Contactless Payment Turf Wars: Transit Platforms

Transit is a kind of holy grail for contactless payments, it’s the biggest driver, the golden uptake path to bigger things. That’s why the credit card industry promotes NFC Pay/EMV contactless on transit systems which have traditionally been closed ticket systems.

NFC Pay on transit achieves two goals for credit card companies: it increases credit card use while capturing processing fees from transit operators under the guise of saving them money. The credit card industry benefits from all that ticketing infrastructure without having to invest anything themselves. Think of it as putting the fox in charge of managing the chicken coop. From the American Express “Contactless in Transit” PDF:

How does the American Express transit solution help Merchants optimize payments in the transit industry? It reduces the cost of handling cash and maintaining proprietary fare systems.

Visa and Mastercard make similar claims. This is an interesting contradiction because lower cost internal payment processing is cited as the advantage for closed loop stored value smartcard systems.

Industry experts and journalists such as Junya Suzuki like to discuss transit payment systems as being a battle between “Open Loop vs. Closed Loop” contactless payments. EMV contactless is portrayed as being open “good” vs. Stored-value/prepaid transit SmartCards (Suica, Oyster, etc) as closed “bad”. This is entertaining but the whole debate is a setup: smartphones destroy the distinctions between the two. Digital wallet cards like Apple Pay Suica and Smart Octopus on Samsung Pay merge ‘open’ and ‘closed’ into a seamless whole that’s more convenient flexible and powerful than either one on its own.

The Japanese IC Transit Card Model: Scale, Compatibility, Regionality
Open Loop really only has one advantage: scale. Japanese IC Transit cards neatly sidestepped the Open scale advantage when they merged under a single interoperable compatible Transit IC SmartCard standard in 2013. Contactless prepaid SmartCard e-money use took off from there.

JR East does a good job of creating loyalty point programs for JR East area merchants tying them into the Suica e-money network. Other Japanese transit companies do the same for their regional Transit IC cards. When Hong Kong officials complain that the city is missing the contactless payments QR code gold rush in mainland China because of the success of Octopus, that only proves how deep the Japanese/Hong Kong IC transit card model has penetrated beyond transit into payments and the general fabric of daily life.

When a smartcard system achieves the level of success and everyday use like Suica or Octopus it isn’t just a smartcard system anymore, it’s a platform.

Keeping it Closed and Building a Platform
What’s fascinating but rarely discussed is that Suica and Octopus are the only transit smartcard systems that have built transit and e-money contactless payment economies of scale, in other words a platform. They are the only native transit stored-value smartcard systems hosted on smartphone payment platforms like Apple Pay and Samsung Pay. And they are both based on FeliCa. In fact when you compare Suica and Octopus with other transit cards, their success is completely at odds with what western experts call success:

  • The systems are closed loop stored-value SmartCards
  • The systems are based on “non-standard” FeliCa
  • They limit credit cards to a backup role for recharging

For these reasons western experts, especially in the UK, dismiss Japan and Hong Kong as ‘outliners’ but that misses the point. Success deserves attention and study, not highbrow ridicule camouflaged as analysis. As said before, Japan is the world’s greatest guinea pig test market, a unique place to identify and analyze new tech trends, and how to adapt them for use in other markets.

Oyster cannot be used as e-money
Inbound UK visitors notice the difference
Speed is safety
By staying Closed JR East controls and optimizes their system for maximum speed, security and safety.

JR East and Octopus Holdings Limited have also evolved their platforms adding new services and features. Technology aside, there are essential core concepts that can be applied to any closed transit smartcard system for long term benefits that build a transit platform not just a ticketing system.

  1. Keep it Closed
  2. Transition from transit only to transit + e-money use (Suica, Octopus, EZ-Link. etc)
  3. Nationwide transit smartcard interoperability
  4. A matching mobile service to create and manage online customer accounts and attach credit cards for over the air recharging via smartphone apps (Mobile Suica, Smart Octopus)
  5. Native card digital wallet support: Apple Pay Suica, Smart Octopus on Samsung Pay, etc.
  6. Promote transit region and local retail with loyalty points and campaigns linked to smartcard + credit card combinations

These concepts transform a transit smartcard system into a platform on which transit operators can build all kinds of services and new infrastructure tying transit and retail together in new powerful ways. Reimagine Oyster or NYC MetroCard as transit platforms and the possibilities are endlessly exciting. The transit smartcard system positioned as a platform is the essential concept most people don’t see or understand. They only see a ticketing system. Visitors to Japan can see the transit smartcard as platform in action where Apple Pay is taking it to the next level.

The Open vs. Closed Debate is Over
Apple Pay Suica is a unique matching of a transit smartcard platform hosted on a major digital wallet platform, the most successful matchup in the world right now that deserves a case study. The standout feature of Apple Pay Suica is that the huge and growing list of Apple Pay credit cards from around the world simply work for recharging Apple Pay Suica on the go. Anyone from around the world with a global NFC iPhone X / 8 / Apple Watch 3 can simply add Suica and use it in Japan.

JR East ties in all kinds of local retail partner points and promotions which in turn drive customers to Apple Pay Suica and more credit card use. Apple Pay Suica in turn is driving Suica use and general Apple Pay use far more than credit cards on their own.

It’s this mix and match flexibility of the Apple Pay + Suica approach that neatly collapses the open closed debate. Customers use the card they want to earn the loyalty points that work best for them with loyalty points from both transit and credit sides. Recharging my Apple Pay Suica with a BIC CAMERA View CARD  (JCB) for a year earned me over ¥15,000 worth of BIC CAMERA store points. I never purchase iPhone cases with money anymore, I use points. Apple Pay Suica and credit cards benefit each other and drive use of both.

This works in many different configurations which is the appeal for customers, the approach benefits both the transit operator and the credit card companies letting each focus on building their own platforms instead of wasting time and resources on turf wars. It’s an intriguing win-win model that can be adapted and applied to other transit markets.

One thing is clear: for smartphones more so than it was with plastic smartcards, transit is the golden uptake path for contactless payments but the combination is most successful when a transit platform matches up with a smartphone one.


JR East Touch and Go Shinkansen

Touch and GoJR East is busy gearing up for the April 1 Touch and Go Shinkansen service launch. With just Apple Pay Suica, Mobile Suica or any Transit IC card you simply board any JR East Shinkansen within the Touch and Go region. No tickets or reservations necessary.Touch and Go Stations

In order to use Touch and Go you have to register your Apple Pay Suica at the nearest JR station smartphone Charge machine like the ones pictured below. Put your iPhone in the Charge bin, on the screen menu there is a new Touch and Go button. Tap and follow the screens to register your Apple Pay Suica.

Once you are registered you can enter any station then transfer and ride at any of the Touch and Go Shinkansen stations. Remember that Touch and Go is limited to non-reserved seats. The maximum one way Touch and Go fare is ¥5,150Touch and Go Flow

Touch and Go is the first step JR East is taking for full Touch and Go Shinkansen covering all stations anticipated for 2019. The current ¥20,000 daily Suica limit is expected to be raised at the same time with all the other Transit IC cards expected to join as well for full compatibility.

McDonalds Japan Finally Activates NFC Pay on March 13

A year after McDonald’s Japan announced full global NFC support the final piece of the contactless payment puzzle falls into place on March 13 when they activate NFC Pay contactless payments for Visa, Mastercard, American Express and JCB. The full press release is here.

It’s nice that the big NFC Pay contactless logo on the reader finally means something for Inbound customers who want to use it. Japanese Apple Pay users can also have fun playing with the iOS 11 Apple Pay NFC switching feature without going abroad.

But what about all those Inbound Chinese mainlanders who use nothing but WeChat and AliPay QR codes for contactless payments? They spend far more in Japan than those stingy inbound westerners. I predict McDonald’s Japan will add a QR payment option at some point and it will see far more use than NFC Pay.

iOS 11.3 beta 4 and Apple Pay Transit

9 to 5 Mac found some interesting Apple Pay code strings in iOS 11.3 beta 4 that imply Shanghai and Beijing transit cards might join Apple Pay.

The text strings along with UI tweaks in the Apple Pay Wallet ‘Card Type’ screen in iOS 11.3 b4 also suggest Apple might be revamping Apple Pay behind the scenes a bit to make it easier to support native stored value transit cards.

Unless the transit operator has their stored value smartcard system matched with a cloud service like JR East Mobile Suica, it’s difficult to add Apple Pay support. Just ask PASMO.

Hong Kong’s Smart Octopus card is the only other native stored value transit smartcard system on a smartphone that I can think of and just like Suica super fast FeliCa to boot, though I suspect Samsung Pay is supplying most of the cloud service at this point.

Apple Pay Transit
Most transit card systems do not have a cloud service to host cards on mobile

As you can see from the Apple Pay transit page above, stored value transit card systems without matching cloud services is the reason most Apple Pay transit support is the slow cumbersome credit card EMV contactless variety.

Credit cards at the transit gate even on a smartphone are not a good thing when the transit operator has to move massive amounts of people through a limited number of gates in a limited amount of time. On top of that transit operators also have to fork over credit card transaction fees.

When speed is essential, native stored fare transit cards always win the day but only when stored fare is combined with a credit card backend on a smartphone like iPhone Apple Pay Suica or Smart Octopus on Samsung Pay, does the magic really happen. Only then do customers enjoy the best and most convenient transit user experience.

Farewell to AirPort Base Station Part 2

Airport Extreme 8th Generation

After posting Farewell to Airport Base Station a reader who also suffered from slow NTT Flets internet speeds asked for a few details to help him troubleshoot his own setup.

Before starting out here is a warning: rental devices from NTT and internet providers like So-net are constantly being updated with firmware updates, backend services running on them are constantly updated as well. NTT Router IPv6 and PPPoE IPv6 settings shown in online documentation may not match router settings of the most recent firmware versions. Also remember that rental NTT router models are different depending on your connection plan.

When in doubt confirm with NTT Flets or your internet provider tech support.

My Setup

migration configuration mapI have a NTT Flets Hikari Phone + ‘Mansion’ internet connection plan with So-Net as the internet provider. As I wrote in the first piece, IPv4 traffic is extremely congested in my local area which So-net tech support checked and confirmed. So-net suggested their free IPoE IPv6 option service as a possible solution.

Unfortunately my AirPort Express Base Station was not very good routing IPv6 traffic. Even in Bridge mode most of the network traffic outside of YouTube remained stuck in the clogged IPv4 stream. This makes sense as AirPort was conceived in the IPv4 era and Apple isn’t updating the software features anymore. The So-net IPoE IPv6 support site mentions that Apple routers “may not be compatible.”

So-net IPoE IPv6 Support Site

The So-net site does list NEC, BUFFALO and I-O DATA WiFi Routers that are compatible with IPoE IPv6. The key is IPv6 Bridge / IPv6 Pass-Through support which all of them appear to have.

Instead of buying my own WiFi router to replace the AirPort Extreme however, I decided to rent a So-net WiFi router preconfigured for IPoE IPv6 service and DS-Lite (IPv4 over IPv6). The So-Net WiFi router is free for the first 7 months, ¥400 a month there after. So-net tech support said I could return the router at any time in the first 7 months, no questions asked. These things can change so be sure to confirm any rental agreement with your internet provider.

I’m sure that NEC, Buffalo and I-O DATA WiFi Routers can be configured for DS-Lite as well but after a year of wrangling with AirPort Extreme configurations, I was done with doing my own IPv6 setup.

I ran with both AirPort Extreme and the So-net rental WiFi router for a few weeks until I was sure IPoE IPv6 and DS-Lite were working OK, then pulled the plug on AirPort. The only tweak on the So-net WiFi router side was renaming the default WiFi network names and login passwords.

Confirming IPv6
There are some simple ways for NTT Flets and So-net customers to confirm if IPv6 running correctly:

1) NTT Flets IPv6 Speed Test site If IPv6 is configured correctly you can access the site and test NTT Flets connection speed.

2) Download the Ookla SpeedTest App from the Mac App or iOS App Store. If So-net IPoE IPv6 and DS-Lite are correctly configured your should see “INTERNET MULTIFEED” as the home network name.

Ookla Speedtest

Lastly, here are some helpful links:

So-net IPoE IPv6 setup site
So-net IPoE WiFi Router Rental site
NTT Flets Router IPv6 Configuration site
Be careful of the NTT site as the configuration information may be out of date. When in doubt call tech support.