The VISA open loop squeeze: VISA’s Apple Pay Suica recharge block one year later

It has been a year since the VISA payment network in Japan stopped accepting foreign issue VISA cards for Apple Pay In-App use with Suica and PASMO Wallet cards (and the recently launched Apple Pay ICOCA card too).

With no explanation or reason, one little VISA payment system configuration change by the merchant acquirer eliminated the default go-to transit and payment card any visitor to Japan with iPhone and a VISA Wallet card Apple could add and use nationwide. Plastic Suica cards were the only option for inbound visitors with iPhone who only have VISA cards, and now the plastic card option is severely limited.

That very same month, VISA’s Nick Mackie, Vice President, Visa Acceptance Solutions, Head of Urban Mobility & Government gave an exclusive interview to Nikkei Business magazine in an article that announced VISA Touch sponsored open loop transit initiatives in Japan were going mainstream. Mackie explained that VISA Touch would ‘co-exist’ with Suica on Japanese transit gates, of course he didn’t mention that VISA in Japan has had a very rocky relationship with Apple Pay.

Wait a minute, what about Suica on store readers? Suica is a payment network, not a transit card. People forget that. Inbound visitors and Japanese open loop media advocates make the mistake of comparing Suica to London’s OYSTER, or Sydney’s OPAL but neither of those systems are payment networks that work outside of transit gate. The only relevant comparison is Hong Kong Octopus which, like Suica, is also a payment network, one that is central to the MRT business model, as Suica is to JR East.

Are we talking open here or global payment cartel economic neocolonialism?
People have this strange idea that EMV card companies are an open standard because everybody uses them. They are not. They are incumbent payment ecosystems with static global marketshare, in other words payment cartels, whose main revenue stream are interchange processing fees from processing different kinds of payments while selling value added services, i.e. your analyzed transaction data to customers. They are lucrative businesses because of their tremendous scale. EMV open loop transit is simply another effort to increase the volume of processing fees by capturing fare gate transactions, and selling the transit use transaction data analysis as a value added service to their business customers.

And because they are ecosystems there are many moving parts: EMV licensing fees, EMV compliance device certification fees, transaction processing networks. This means it is very difficult for new services to emerge and compete with a giant multi-arm consortium or recreate its vertical integration. They have to play with the EMV payment cartel if they are going to play at all.

In Japan mobile apps have provided an opening to link bank accounts with QR Code payment systems. QR Code App are popular for many reasons, the main one being that they offer ways to circumnavigate the EMV payment cartel. a mobile debit card scheme without the card or the EMV payment network as QR Codes circumnavigate the hammer lock of pre-installed EMV on smartphone secure embedded elements (eSE).

As I have written about many times, global NFC and Suica support on Android has been stymied by the lack of pre-installed Mobile FeliCa that works everywhere. Mobile FeliCa is the only real payment NFC protocol that can compete with EMV on payments. Calypso could but is transit only. The pre-install problem is why Navigo on Android had no choice but to develop the lower performance Calypso HCE, it was the only way for Île-de-France Mobilités (IDFM) to work around the lack of getting Android smartphone manufacturers to post-install Calypso eSE applets even thought the hardware fully supports Calypso NFC-B.

This is why the EU pressure to ‘open’ the iPhone NFC chip is so false to me. The current plan would only serve to increase the EMV payment cartel grip on mobile payments. If the EU really wanted to foster payment competition they would force manufacturers to pre-install Mobile FeliCa, and Calypso along with EMV and MIFARE. Nobody gets this except for a select few. I’d argue that Apple Pay actually levels the playing field by pre-installing and integrating all the necessary pieces, giving non-bank payment providers equal opportunity to bring non-EMV solutions to the mobile platform. Established players don’t like that. Western countries will continue to abide with the EMV payment cartel instead of enhancing payment competition, witness the proposed Credit Card Competition Act of 2022~2023 going nowhere in the American Congress.

The ramen shop arcade business model
Japan is lucky to already have alternative home grown payment networks even as the EMV cartel tightens its grip here. Unlike the western monopolistic ‘winner take all’, ‘one size fits all’ business culture, the nature of traditional Japanese business culture is akin to a ramen shop arcade. One successful ramen shop is okay but many together in the same area are better because more choice brings in more customers. More customers is more business that raises all boats. That’s why Japanese customers like having payment options, and are adept at juggling them for the points they want. Westerns say they like having options, but when they visit Japan complain they complain about having too many options.

VISA and their main Japanese partner SMBC group are investing heavily to market contactless payments under the banner of ‘Visa Touch’ along with the SMBC stera payment system to shift payments to EMV contactless and away from FeliCa based payment players such as iD (NTT Docomo) and QUICPay (JCB). Open loop stera transit is part of this investment.

What IT media in Japan and abroad never write about is the FeliCa ecosystem and how much of the technology licensing, payment processing, and other fees stay in Japan versus how much leaves Japan for Europe and America if that basic ecosystem is completely replaced with EMV. In other words what the long term price of removing the native payment system and replacing it with payment system neocolonialism? If you carefully examine what China has done, they have carefully cloned the basic EMV spec for transit, China T-Union PBOC 2.0/3.0, which neatly circumvents EMV licensing while maintaining compatibility, similar to what GhostScript did back in the PostScript era: PostScript compatibility without expensive Adobe licensing.

Stay in your lane: open loop reality in Japan
I see the VISA block of Mobile Suica, PASMO, and ICOCA as part of that VISA/SMBC effort. What better way to put pressure on domestic transit operators to add open loop by denying inbound visitors the ability to add and use Suica, PASMO, and ICOCA in Apple Pay Wallet? In any other age this kind of market abuse would come under anti-monopolistic regulatory scrutiny but here we are living in an age where regulators focus on Apple for the wrong reasons.

JR East and JR West will likely never add open loop as doing so dilutes their core business, Suica and ICOCA are central to their business strategy of extending those payments platforms into service platforms. The reality is that despite all the VISA and SMBC efforts, VISA Touch open loop transit will be just another ramen shop in the arcade, a thin client bolted on to the existing transit IC system, an EMV and QR Code reader bolted onto the current transit IC gate.

It will be at some stations and some transit operators, but it will not be everywhere. It can’t do reserve seating Shinkansen, Express Train fares, Green Seat Tickets, etc., those can only be accomplished with closed loop. The reality of open loop will be an extension of what we have now, separate gates and lanes for slower more error prone open loop, while the rest use transit IC gates because when you ride JR East, JR West and JR Central, the only choice will be closed loop Transit IC, and (eventually) QR.

And there will be no Express Mode for open loop. If there is one lesson we have learned from all open loop installations in the world to date it is this: smartphones do not support multiple Express Transit modes on the same system. As Suica, PASMO and ICOCA already have Express Mode, open loop with smartphones will always be just like the store reader payment authentication process.

The EMV payment cartel may want to be the only ramen shop in the arcade but I hope the lively variety of payment choices that flourish in Japan continue to flourish and provide new opportunities. I don’t have anything against EMV open loop, just as long as the EMV consortium partners play fare fair with all domestic transit payment players. May all boats rise together.

MythBusters: plastic Suica isn’t safer than Mobile Suica


On June 24 from 0:37 to 13:00 JST, JR East online services went offline due to a mishap during server center related power supply construction. The most affected services were the most used: Mobile Suica and the online Eki-Net ticketing service. While embarrassing and inconvenient, the damage was minimal due to the fact that the outage was like a very long nightly maintenance when all services are taken offline. There were no transactions taking place, all JR East had to do was refund Eki-Net ticket holders who couldn’t change their reservations.

A shorter, far more problematic and partial Mobile Suica outage happened on June 24 from 16:24 to 18:00. Despite media reports screaming ‘Mobile Suica is down again’ even though the system itself was running just fine on non-Apple devices. This one was not on JR East or the Mobile Suica system: Apple Pay servers crashed from overload on Apple Pay ICOCA launch day taking down Suica, PASMO, WAON, nanaco, Hong Kong Octopus and other Apple device Wallet services worldwide. JR East had to refund iOS Suica App iPhone users who could not use purchased Suica Green Car Tickets.

Media reports were sensationalistic and misleading, claiming the outage left “Suica App Users Stranded at Ticket Gates“, when Suica App has nothing to do with using Suica at transit gates. Naturally, social media sites and online media report comment sections were full of ‘I’m going back to plastic Suica’ comments. Yahoo News Japan even ran a brain dead hack piece from GIZMODO entitled, “Be prepared: carry an unregistered plastic Suica in case of Mobile Suica problems,” recommending unregistered Suica because, ‘anybody can share it.’ Both writer and editors failed to notice that unregistered plastic Suica and PASMO cards are currently unavailable due to chip shortages.

Here’s the thing, plastic Suica isn’t ‘safer’ than Mobile Suica. It’s a myth:

  • Myth: I can’t use Mobile Suica if the service is offline.
  • Reality: Offline Mobile Suica doesn’t affect card use, the situation is no different than nightly offline maintenance.

You can always use Mobile Suica for transit and payments, it is no different from plastic, a Mobile Suica outage doesn’t affect that. The only real impact is the mobile exclusive credit/debit card recharge function and this is no different than the nightly maintenance when Mobile Suica goes offline. It’s the same situation for Mobile PASMO and Mobile ICOCA. Cash recharge is always available 24/7 at any convenience store, Seven Bank ATMs which are everywhere, and mobile friendly station recharge kiosks which are also everywhere these days.

The only real outage inconvenience was for people who wanted to buy Mobile Suica extras: Suica Green Car Tickets, Suica Day Passes, or those who might need to renew their Mobile Suica commuter pass…on a Saturday.

Which brings us to the GIZMODO Japan hack piece that was full of outrageous misinformation, implying not only that Mobile Suica on smartphones automatically stops working in an outage, you can simply go out and buy a plastic unregistered Suica card and use it anytime you need to. This is exactly the same stupid shit that bloggers posted back when Apple Pay Suica launched in 2016: carry a plastic Suica in case your iPhone battery dies.

Even in the days before Power Reserve Express Mode iPhone, this was, and is, completely wrong ‘advice’ that will get you in trouble at the transit gate. Never forget the golden Suica rule: the same Suica card used to tap in must be used to tap out to complete the transit. If the Suica you started out with cannot be used at the exit gate, for whatever reason (lost card, dead device, etc.), the gate alarm will sound and you must pay full fare in cash.

I’m sure there will always be people who believe that plastic Suica is somehow ‘safer’, and that’s fine, but the reality is that with JR East reducing station staff wherever they can, finding real people to deal with plastic card problems will be more of a hassle than it already is. In the future JR East will tell plastic card users to use online assistants at station kiosks. In the end it will be faster to do it all on mobile.

Thoughts on the Apple Pay ICOCA launch

Yesterday’s Apple Pay ICOCA launch followed a well established pattern: a widely used Japanese transit card launches on Apple Pay but Apple completely underestimates the demand and Apple Pay servers buckle under a crush of stampeding iPhone users transferring plastic cards to Wallet. By 4:30 pm Japan Standard Time, Apple Pay stopped working, bringing down recharge and other card services for Suica, PASMO, ICOCA, nanaco, WAON and Octopus in Hong Kong for 2 hours. Apple’s system status page listed the Apple Pay and Wallet outage as affecting all users.

The strange thing is that nobody outside of Asia seemed to notice any of it, not the ICOCA launch, not the Apple Pay outage. Nada. No one seems to care anymore. The era of fun, sexy Apple Pay service launches died in 2020, a victim of the COVID pandemic with people scared out of their minds transit ridership vanished into thin air. It’s still recovering.

New Wallet features and ID cards still get some press and social media attention in American these days, but Wallet ID’s are not sexy. Airport security lines are not sexy. State bureaucracy issued driver’s licenses are not sexy. EU deliberations to pull the wings off of Apple Pay are not sexy. VISA slamming the door on foreign issue card use for Apple Pay Suica and PASMO is most certainly not sexy.

Can you believe that Apple Pay will be 10 years old next year (2024)? It has come a long way but we hardly notice. Apple Pay is bigger and better than ever and we take it for granted. We don’t care about getting in the Apple Pay car anymore, we only care about one thing: “are we there yet?” Wherever ‘there’ is, is tricky though, the desired destination, and priorities, are different for different countries.

And yet in Japan this morning, there are people on social media who are delighted they can put ICOCA on iPhone and be on their way through the transit gate. We aren’t there yet but once in a while it’s nice to sit back and enjoy the journey a little.

Apple Pay ICOCA launches for JR West

JR West launched Apple Pay ICOCA today, June 27, three months after launching Mobile ICOCA for Android Osaifu Keitai devices, two months after announcing Apple Pay support, one week later than my estimate.

Apple Pay ICOCA works on iPhone 8 and later with iOS 16 or Apple Watch 3 and later running watchOS 8.7.1, similar but slightly different support specs than Suica and PASMO as detailed in Apple’s updated support page. Unlike the Android version, Apple Pay has a few, for now, exclusives:

  • Directly add new ICOCA cards to Wallet without ICOCA App
  • Directly transfer of plastic ICOCA and SMART ICOCA cards to Wallet
  • Directly add money with Apple Pay in Wallet without ICOCA App

Direct Wallet add is an important difference from Mobile ICOCA on Android as any user can add and use the card without the WESTER ID requirement. Apple Pay ICOCA is also the first ICOCA for wearables thanks to Apple Watch. All regular JR West issue plastic ICOCA cards: unregistered, registered, commuter passes are supported in Wallet.

Launch day demand was beyond expectations and Apple Pay servers were down for 2 hours in the evening hours, bringing down all Apple Wallet add card and recharge services in Japan, a repeat of the Apple Pay Suica 2016 launch meltdown. As always Apple underestimated demand from a user base with 19 years of mobile payments experience.

As previously discussed, the addition of Apple Pay ICOCA means that along with Apple Pay Suica and Apple Pay PASMO, over 90% of the transit IC card market is now on mobile. The advantage for Apple Pay ICOCA users is that they can now use JR West commuter passes and also get the benefit of WESTER POINT rewards with recharge and using Apple Pay ICOCA on JR West lines. Another nice Apple Pay ICOCA touch is that card details display the entire card number which is very helpful to copy/paste the ICOCA number with linked services such as Shinkansen eTicket EX and Eki-Net.

ICOCA App for iOS also launched on June 27. The functionality is limited compared to Suica App. A WESTER ID is required and can be registered in the app. Registered WESTER users can add new commuter passes, earn and use WESTER POINT for recharge, app recharge is limited to J-West issue credit cards. Apple Pay ICOCA commuter passes are limited to JR West issue and have to be added to Wallet separately: unlike Suica, users cannot purchase a ICOCA commute pass for a regular ICOCA card already in Wallet.

Unfortunately foreign issue VISA card use with Apple Pay ICOCA is blocked by VISA as it has been for Apple Pay Suica • PASMO In-App use since August 2022 with no explanation or resolution in sight., a pain point for international travelers without Mastercard or AMEX card options. As always cash recharge is always available when credit card recharge doesn’t work.

Apple Pay ICOCA intro video from JR West

JR West announces Apple Pay ICOCA

Update: Apple Pay ICOCA launched 2023-06-27 7:00 am JST.

With the successful launch of Mobile ICOCA (2023-03-22) on Osaifu Keitai Android, it’s time to think about Apple Pay ICOCA that was formally announced today (2023-04-17) as coming ‘this year’. The timing depends on how quickly Apple tests and qualifies ICOCA for Apple Pay, and how badly JR West wants to launch.

And believe me, Apple Pay ICOCA needs to launch sooner than later because JR West will never achieve their stated goal of 5 million Mobile ICOCA users without Apple Pay. However the ICOCA service menu on Apple Pay might be different than Suica or PASMO. Apple Pay Suica works out of the box without Suica App or registering an account. Based on Mobile ICOCA on Android, Apple Pay ICOCA might require ICOCA App and a registered WESTER ID. Let’s take a look.

The WESTER ID requirement for Mobile ICOCA Android
The Mobile ICOCA app for Osaifu Keitai Android allows registered WESTER users to add a new ICOCA, transfer a Mobile ICOCA card from another device, reissue a Mobile ICOCA (from a lost or damaged device). The key point is that: only registered WESTER ID users can create and add a Mobile ICOCA card. No plastic card transfers to mobile are allowed because they include unregistered cards bought at a station kiosk. Does this means ICOCA will not have native Apple Wallet add card support like Suica and PASMO?

Technically transit cards added natively in Wallet are ‘unregistered’ cards, but in reality they are registered to the Apple ID. A careful reading of JR West’s carefully worded Apple Pay ICOCA announcement states, “you can add your ICOCA card to Wallet.” JR West is playing it carefully, it might be native Wallet add, or transfer plastic card add. We won’t know until service details are released, but releasing a different and more limited service than Apple Pay Suica or PASMO won’t wash well with vocal Kansai area users or grow the ICOCA user base.

If JR West goes the WESTER ID requirement route, we’ll have the Japanese version of HOP or Ventra. When you take a look at the transit card list in Wallet for the United States you’ll notice that Chicago Ventra and Portland HOP are not listed even though they appear on the Apple support page: Where you can ride transit using Apple Pay. This is because even though these cards can be added to Wallet, they have the same limits Mobile ICOCA does: only registered cards can only be added from an app, plastic card transfers to Wallet not supported.

JR West is doing this because they are positioning Mobile ICOCA on Android as part of the JR West WESTER portal service for earning WESTER POINT with transit use and purchases, and using WESTER POINT for recharge, eTickets, and more. You have to have a WESTER ID to add and use Mobile ICOCA. Why? I suspect it has to do with the end of paper ticket coupons, the old reliable buy 10 get one free. These were incredibly popular in the JR West Kansai area and said to be one of the reasons why it took so long for ICOCA to go mobile. Having WESTER and Mobile ICOCA as one package deal means JR West has the mobile equivalent of paper ticket coupons in place giving WESTER POINT rewards.

JR East’s focus on the other hand, is all about growing the Mobile Suica user base with JRE POINT as an option that adds value to being a Mobile Suica user. Yes JRE POINT and Suica offer the mobile equivalent of paper ticket coupons too, but the JR East service ecosystem is messy. Users have to register and juggle separate accounts for Mobile Suica, JRE POINT, Eki-Net, VIEW CARD and so on. JR West is shoehorning all of their services into one WESTER ID to streamline everything and make it easier for users.

Full embrace of Apple Pay drives growth
One of the very nice things about Suica is that anybody can add it to Wallet and recharge it with Apple Pay credit cards. Apple Pay Suica Commuter Pass users can also renew passes in Wallet directly. Will ICOCA have the same? The announcement suggests so, a good sign because if JR West keeps Apple Pay at arms length and restricts all recharge and commuter pass renewal to ICOCA app, there will be no add money button in Wallet and no recharge with Apple Pay. This is what we see with Apple Pay Ventra and Apple Pay HOP: card issue, recharge, commute plan renewal is all restricted to registered account users in the iOS app. This kind of recharge limitation is a huge pain for Apple Watch users. We won’t know for sure until JR West releases clearly outlined service details.

JR East achieved 20 million Mobile Suica users because of their full embrace of Apple Pay and unregistered Mobile Suica cards. Users can add and use Suica on iPhone and Apple Watch right out of the box without a Mobile Suica account or an app. It just works. It’s the deal same for Mobile Suica on Garmin, Fitbit and Pixel Watch. The Mobile Suica service ecosystem may be messy, but it works on a huge variety of mobile devices.

The JR West approach is streamlined but does risk reducing the potential Mobile ICOCA user base if they restrict it to WESTER ID account holders and ICOCA App. Little details like full Wallet support makes all the difference with user growth. It all comes down to business choices: JR West wants WESTER ecosystem users, JR East wants Suica users, but how much does JR West want Mobile ICOCA users? If JR West closes the door to unregistered Mobile ICOCA on Apple Pay and Wallet recharge, Kansai users who don’t need commuter passes or WESTER points will use Mobile Suica. Actually, they already are.