Octopus Card Coming to Apple Pay

UPDATE: Apple Pay Octopus is coming with iOS 13

Note: Older Octopus coverage (December 2018~March 2019) has been merged here


It’s exactly a year since the Hong Kong Smart Octopus card launched on Samsung Pay. And just like last year, rumors are flying again before a launch, this time on Apple Pay. We will know in the next few weeks. It may arrive in tandem with a iOS 12.x update though last years launch on Samsung was a quick and low key ‘what? it’s here?’ affair.

Global FeliCa has been standard on all iPhone and Apple Watch models since 2017 and the device use profile will certainly match what Apple support lists for Suica:

  • An Apple Watch Series 2 (purchased in Japan), Apple Watch Series 3, or Apple Watch Series 4
  • An iPhone 7 or iPhone 7 Plus (purchased in Japan), iPhone 8, iPhone 8 Plus, iPhone X, iPhone XS, iPhone XS Max, or iPhone XR

The process for adding cards will be slightly different from Suica and closer to Apple Pay China Transit Cards for Beijing and Shanghai: new cards can be created in Apple Pay Wallet and plastic cards can be transferred, but just like Suica, plastic Octopus cards cannot be used after being transferred.

A lot of iPhone users in Hong Kong have been waiting for Octopus on Apple Pay since the debut of global FeliCa iPhone, it will certainly be a welcome addition.

UPDATE
Hong Kong transit directions will also be added to Apple Maps with the Apple Pay Octopus launch. They will be integrated similar to Japanese transit in Apple Maps that notifies insufficient Suica Express Card balance for on route transit fare.

Apple Maps Transit integrates Apple Pay Suica information

More Apple Pay Octopus

I assumed the previous post would be ignored in the end of year rush period. However the timing perfectly coincided with an Octopus Cards Limited press conference where the CEO demurred any Octopus tie-up with Apple and the post got much more attention than I ever anticipated. Obviously there are lots of iPhone users in Hong Kong who want Apple Pay Octopus. A few readers were confused by the situation and asked for some clarification.

First of all the source who correctly predicted last years Smart Octopus on Samsung Pay launch tipped me about the Apple Pay launch. That in itself was enough for me but here’s the thing: Even if the information is wrong, if Octopus Cards Limited (OCL) is serious about expanding Octopus use on digital wallet platforms, taking the next step of getting Octopus on Apple Pay is the only way to achieve that.

Digital Wallets like Apple Pay and Samsung Pay are the most tightly integrated NFC software and hardware digital wallet platforms out there with integrated FeliCa, but Apple is the only one to implement the necessary Secure Element on their own A Series/S Series hardware with FeliCa Networks keys, and sell the package globally. All the major NFC technologies are standard on Apple Pay: NFC A-B-F, EMV, FeliCa, MIFARE, VAS.

Octopus on Google Pay might look nice on paper but it can’t achieve anything of scale yet because of the highly fragmented nature of Android: to date hardware manufacturers have yet to produce an answer to Apple’s global FeliCa iPhone and Apple Watch, even though everybody’s smartphone has a NFC A-B-F chip. Not even Google has pulled it off. Huawei says they are planning to add global Felica but it will take time.

OCL is playing coy because majority shareholder Hong Kong MTR has added QR Codes and EMV contactless to the transit gate mix removing the exclusive Octopus Card franchise, but the technology and market politics don’t mesh. On one hand you have a fast, established and ‘open’ in-house contactless payment system (as in anybody can buy a plastic Octopus card and ride) basically run by public transit companies. On the other hand you have slow and ‘closed’ contactless payment systems (as in only people with certified credit cards and bank accounts can ride) run by major outside credit/debit network companies chipping off money from both customers and transit companies.

In this context putting Octopus on Apple Pay isn’t just adding a card to a digital wallet platform, it is also a statement of who ultimately controls, operates and benefits from the public transit gates. It’s more about market politics than technology, in other words another battle in the contactless payment turf wars. The outcome will be fascinating to watch but determines whether Octopus will remain a great transit payment platform for Hong Kong with a future, or not.


Apple Pay Octopus and the iOS 12.1.3 Release Window

JR East posted a special maintenance schedule this month for Mobile Suica on 1/15, 1/22 and 1/28. The work appears concentrated on the Suica Recharge backend which hopefully points to improved Apple Pay Suica Recharge performance.

I think it also points to something else: a iOS 12.1.3 release with Apple Pay Octopus/Hong Kong transit directions for Apple Maps service around January 29 Cupertino time, early am January 30 in Hong Kong. The timing fits with a full beta test cycle wrap up but more importantly it fits as a kickoff for the Chinese New Year vacation period, good news for an important market to Tim Cook who desperately needs some good news right now.

Go for it Tim! It will undoubtedly help Apple sell more global FeliCa iPhones because 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.

UPDATE
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 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 Octopus with a smaller point release, or none at all which was the case with contactless student ID cards.

The original source reports pointed to an end of January rollout, now that iOS 12.1.3 is released we will see how it plays out between now and iOS 12.2. Considering the Apple Pay Suica launch meltdown on iOS 10.1 update day, Apple would be wise to launch on a quiet network day as Apple Pay Octopus day 1 user additions will far outstrip any regular credit card Apple Pay rollout, the use profile for prepaid transit cards is very different.


Updated Smart Octopus Samsung Pay Image Hints at Apple Pay Octopus Launch

Samsung has updated their Smart Octopus on Samsung Pay advertising. The tag line used to read “only on Samsung Pay,” the updated tag reads “First Smart Octopus in Samsung Pay”. The Samsung Pay Smart Octopus exclusive window is over. I think we are getting very close to a Apple Pay Octopus launch possibly coming with the iOS 12.1.3 update.


Someday We’ll Be Together

iOS 12.2 beta 6 has dropped with no sign of Apple Pay Octopus from beta code spelunkers like Guilherme Rambo. A source close to the Cupertino mothership also indicated the situation in Hong Kong is “complex.”

Live by the rumor and pay the price, it looks like the story sources and my judgement were wrong: Octopus won’t be on Apple Pay when the OS 12.2 update is released at the March 25 Apple Special Event Octopus Cards Limited and Apple were originally planning an Apple Pay Octopus rollout for Chinese New Year but for some reason it was postponed. Nevertheless, I stand by what I wrote back in December:

Octopus on Apple Pay isn’t just adding a card to a digital wallet platform, it is also a statement of who ultimately controls, operates and benefits from the public transit gates… The outcome will be fascinating to watch but determines whether Octopus will remain a great transit payment platform for Hong Kong with a future, or not.

I also have a new prediction that we’ll see Apple Pay Octopus with the iOS 13 release this fall. Take it for what it’s worth, but I feel confident that we can celebrate some good news in September.

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Apple Pay Japan Market Info Update December 2018

The Bank of Japan posted presentation material from the 7th FinTech Forum held November 30. The Rakuten presentation has some contactless payment market data for Japan that is worth a look.

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.

iOS 12.1.1 Suica Express Transit Performance

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

As pointed out in earlier posts Suica Express Card with power reserve on A12 Bionic is a significant departure from previous devices both in operation and performance. Also the iOS 12 Suica Express Card error flicker issue is a iOS 12 software issue that is completely different from the iPhone X Suica NFC hardware problem.

The quick summary is that Suica Express Card performance has not improved from iOS 12.1. We’ll have to wait until iOS 12.1.2 and try again.

The Contactless Payment Turf Wars: why Oyster is missing from mobile

  1. Contactless Payment Turf Wars: Transit Platforms
  2. Contactless Payment Turf Wars: PiTaPa Pitfalls
  3. >Contactless Payment Turf Wars: why Oyster is missing from mobile
  4. Contactless Payment Turf Wars: tapping the potential of TAP

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. That’s a value capture gold mine to build an empire, budget problems solved. Unfortunately TfL gives that gold mine away to the banking industry 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.

Open Loop QR

Hong Kong’s Octopus (FeliCa) and Singapore’s EZ-Link (Ex-FeliCa now CEPAS) are going open loop but in different ways. EZ-Link has been testing EMV contactless for over 2 years now, users report a less than smooth experience. Kaohsiung Rapid Transit in Taiwan which uses MIFARE based iPASS and EasyCard is also considering EMV contactless open loop while the recently opened Taoyuan Airport MRT offers QR Codes and a cute YouTube video.

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.

Japan was fortunate that major transit players like JR East, are private companies with strong technology partners, like Sony and NTT Docomo. Out of this fortunate set of circumstances Suica was created and finally reached  the market in 2001 (a fascinating engineering story). Suica became the Japan IC Transit card template which evolved into the ubiquitous Japan Transit IC Mutual Use Association project for transit and e-money use. Mobile Suica was introduced in 2006 by NTT Docomo and now resides on the Apple Pay and Google Pay platforms.

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.

Future trends
For every marketing report that predicts QR Code payments growing into a 70 billion USD sized market by 2023, someone else calls it nonsense because Suica is becoming the card for everything. In many ways Suica already is. MITI said it is investigating using QR Codes for small rural transit systems that cannot afford IC card systems. This loops back to TfL complaint that IC cards are expensive to issue and manage.

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.

JR East and Sony have announced that they will solve cost problems for rural transit and much more in early 2021 with Super Suica.


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.

iOS 12 Apple Pay Wallet pulled a MIFARE and nobody noticed

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.

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.

Blackboard supplies the technology and backend services for Student ID cards on iOS 12. I contacted Blackboard PR to confirm if the card technology was FeliCa or MIFARE but did not receive an answer. However I did run across an interesting Blackboard press release from 2015 Blackboard and NXP Semiconductors Collaborate to Strengthen Campus Card Technology:

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.

Apple Wallet Ponta cards on iOS 12 are VAS protocol contactless passes outlined at WWDC18 , WWDC16, and in the Contactless Passes section of the iOS Security Guide:

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 PASSKit NFC Certificate MIFARE 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.

UPDATE 2
Apple has announced support for Portland’s HOP transit card and Chicago’s Ventra transit card, both of which are MIFARE