One of the great tragedies of the NYC MTA is that it’s a too-much-public-not-enough-private transit cash pipe with too much exposure to local NY politics. NYT has a wonderful video on YouTube that explains the critical MTA flaw: politicians cleverly borrow against the MTA cash pipe for pork barrel projects that have little or nothing to do with MTA, but leave it highly leveraged and helpless to fix it’s own problems or invest in infrastructure.
Think of what MTA could really do if it was effectively protected from political interference, with full control of its own money and a Suica-like transit+payment empire, free to use the float of all those MetroCards soon to be OMNY transit cards.
One of the many things never discussed about open loop is who uses the float, but banks hold the money until the user account is settled with the transit company and they take a cut of the fare. It doesn’t take much imagination to see why banks and credit card companies reallylike promoting open loop.
Closed loop Japanese transit companies don’t talk about the float either but Japan IC Transit cards are like micro bank accounts with unused e-money balance and plastic card deposits sitting in all those Suica, PASMO, ICOCOA, manaca, etc. Japanese transit companies love to put all those micro bank accounts to work earning interest.
Japanese transit companies and Hong Kong Octopus have built those micro bank account transit cards into a very nice transit payment platform business that combines transit, payments and other services attached to the card which means there’s a lot more stored fare floating around than plain old transit-only cards. The addition of digital wallets like Apple Pay Suica and Apple Pay Octopus means there’s ever more e-money moving through those cards with short term parking…more float for transit companies to earn interest.
It’s a wonder why more transit companies haven’t followed the transit payment platform model to capture more business in the digital wallet era, but it’s testament to how little control they have over their own business destiny. Next time when you hear the praises of open loop over closed loop, remember to think about who’s floating in that business arrangement…and who’s not.
The 2019 Apple Pay Octopus launch saga made one thing was very clear: Octopus was living on borrowedtime:
Octopus Cards Limited (OCL) has been slow extending the service to include mobile. Instead of putting early effort into digital wallet support for Apple Pay/Google Pay/Samsung Pay, OCL wasted time and resources developing the niche Mobile SIM product which didn’t pan out. This lag coupled with the rise of AliPay and WeChat Pay QR Code payment empires put enormous pressure on OCL to do something…
Cheung said internet users’ criticism of Octopus being a tech laggard died down in June after people were allowed to add their Octopus account to Apple Wallet on their iPhones. Cheung, who admitted he was stung by the criticism, regarded Octopus’ breakthrough on the iPhone as one of the best times of his stint with the company. “This was one of my biggest challenges,” he said. “The breakthrough helped refresh Octopus’ image even though it is still using NFC technology.”
Hard Reality China has ruthlessly weeded out MIFARE and FeliCa transit cards and replaced them with the slower PBOC 2.0/3.0 China T-Union standard, aka the supermarket checkout spec. Octopus will eventually get the same China T-Union lobotomy.
If OCL went deep instead of cheap Octopus would go ‘dual mode’: a single card with separate NFC protocols and currency purses: NFC-A/China T-Union RMB and NFC-F/Octopus HKD. In this scenario Hong Kong Octopus remains on FeliCa with the rest of China on PBOC China T-Union.
Unfortunately OCL will probably go cheap instead of deep at some point…. a single protocol China T-Union PBOC 2.0/3.0 card that works everywhere, and on mobile, for all mainland transit and for mainlander transit in Hong Kong. There is also the plastic card issue business angle to consider. Read FeliCa Dude’s Octopus on iPhone 7 post paying special attention to the Octopus plastic card issue steps that he outlines. The Hong Kong powers that be would like that profitable franchise sourced locally or in mainland and not from Sony.
‘One country two systems’ was an illusion. Hong Kong is being force fitted into China, nothing is sacred, there are no hold outs. It may take a few years, but as MTR transit gates and OCL store readers are gradually replaced with newer models, those readers will all have dual mode FeliCa/PBOC support. And when everything is ready, MTR and OCL will simply turn off FeliCa. FeliCa based Octopus has had a great run that influenced transit fare system development around the world. Enjoy it while it lasts.
Good old William S. Burroughs hit the nail on the head explaining what the title of Naked Lunch really meant: that awkward frozen moment when everybody in the restaurant sees exactly what is on their fork. iOS developers staring at the thing stuck on the tip of the App Store fork don’t like what they see: an Apple platform that’s supposed to be a level playing field, where the reality is that Apple plays favorites and cuts side deals, a losing game of lowering standards.
Octopus Cards Limited (OCL) released an iOS Octopus app for tourists last week that perfectly illustrates what’s at stake in Apple’s losing game of lowering standards. The long delayed Apple Pay Octopus launch in June was very successful but OCL shut inbound visitors out by limiting the Apple Pay Octopus service to Hong Kong issue bank payment cards.
This is something that Apple Pay Suica has never done. All Apple Pay cards and iPhone users from around the world are welcome to use Suica. This is why Suica remains the gold standard of what a transit card on mobile should be.
Instead of following the Suica example, OCL took the low road for inbound iPhone users. Octopus Tourist app adds an Octopus card to Apple Pay Wallet with a non-Hong Kong issue card. However the currency charged to the users Apple Pay cannot be in local HKD currency. OCL forces users to choose another currency as the default currency for the life of the card. This adds an invisible surcharge over local currency transactions, 4% or more on average, which is OCL taking their cut.
This is called forced Dynamic Currency Conversion (DCC) and is a credit card compliance violation. Visa, Mastercard and all stipulate that merchants cannot impose any requirements on the cardholder to use a non-local currency. Why OCL is so brazenly breaking these rules, and why Apple is allowing this level of gouging in a major app from a major Apple Pay payment provider is not good at all. As FeliCa Dude says, “Apple should swiftly rebuke this kind of grasping banditry lest it poison their platform.”
If Apple does nothing, I think we have the answer Tim Cook didn’t give at the Congressional hearings, and many more embarrassing awful Handsome Anthony moments to follow. Okaaaay?
Apple Pay Octopus has been in service for a week so I asked for some Apple Watch field impressions on Twitter. Overall, users seem pretty impressed:
I am using it daily and it is really out of this world. I use it on my watch and now I can literally go out for a jog or hike with just wearing the watch.
It works perfectly on my AW so far. But from I’ve heard on LIHKG, there some users facing the difficulties on the express mode. Mostly are requiring passcode when going through the gate.
It’s mostly positive. However there’re times where the reader isn’t sensitive enough and need to linger the watch longer. Also going to work first thing in the morning but forgetting to enter pass code in the apple watch is frustrating since it doesn’t inform you need to unlock.
Been using AW Octopus everyday. Use cases include MTR, tram, ferry, 7-11, eating meals at all sorts of restaurants like Tai Hing, Ki’s Roasted Goose, Pret etc. Octopus on Apple Pay drastically improved HK’s cashless experience. It’s definitely okay for me to go out with only AW. Not even with my phone. Feels really good. The speed of payment is also very remarkable. However, the reader in Tai Hing seems to need an extra second to detect my AW, not sure why. Plus AW users might want to wear it on the right wrist, which makes passing MTR gates easier.
Using it everywhere. All good and same speed as physical card, expect bus and some small shops were like a heartbeat slower. Also twice there was no “ping” confirmation sound. Tried AW on my right for mtr, its only good for that, imo left is more comfy for other occasions…
… after so many years of waiting, finally an apple pay suica experience in HK.
You can follow the Twitter thread here. I have noticed a few small gate lag hiccups on my Apple Watch Suica since upgrading to watchOS 6.2.5/6.2.6. The lag is especially noticeable if a workout is in progress. The passcode request at the gate could indicate that Express Transit is deactivated somewhere along the way, either by a loose band activating the wrist detector into thinking Apple Watch was taken off the wrist, or it could be something else.
My Apple Watch insisted that I create a 6 digit passcode recently and disabled the 4 digit passcode option for a few days. Who knows, the passcode requests that some HK users are seeing could be a watchOS bug or an Octopus reader side issue that can be addressed with a firmware update.
Apple Watch is still prone to OS version performance issues that disappeared from iPhone with A12 Bionic and Express Transit with power reserve. Apple Pay transactions on A12 Bionic and later bypass most of the iOS layer and are directly handled in the A12/A13 Bionic Secure Enclave and Secure Element. It makes a big performance difference for Suica and Octopus.
Hopefully the next watchOS update will improve Suica and Octopus performance. Better yet let’s hope that Apple Watch 6 introduces a Apple S6 chip with Express Transit with power reserve. That would solve the watchOS version NFC performance issues for good, just like it did for iPhone.
Apple Pay Octopus launch day was a big success, so successful that Octopus apologized for their servers buckling under the demand. What’s next for Octopus, Google Pay? There are some possibilities but when it comes to Android there is the matter of the Secure Element (SE), where it resides and what transaction protocols are supported.
From the NFC hardware angle everything has been ready to go on all smartphone hardware for years, NFC A-B-F is required for NFC certification. The problem has been on the SE side, the black box where all the transaction magic happens. From GlobalPlatform the SE certification organization:
A SE is a tamper-resistant platform (typically a one chip secure microcontroller) capable of securely hosting applications and their confidential and cryptographic data (for example cryptographic keys) in accordance with the rules and security requirements set by well-identified trusted authorities.
There are different form factors of SE: embedded and integrated SEs, SIM/UICC, smart microSD as well as smart cards. SEs exist in different form factors to address the requirements of different business implementations and market needs.
SE Wars and Google HCE ‘SE Pie in the Sky’ In the pre-Apple Pay mobile carrier hardware era, carriers used SE SIM or embedded Secure Elements (eSE) + SIM combos that chained customers to service contracts for the privilege of using mobile payments. This is the classic Osaifu Keitai textbook maneuver pioneered by NTT Docomo: leave those pesky SIM Free whiners in the cold world of plastic cards and hard cash, or crippled digital wallets until they give up and buy an overpriced carrier SIM.
This brain dead approach is one reason why Mobile FeliCa ended up being ridiculed as ‘galapagos technology’ even though everybody copied it with inferior crappy me-too products. This carrier SE hostage situation, i.e. the Mobile Wallet SE Wars, led Apple and Google to follow different strategies to address the problem.
The Apple Pay Way Apple’s answer of course was Apple Pay. A unique in house strategy of putting a GlobalPlatform certified Secure Element in their A Series/S Series chips then building it out from there. Most eSE go on the NFC controller, but doing it the Apple in-house way has advantages over a NFC chip vendor bundle: control of the eSE applets and ability to update them and the Apple eSE for new protocols in iOS updates. We saw this in action with the addition of FeliCa in 2016, PBOC in 2017 and MIFARE in 2018. We may even see the addition of Ultra Wideband (UWB) Touchless in iOS 14.
The Google Pay Way Google’s answer to the carrier owned SE problem was the more convoluted evolution from Google Wallet (2011) to Android Pay (2015) and finally Google Pay (2018). Google first salvo was Host Card Emulation (HCE): “NFC card emulation without a secure element” hosted on Google’s cloud. Later on Google attempted to do the same for FeliCa with HCE-F.
But then something happened that put an end to all this: Google decided to get into the hardware business. And now we have Google Pay and Google Pixel with it’s own embedded Secure Element (eSE). With Pixel, Google decided they didn’t want to be the Secure Element cloud provider for every Android OEM out there especially when the Chinese OEMS are all rolling their own eSE based digital wallet services anyway, completely ignoring HCE. Sure, HCE/HCE-F is still there in the Android developer documentation but it’s a dying vestigial relic of the SE wars.
But Google Pixel depends on vendor bundled eSE + NFC controllers and the Osaifu Keitai software stack. This makes global NFC support more complicated because Google doesn’t ‘own’ the eSE and the software stack, at least not in the Apple sense of making their own all in one design. This is one reason why Pixel 3/4 only support FeliCa in Japanese models even though all worldwide models have the same NFC A-B-F hardware.
The end result of all this is the Android market is a very fragmented landscape, there are no global NFC Android smartphones: a device that supports EMV, FeliCa, MIFARE, PBOC out of the box in one globally available package.
Google Pay Octopus and the Android Global NFC Installed Base Back to our original question, can Google Pay Octopus happen? We already have Google Pay Suica right? Let’s assume that Octopus Cards Limited (OCL) has everything in place for it to happen. Here we run into the problem just described: there are’t any global NFC Android smartphones available globally. Samsung sells them in Japan and Hong Kong, Google only sells them in Japan along with Huawei, Oppo, Sharp, etc.
For OCL this means the potential Google Pay installed base that can support Hong Kong Octopus consists of Samsung Galaxy smartphones that are already using Smart Octopus in Samsung Pay; not exactly a business opportunity worth the support expense. Even if Google Pixel 5 goes deep instead of cheap, Hong Kong would have a potential Octopus non-Samsung Android device, but that’s only one new device not an installed base. I only see Google Pay Octopus happening if Google localizes all the necessary Osaifu Keitai software and foots the entire support expense.
There is a way forward however for OCL: Garmin Pay Suica. The same Garmin APAC models that support Suica can also support Octopus, the recharge backend is entirely Google Pay. Garmin smartwatches work with any Android 5 and higher smartphone, a much larger installed base that bypasses the fragmented Android problem. Garmin Pay Octopus would offer Android users a way in, who want to use Octopus on a mobile device but who don’t want to use Samsung or Apple devices.
The conclusion: forget Google Pay Octopus for the time being. Hong Kong is a golden opportunity for Gamin Pay Octopus….if Garmin can get Garmin Pay clearance from Hong Kong authorities and banks, and cut a deal with OCL. It’s certainly in Octopus’ best interest for OCL to help turn the negotiation wheels. It’s also in Google’s interest as Google Pay would supply the recharge backend as it does for Garmin Suica. Big hurdles all, but I hope it happens.
There’s another possibility besides Garmin Pay or Google Pay: Huawei Pay Octopus is said to be launching before the end of 2020. Huawei has shipped FeliCa capable smartphones for the Japan market since June 2018. From a hardware perspective Huawei Pay Octopus support is ready to roll and Huawei has the deep pocket resources to build their own support stack without using Osaifu Keitai apps, just like Apple and Samsung have done. It makes sense in light of Google Pixel refusing to support global NFC, and gives Octopus Cards Limited a second digital wallet platform in the all-over-the-place global NFC support reality of the Android world.