch at some point when the Mobile PASMO name was registered in late 2017. Here are a few quick observations based on the sparse announcement details.

  • Service is limited to the Mobile PASMO Osaifu Keitai Android app with a limited credit/debit card backend. Think Suica App without Google Pay or Apple Pay integration. You can register a single card for recharge hosted by the Mobile PASMO backend but users cannot mix and match cards like you can with Apple and Google digital wallets and Mobile Suica.
  • This announcement is cutting things awfully close for a March debut of a major service with a squishy start date and no user device profile due until just before launch. Japanese companies usually announce ‘coming this spring’ services 3~4 months in advance. This suggests testing is not very far along and not all PASMO rail operators are integrated for Mobile PASMO commute passes at launch. Long story short: we won’t see Google Pay or Apple Pay integration for a while, local Japanese reports are confirming this already.
  • Suica and PASMO systems are already cross integrated for auto recharge and commute passes at the transit gate and station kiosk level, we also have the next generation Suica format coming one year from now in early 2021. Reducing support costs for commute pass purchase and renewals by moving them online are a key target for both systems, growing integration of Mobile Suica and Mobile PASMO is a given.

Summary and Update
Mobile PASMO is a classic Osaifu Keitai app similar to 2011 era Mobile Suica before Apple Pay and Google Pay integration. That level of integration will require more backend cloud support and qualification but this won’t come easy for PASMO by itself: unlike Suica which is run by JR East, PASMO is an association of large and small private rail operators, only a few of whom have deep pockets and IT resources. The real question is how much JR East Mobile Suica and Mobile PASMO will cooperate to deploy Mobile Suica resources and deep expertise to integrate the many different PASMO players and expand services for all. FeliCa Dude sums it up best in his essential Reddit post: Mobile PASMO – something we shouldn’t need.