The Transit Platform Argument

A reader asked some very good questions regarding the Suica Transit Platform model and Open Loop:

1) Thinking about this recently – is there a non-techie argument for introducing Suica-type cards in the current day in places with preexisting open-loop infrastructure, wide debit card adoption (even kids), and little overcrowding at ticket gates due to lower volumes?

2) As a tech & transit nerd, I obviously love them, but what could be a convincing, economically sound pitch to a transit operator for creating/adopting an integrated transit&e-money system, given the significant expense and questionable added value?

3) Answers to possible q’s about EMV contactless: 1. 定期券 (commuter passes) & discounts can be tied to card no.; 2. solution for visitors: in-app/paper/multi-trip tickets (like in SG). Obv., Suica has superior privacy & speed, but where speed is not an issue, what’s the killer argument?

I tweeted a response but Twitter is a terrible vehicle for long form discussion. I have many posts on the subject scattered over 2 years, it might be convenient to summarize a few things here.

Any argument for building a Transit Platform or going all in with Open Loop transit comes down to transit company priorities for safe operation, better customer service and long term business goals. A few crucial points to consider.

Whose customer?
A vital point that many people miss in the Open Loop debate is that transit users end up as the bank card customer, not the transit company customer. That might seem like an insignificant difference but ‘owning the customer’ is the whole game and key to growing any kind of business, in our era or any era. Which brings us to the next point because the best way to own the transit customer is…

Cards
Cards are the delivery vehicle for all kinds of service goodies from transit, to points, rewards and all kinds of services. The beauty of a non-bank transit pre-paid card is its flexibility, it can be a simple ticket that customers buy with cash from a station kiosk, it can be linked to an online account with credit cards, extended transit services and beyond. Cards are convenient but not transformative however, until they land on a smartphone…

Digital Wallets
The most powerful card incarnation is the digital wallet transit card with a flexible recharge backend, where any bank card can used, or even cash, and a flexible front-end that can be any flavor of NFC, UWB Touchless or even QR. I say it’s better for the transit operator to decide what payment technology works best for their needs and how to deliver better customer service with new payment technologies, not banks.

Value Capture
Value Capture applies to rail and transit operators with the rights to develop the land around their stations, I include station retail development and operations. Owning a transit + payment card like Suica or Octopus combined with retail opens up a whole new levels of value creation and capture.

It’s also important to remember a few other dynamics, (1) Transit is the golden uptake path for contactless payments, (2) Contactless payments are most successful when a transit payment platform, like Suica, is matched with a mobile wallet platform, like Apple Pay. The key is building better services tied to transit cards that benefit customers and businesses of the entire transit region.

Other Details
Regarding detail questions such as attaching commuter passes to EMV cards and special ticketing, I am no systems design expert but a few things come to mind. First of all we have not seen Open Loop commuter passes because the EMV spec doesn’t store anything locally and there are always security and performance issues to consider when everything is done in the cloud with soft-linked registration to system outside numbers.

The classic catch 22 here is that when the soft-linked number changes on one system, everything attached to it on the other system stops working. This is a constant weakness of the SmartEx and new JR East Shinkansen eTicket service. And what happens if the bank pulls a card mid-transit? These things happen. They are endless headaches when linking to any outside system, for this reason Open Loop sticks with the simple stuff while transit operators keep the more complex stuff in-house. In general the more complicated the fare configuration, the less likely it can be synced with an outside system or be hosted on Open Loop.

For low volume specialty ticketing QR Codes are the easiest step up from paper but they can be printed on ordinary paper for transit users without smartphones and needs to be there. This is why JR East is deploying QR code readers in some gates as they prepare to end mag strip ticketing.

NFC Contactless Passes might sound like a good idea but Apple Pay VAS and Google Pay Smart Tap were designed more for retail in mind, and the transit gate reader system would have to juggle a different protocol that isn’t EMV, FeliCa or MIFARE. It could be done, but judging from my experience of using Apple Pay VAS PONTA and dPOINT cards, QR Codes are faster and likely easier to implement.

In the long run there are no easy solutions. The risk of Open Loop is that it is sold as a general easy ‘fix all’ and mobile solution, which it’s not. This lulls transit operators into complacency instead of improving Closed Loop ticketing systems and extending them to the mobile digital wallets. The bigger and more complex the transit system, the less Open Loop can accomplish.

Relevant Core Posts
The Contactless Payment Turf Wars: Transit Platforms (an intro)
Transit Gate Evolution: Do QR Codes Really Suck for Transit? (a deeper dive into transit cards, gates and technology)
Value Capture and the Ecosystem of Transit Platforms (the bigger picture)
The Japanese Transit Platform Business Model (an outside perspective)

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Requiem for Shaken

The once mighty Shaken KK, who’s founder co-created the modern Japanese typesetter with Morisawa in 1924 and a huge highly profitable font library that once dominated the entire Japanese print industry, is not quite dead but the last vestiges are quickly disappearing. Japanese blogger tkri notes that the Shaken Saitama production facility is being demolished, the same fate of the Kawagoe factory in 2017. The very last Shaken ‘digital’ typesetter machines serving the last 100 customers are due to go out of service by 2024.

Shaken had everything but never made it into the desktop publishing era by their own choice:

Hiragino started just about the time that Japanese PostScript arrived in the late 1980’s. At that time, the king of the typesetting market was Shaken KK. Anyone who knows Japanese typography knows Shaken. It had the most sought-after type library, the best designers, the biggest market share. Shaken made so much money that it became arrogant and absolutely refused any offers from Adobe and Apple to jump on the PostScript bandwagon.

But there was trouble in paradise. A few designers felt Shaken was becoming stagnant and left the company. Each sought his own vision, yet they came together to create the fonts that would eventually end up in MacOS X.

Inside Hiragino: A Closeup of Apple’s OS X Japanese Font

Shaken kept its proprietary typesetters and formats, losing 40 percent of its market share by 1999 along with lots of prestige and talent in the bargain. Ex-Shaken people filled the Japanese print industry. The low point came that year when government tax raiders found several safes in the company basement filled with 10,000-yen bills; president Yuko Ishii, daughter of the founder, had stashed away some 15 million USD in the early ’80s and reported it later as profit. The directors of the company tried to oust her but failed. She died in the presidents chair at age 92 in 2018 leaving a ghost company as her legacy.

This sorry state of affairs had two huge repercussions. It denied a vital part of the Japanese font design legacy to designers working with DTP. Imagine a world with younger generations of designers denied the use of Helvetica and Times and you get the idea. It also left the only other competitor, Morisawa, which did license its library to Adobe, with a practical monopoly in the new DTP era.

Tomihisa Uchida who retired from Iwata Corporation a few years back knows more about Japanese font programming and typography than anybody else in this world. He was involved with Japanese digital font production from the start, working at its very heart: Shaken KK. I interviewed him in 2003.

Uchida: I was with Shaken for 23 years. I entered right out of college, where I was a chemistry major. My first job there was working with analog plates and mechanical processes. That involved high-resolution plates, similar to what is used for IC chip manufacture, to produce high-quality typography. I did that for 10 years; then digital fonts came along in the early ’70s. Shaken was the first Japanese vendor to have computerized layout. It also did the Japanese version of Ikarus. There wasn’t any real competition and it had the market to itself.

Question: So Shaken made the transfer to digitalized fonts and computer-based layout successfully?

Uchida: Yes, it purchased the Japanese rights to Autologic technology to produce a hybrid product where the software was a customized Autologic engine running on Shaken hardware. That didn’t last too long, as Shaken had been developing in-house technology and soon released its own original product.

We simply implemented Japanese typography and composition rules on the computer with outline fonts that output on an imagesetter using proprietary technology. At that time, Shaken systems were extensively used in newspaper production. However, Shaken lost that market because it didn’t have strong network capability, which newspaper production demands.

One of the ways Shaken was able to build up a strong type library in a fairly short time was by sponsoring a typeface competition. It would pay the winner and purchase his typeface. It raised lots of young designers that way (like Suzuki-san, who would later create the Hiragino font used in Apple’s MacOS X) and really expanded the market with new typefaces for comic books and such.

Later on, my job was creating different weights. The designer would create the basic design, then we’d use the Ikarus system to make the weights. That was the late ’70s. The systems we designed ran on hardware from the likes of DEC and Wang. I had a group of people who were basically a font production line. When Japanese PostScript first arrived, it wasn’t immediately apparent that things would change as they did, it took forever to print. Shaken systems always had excellent performance.

Shaken sent Uchida san to programming school then put him in charge of their digital font engineering group. He created the Shaken proprietary font format for their digital typesetter machines. He joked that if Shaken ever wanted to convert their font library to OpenType format, they would have to hire him back.

The very last time that Shaken made any kind of product announcement these past 20 years was at the July 2011 International eBook Expo Tokyo. At the time I blogged:

The once mighty Shaken finally waved the white flag and demonstrated OpenType versions of their fonts running in InDesign and on an iPad today at International eBook Expo Tokyo. Shaken’s Toshiro Ito said they don’t have a set release date, but hope to make an announcement soon; Japanese designers, who have been waiting for Shaken packaged software fonts since 1989, can finally look forward to using Shaken fonts on personal computers and mobile devices.

Blogger Danbo was there too and took some video of the Shaken demonstration. I remember most of the audience being near retirement age. That was the last word from Shaken. The OpenType product never appeared. Uchida san told me that Shaken probably didn’t have any designers and engineers left to build out the smaller legacy proprietary digital font collections into Adobe Japan 1-4 character sets for modern designers and devices.

Any time I talk with ex-Shaken people like Torinoumi san of Jiyukobo, or Toyoizumi san of Screen, or Uchida san of Iwata, there’s a wistful quality to their shared memories, even though they all went on to create new and better things. It’s bittersweet legacy only they can know: building something great then watching it rot away, destroyed by greedy deluded people in charge of protecting it. And now that it is almost gone, with most designers of that time in retirement, it is largely forgotten.

Some people will want to write the Shaken story off as Japanese culture unable to change but that’s just snobbery. What happened to Shaken can happen to any company with a monopoly. Steve Jobs definitively explained how monopolistic market power rots a company in his lost interview:

Sales and marketing people end up running the companies and the product people get driven out of decision making forums. And the companies forget what it means to make great products. The product sensibility and product genius that brought them to that monopolistic position gets rotted out by people running these companies who have no conception of a good product vs. a bad product. They have no conception of the craftsmanship that’s required to take a good idea and turn it into a good product. And they really have no feeling in their hearts usually about wanting to really help the customers.

When the last person turns out the lights at Shaken KK, I hope they open the vaults and set the Shaken font library free. Only by taking flight and having a life of its own can it ever hope to live on in the hearts and imaginations of future Japanese designers. Only then can the Shaken tragedy be reborn into something new.


UPDATE
A reader forwarded a Japanese public record document from 2008 regarding a Shaken company labor union dispute with management over mandatory retirement policy. It’s a pretty damning document. Company sales data from page 11 on clearly shows in ugly detail how management ruined the company business: focusing exclusively on milking customers with outrageously expensive font library rental royalties on proprietary hardware at the expense of everything else.

Shaken had the talent, technical expertise and opportunity to lead Japan into the DTP era with non-proprietary digital fonts and imagesetters. Instead of innovating, management clung to a do-nothing easy money strategy that destroyed the company. Meanwhile, the Japanese print industry moved on to better modern production infrastructure; a perfect example of Steve Jobs’s explanation.

The Self Checkout Barcode Reader Dilemma

Reach out and touch is not something we want to be doing right now. Along with wrangling face masks and Face ID iPhone Apple Pay in the Covid-19 era, we also face another hurdle: self checkout barcode readers. Any volunteers out there who like fondling public plastic? I didn’t think so.

Convenience store self checkout all have the same deal: scan with barcode reader, tap some choices on the checkout touchscreen, scan a rewards card and pay with Apple Pay Suica, etc. The stationary barcode readers at JR East station NewDays are slightly better but you still have the touchscreen to deal with.

Barcode app and plastic variety reward cards were already a pain in the ass before all the fun started and are worse now. Apple VAS and Google Pay Smart Tap for NFC contactless reward cards has been in place for some time but uptake in Japan has been slow and small. So far only 3 contactless NFC point cards exist: Docomo dPOINT, T-Point and PONTA, and only 2 places use them: LAWSON (dPOINT and PONTA) and Tsutaya (T-Point). Part of the problem is that VAS/Smart Tap support depends on 2 factors: the reader and the POS system.

Most modern NFC readers support Apple and Google protocols but POS system support is another matter. Pre-packaged POS system providers like AirPay and J-Mups that are popular with smaller merchants don’t support them yet. This means that only big retailers with deep POS development resources like LAWSON (Mitsubishi Corp group) have added NFC contactless reward card support so far.

Apple Pay Japan supports dPOINT and PONTA cards but there are subtle differences: PONTA card requires Face/Touch ID authentication, dPOINT does not. I have not fully tested dPOINT for point payment but suspect authentication is not required for getting points but required for paying with points. One hopes that with the Covid-19 crisis in full swing, retailers and card empires (JRE Card, etc.) have the incentive to provide customers with the safest contactless experience for both payments and reward cards.

dPoint card can be accessed without Face/Touch ID, PONTA requires authentication

The Contactless Tipping Point, Face ID Apple Pay and iPhone SE Reviews

Back in the different era of 2019, many journalists, both Japanese and gaijin, fretted about the Japanese fondness for hard cash and how things might change with the CASHLESS Rebate government program and the Tokyo 2020 Olympics. There were signs that things might be changing. But none of this matters anymore. Forget it.

Everything changed the moment the Japanese Government requested school closure to prevent the spread of COVID-19 on February 27, 2020. In Japan, as in the rest of the world, social distance, face masks and rigorous hand washing are now mandatory daily routine. Anything we touch is suspect. This includes money. This is why the COVID-19 crisis will rearrange the contactless payments landscape in Japan very quickly. Nobody wants to risk becoming sick from handling money or tapping public touch screens when they can pay without touching anything.

When living condition baselines changes overnight, it takes time for our brains to adapt. For iPhone users in the new era, Apple Pay has gone from convenience to necessity. Unfortunately Face ID doesn’t work with Apple Pay in this new face mask era. Actually it sucks. Snazzy technology turned albatross, Face ID was ultimately the wrong tech bet to make.

Fortunately for Apple they made a very smart move with the new iPhone SE that incorporates the A13 Bionic with Touch ID. For customers in Japan iPhone SE with Touch ID Apple Pay is the device that perfectly fits current conditions offering the best Apple Pay and Suica experience with Express Transit power reserve plus other good features, at a budget price. For many in Japan, and likely everywhere, Apple Pay use with face masks is a very important decision factor for purchasing a new device. It will likely be a factor in Apple’s bottom line the rest of the fiscal year.

Unfortunately most tech reviewers are still living in the past era of 3 months ago. This is understandable, but good reviewers should take everything into account. That’s why we read them. That’s why I was disappointed when John Gruber, who usually writes great stuff, completely blew it for me with his iPhone SE analysis/review/think piece that does not mention the face mask Face ID vs Touch ID issue at all. That’s the baseline purchasing decision point now. If Gruber needs to think about the issue, fine, but Face ID vs Touch ID in the face mask era is a huge factor buying any iPhone now and he didn’t cover it, any iPhone SE review that doesn’t cover that is worthless.

UPDATE
Gruber’s official iPhone SE review is out. He finally addresses the Face ID with face mask problem…way down in the footnotes:

I must point out here that Touch ID works just fine while wearing a face mask, and Face ID doesn’t work at all. That’s been a consideration for medical professionals and citizens of countries with a culture of face-mask-wearing ever since Apple introduced Face ID with the iPhone X in 2017. Now it’s a consideration for literally billions of us around the world. That’s not enough to even vaguely make me, personally, consider switching to the SE as my personal phone. But your mileage may vary, especially if the nature of your work requires you to wear a face mask all day, not just while out of the house on brief excursions. (But such jobs might also require gloves.)

A culture of face mask wearing eh? While not a snub, it sure feels flippantly dismissive. The footnote escape is a classic way of avoiding serious discussion, or taking the time to investigate the issue deeply for the benefit of his readers, or how it plays out here on regarding iPhone design and technology. iPhone SE is the most important product Apple is releasing this year. The reasons behind it’s unfortunate success deserve proper review and analysis.

All the top US tech iPhone SE reviews are similar and don’t go deep on it, in other words have fun with Face ID Apple Pay with face masks folks. Meanwhile here in Tokyo, stores are refusing entry for customers without face masks.

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.