Year over year contactless payments use in the first slide basically covers the same period of the MMD Labo report but with different questions. The Rakuten data shows Rakuten Pay in the lead, naturally, at 15.2% and Apple Pay in 2nd place at 12.9%. The MMD numbers showed Rakuten Pay at 13% and Apple Pay at 20%. Google Pay only added Japanese payment support in May 2018 so the full impact will take time to play out, the 30% Osaifu Keitai use figure from the MMD report suggests a possible outcome.
As I explained in the earlier post, Apple Pay use is highly regional and tied to Suica compatible transit routes. In major metropolitan areas Apple Pay use is higher than Rakuten but Rakuten has done a good job building an ecosystem of e-commerce, travel reservations and other services that offer members large discounts and points. That’s the reason behind the robust growth from 3.4% and the larger nationwide average use figure.
Apple Pay Suica is the entry point for Apple Pay use, the more incentives that customers have to use Suica the faster Apple Pay use in Japan will grow. Sachiko Watatani pointed out that only 27% of Apple Pay Japan capable device users actually use Apple Pay, that represents a lot of potential users sitting on the fence. The Rakuten Pay growth rate shows that points and discounts are great incentives but Apple Pay Suica, convenient as it is, doesn’t offer that. At least not without going to the trouble of getting the right Apple Pay credit cards for the right points. And even then, as setting up and using the JRE POINT app makes clear, it’s not user friendly.
The next big opportunity for Apple Pay Suica growth is ‘Super Suica’ that will unite transit cards, commuter passes and various transit point systems in a single format for plastic and mobile. Unfortunately this doesn’t happen until April 2021. Until then Apple Pay Japan needs to add the other e-money prepaid cards (WAON, nanaco, Rakuten Edy) and as many point system reward cards to Wallet as possible to keep growing. Not only that but also make them work better together than they do on their own. Think PONTA card with the kinks ironed out.
Apple has never issued an iOS update that specifically mentions Suica or Express Transit Card performance, so each update becomes a guessing game of what’s fixed and what’s not. iOS 12.1.1 was released December 6 in Japan and there has been very little mention of Suica performance on Twitter. Not necessarily a good thing, if performance has changed dramatically, good or bad, people tweet about it.
I reached out to a few trusty Revision B iPhone X Suica user sources. They report no change from the buggy Suica performance they’ve experienced since upgrading to iOS 12. A few iPhone 8 users have also complained about buggy Suica performance. My experience with Suica Express Transit on iPhone XS continues to be excellent though Apple Pay Suica recharge performance is poor when recharging from a Suica notification short cut.
Here’s the iOS 12.1.1 performance score as I see it:
Suica Express Transit performance on pre A12 Bionic iPhone: B-
Occasional error flicker at transit gates
Unresponsive Apple Pay Suica recharge, 50% failure rate when recharging via Suica notifications
Suica Express Transit performance on A12 Bionic iPhone: A-
Unresponsive Apple Pay Suica recharge, 50% failure rate when recharging via Suica notifications
Open Loop EMV It is very strange that the TfL Oyster card, which completely transformed London area transit still isn’t hosted natively on Apple Pay or Google Pay. Other MIFARE based cards are hosted on both digital wallet platforms and TfL has an Oyster app for account management and online recharge (top-ups). From a technical standpoint there doesn’t seem to be any particular problem preventing them. Perhaps it is a political thing.
TfL decided in 2011 to put their resources into the emerging EMV contactless standard. The reason was simple:
The current Oyster system, though very popular, is expensive and complex to administer. Contactless bank cards use existing technology, responsibility for issuing cards would lie with the banks rather than TfL, and the operating costs should be lower.
That is politician think, not business think: everything is a budget problem, not a business opportunity that needs investment, reduce costs by letting someone else pick up the tab but let them take their cut first. I wonder if TfL publishes how much they pay out in transaction processing fees to banks and Cubic? Perhaps not. Meanwhile budget pressures are not letting up as Londonist notes:
In 2017 there was a push to nudge people away from their Oyster cards and towards contactless. One announcement rang out all over London’s tube stations: Why not use your contactless bank card today? Never top up again, and it’s the same fare as Oyster.
The die was cast in 2014 and probably won’t change. Instead of putting resources into hosting Oyster on Apple Pay or Google Pay, TfL and Cubic already have a mobile solution which is ‘open loop’ ticketing with EMV contactless bank cards. Open loop does not address the finer issues of different fare schedules (children, seniors, etc.), commuter passes, season tickets, nationwide transit interoperability, regional promotion, nor does it offer the business advantages of a transit payment platform, Express Cards with power reserve or any kind of future vision. That’s the end of the open loop story because EMV contactless is a very dumb smart card.
It’s a shame really because TfL loves to say they generate the most transactions in all of Europe. To me that’s a gold mine to build an empire, budget problems solved. Unfortunately TfL gives that gold mine away to banks and Cubic.
You can see the same thinking with Oyster’s Australian cousin, the Opal card system, built and managed by Cubic, just like Oyster. Opal is also going the ‘open loop’ route instead of transit cards on mobile.
Hong Kong going the QR Code route shows how badly AliPay wants in on Hong Kong transit, and MTR Corporation in on China transit, bad enough that Hong Kong will sacrifice a great transit payment platform for AliPay, another gold mine giveaway. Judging by the AliPay branding and retrofitted QR Code readers on Hangzhou Metro gates in the pictures above, what AliPay wants, AliPay gets, but the fast FeliCa based Octopus smart card stands in the way. Instead of improving Octopus or extending mobile Smart Octopus, it looks like Hong Kong will invest in very slow and very dumb QR. The Hong Kong Economic Journal had this to say about the development:
MTR has set its sights on a major revamp of its fare collection system, accepting new electronic payments methods rather than just single journey tickets and Octopus Cards. From the passengers’ perspective, it means there will be no need to have an Octopus card on hand for a journey on local trains, if MTR’s new fare collection system supports all the mainstream contactless payment methods such as Visa payWave and MasterCard PayPass, or mobile payment means like Apple Pay, Samsung Pay and Google Pay.
Japan in the middle TfL/Oyster and Transport for NSW/Opal, Octopus, EZ-Link are government held transit authorities, not private independent companies. Publicly run transit authorities are subject to politics and special interests like any government agency, this sometimes leads to poor decisions and short-term thinking.
The ubiquity and scale of interoperable transit IC cards sets Japan apart from all other countries. China copied the Japanese model for China T-Union but the cards cannot be used as e-money and have been upstaged by AliPay and WeChat Pay which, surprise, can be used for e-money and transit.
Japan occupies a very unusual middle ground between EMV contactless from the West and QR Codes from China, neither of which play well together. The scale of Suica provides the breathing space for Japan to pick and chose what works best for, and enhances their transit payment platform. The result is an incredibly rich and varied contactless payments market anchored around Suica and similar FeliCa prepaid cards.
Low-cost QR Codes certainly make sense for lightly used rural transit operations but they have a fatal weakness: they don’t have plastic card versions that work anywhere and seniors prefer the simplicity of plastic, QR Codes require a high cost network connected smart device, an app and are strictly one way read with no offline processing.
Update: Open Loop QR Code Security Risks One issue that was in the back of my mind while writing this post was the privacy and security implications of letting AliPay inside with direct transactions on transit gates. Japanese customers are very sensitive about where and how transaction records are held and used but I have yet to see any security discussion in connection with Hong Kong MTR opening up transit gates to AliPay and WeChat Pay. QR Code transactions are very different from offline FeliCa Octopus transactions. Where and how does the QR Code transaction data from Hong Kong MTR transit gates get stored, does the Chinese government has access to it to gather intelligence from transaction and location records?
If there is one thing we do know about Chinese companies is that they do what they want when nobody is looking. Witness China Telecom spoofing the BGP protocol to poison internet routes and suck up massive amounts of American and Canadian internet traffic for intelligence analysis. If I was living in Hong Kong I would be concerned about the privacy implications of MTR going open loop with QR codes.
The Apple Wallet Ponta card launch at LAWSON presents another dilemma: just what exactly is Apple using for iOS 12/watchOS 5 Apple Wallet Passes and Student ID cards? Student ID cards and Apple Wallet Ponta have the same device eligibility specs: iOS 12/watch OS 5 running on iPhone 6 and later/Apple Watch Series 1 and later.
You might assume that Apple Wallet Ponta is FeliCa but the eligible device list tells a different story. You might also assume that everything in Japan is FeliCa but this is also not the case. Doutor Coffee shops sell a handy little Doutor pre-paid card that is MIFARE and it works flawlessly side by side with FeliCa flavored Apple Pay Suica on the same NFC reader.
Altogether we have an interesting spec list for Student ID and Mobile Ponta cards.
The same eligible device specs that only support NFC A-B across all devices
I’m calling it (again): the only technology that fits this profile along with Express Cards (for Student ID cards but not Ponta) is MIFARE iOS 12 PassKIT Wallet passes are simply MIFARE. Only Apple could pull this kind of ‘under the hood thing’ off in iOS 12 without anybody suspecting and it neatly puts all the major NFC technology pieces on Apple Pay: EMV, FeliCa, MIFARE and PBOC China Transit.
Blackboards’ push to adopt NFC in addition to their existing MIFARE-based solutions, back in 2012 showed incredible insight into the potential of this technology. The security, convenience and flexibility that NXPs NFC and MIFARE solutions bring truly reflect the student lifestyle. Now access to campus services can be simply enabled via a smart watch or smart phone.
Based on this and the fact that it came 2 years after a FeliCa demo of Blackboard Student ID cards with a rumored migration from FeliCa to MIFARE, plus the eligible device specs, my conclusion is that Student ID cards on iOS 12 are MIFARE card emulation which is NFC-A.
Wallet supports the value added service (VAS) protocol for transmitting data from supported passes to compatible NFC terminals. The VAS protocol can be implemented on contactless terminals and uses NFC to communicate with supported Apple devices.
This is also NFC-A. Contactless passes have been around for a while on iOS but adoption has been slow. With iOS 12 PASSKit, Apple is encouraging developers to migrate from QR Codes to NFC contactless passes and hopefully lowering the NFC Certificate requirement bar a little. Part of the reason for the slow uptake is poor NFC reader support. LAWSON has a new POS system built around Panasonic JT-R600CR readers which are Apple Pay savvy and Apple Wallet Ponta cards only work correctly when you tell the LAWSON cashier to use “Apple Pay”.
UPDATE A highly trusted NFC engineering source contacted me that I got it partly wrong. The correction edit above explains that Wallet Ponta cards are Apple’s implementation of the VAS protocol and not MIFARE. Student ID cards are certainly MIFARE/PASSKit NFC Certificate card emulation, Apple has not publicly announced MIFARE support but it is the only technology compatible with Blackboard IC card formats that could power the express card features of iOS 12 student ID cards across all eligible devices. Research and confirmation efforts are ongoing.
Apple Wallet Ponta Notification with point summary after successful Apple Pay transaction
The Ponta rewards card for Apple Wallet launched at LAWSON Japan right on schedule and without a hitch. iOS 12/watch OS 5 users with any Apple Pay capable device: iPhone 6 and later, Apple Watch Series 1 and later can add the Ponta rewards card operated by the Recruit Group to Apple Wallet and automatically earn Ponta points with Apple Pay purchases at LAWSON without having to use an app or show a bar code. Apple Pay purchases earn 4X Ponta points during the launch campaign running through March 6, 2019. You can also make purchases with Apple Wallet Ponta points.
NFC Apple Wallet passes are a new feature of iOS 12/watchOS 5. Apple is encouraging developers to use NFC instead of QR or bar codes for Apple Wallet passes, and has been showcasing contactless NFC passes at recent Apple Events. Ponta Apple Wallet hopefully marks the beginning of other NFC enabled reward cards such as JRE POINT joining Apple Wallet.
Create a digital Ponta card with iOS Ponta Card App then add it to Apple Wallet as shown here and in the above screenshots. Say “Apple Pay” to the LAWSON cashier and use Face ID/Touch ID with the card you want to use. Ponta automatic points don’t register with Suica Express Cards, iD or QUICPay, be sure to say “Apple Pay”. The reader does a double read, first for Ponta then for Apple Pay, so hold iPhone to the reader until it gives you a transaction complete sound, the linked Tweet video below gives you the idea. It’s slower than a regular FeliCa transaction because of the double read and the poky Ponta NCF-A protocol.
With a successful Apple Pay transaction the Ponta logo flashes briefly confirming purchase reward points, shown in the GIF Tweet, followed by a Ponta Wallet point summary notification. If you pay close attention to the GIF you’ll notice that LAWSON accepts NFC Pay in addition to FeliCa, iOS NFC switching in action again as Apple Wallet Ponta uses NFC-A. Whatever the NFC flavor is Apple Pay takes care of it, just as it should be.
Update: the LAWSON POS is built around Panasonic JT-R600CR readers which are Apple Pay savvy and Apple Wallet Ponta cards only work correctly when you tell the LAWSON cashier to use “Apple Pay”. Apple Wallet Ponta is Apple’s implementation of the VAS protocal for contactless NFC passes, reward cards, etc. and is NFC A. The Panasonic reader reads Ponta then selects the correct FeliCa payment method (Suica, iD, QUICPay). Users are complaining that LAWSON did not train store staff well but are getting up to speed quickly.