Of course COVID and face masks stalled US Apple Pay growth…they don’t have Suica payments

Using Apple Pay with Face ID and face masks sucks after all. Semi-distracted Gruber: “Apple Pay with Apple Watch works well while wearing a face mask, but using your iPhone sucks.”

Oh really?

The moment I saw the ‘Only 6% of People with iPhones Use Apple Pay‘ survey advertisement appear on Apple news sites (they took the bait, mission accomplish!), I knew all the major Apple blog gasbags would clock in with their important opinions. And they did. Look folks, this survey stuff is a craps game. One thing I have learned in Japan is that payment survey data are all over the place. Reliable information is hard to find. PYMENTS.com sez their survey is ‘based on PYMNTS’ national study of 3,671 U.S. consumers conducted between Aug. 3-10, 2021.’ Okay but how, where, what’s the age spread and whom are we talking about here? Grandma’s in Savanna, Illinois? College kids in New York? PYMNTS also have an axe to grind to juice the story:

“Sept. 9, 2014 – when Tim Cook took the stage at Apple’s WWDC and introduced Apple Pay….The media and industry pundits went bananas. Reports predicted that soon, plastic cards would be a relic, and that Apple Pay at the point of sale would markedly eclipse their usage and utility.”

Ha ha stupid Apple fanbois, joke’s on you.


Let’s put all of this plastic vs Apple Pay, Face ID with face mask stuff aside for a moment and look at the long bumpy, horribly uneven American payments infrastructure. People in America are used to plastic but EMV chip cards are fairly new, contactless cards are even newer. And people are not used to face masks, it’s not part of the culture. I bet if PYMNTS did local surveys of people using Apple Pay Express Transit in New York (OMNY), Washington DC (SmarTrip), San Fransisco (Clipper), I guarantee you the Apple Pay usage rates are way higher because: (1) it’s incredibly convenient (2) Express Transit doesn’t care if you wear a face mask, it just works. Too bad those transit cards can’t be used for Express Transit payments too because people would use them…a lot.

Japan by comparison has higher Apple Pay usage rates, it was 27% back in 2018, and this before COVID and the Japanese government CASHLESS rebate campaign which did a lot to increase the contactless reader footprint for smaller merchants. But it’s simpler than that, I think the difference can be easily summed up with 2 points: (1) face masks are part of the culture in Japan, people are used to them, (2) paying for stuff using Apple Pay Suica, with or without a face mask, is incredibly fast, convenient and blends seamlessly with the long established transit IC standard with mobile making it far more useful.

Suica Smart-Lock service announced for December launch

JR East announced the Suica Smart-Lock service for a December launch. The service is a co-venture that incorporates JREM who provide the cloud based ID-Port technology and ART, an access system provider using FeliCa and MIFARE NFC technologies and lock provider/partner ALLIGATE. A Suica card (physical and mobile) can be registered online as a key and might utilize the ‘Super Suica’ FeliCa Secure ID cloud centric feature found in next generation FeliCa with JR East providing the backend authentication service. The Suica Smart-Lock site lists apartment buildings, hotels, company building access, parking lot and elevator use as end user scenarios.

The streamlined cloud aspect is being marketed as a cost saver: hosts don’t need to setup a key server or issue cards. The user simply registers their Suica ID number online but the ID number is not used for access, the unlocking part is done with secure mutual authentication. Management sets the key privileges or guest access. Other transit IC cards can be registered as a key but the press announcement fine print suggests some limitations with non-Suica cards (i.e. only Suica and PASMO are on mobile devices).

Mobile Suica support is shown extensively in the web images and the watch images strongly suggest Apple Watch which is the only wearable device, so far, that fully supports all Mobile Suica features. Another interesting aspect is that Apple’s iOS 15 Japanese language preview page only shows Wallet digital key support as a new feature. I think it’s safe to assume that Apple Pay Suica Express Transit support will be there with Suica Smart-Lock in December. The question is will there be a separate iOS 15 Wallet digital key version for people who only need the Suica Smart-Lock digital key function? Suica and transit IC cards are already used by some access solutions but key management and cost have kept them from wide deployment.

The Japanese iOS 15 preview site only shows digital keys for Wallet
Wallet digital key partners announced at WWDC21

Instant digital issue apps for Apple Pay Edy, nanaco, WAON support?

A fun mockup of card options for direct iOS 14 Wallet issue for Edy, nanaco, WAON that will probably never happen. If they come at all they will be digital issue via apps.

Now that VISA JP finally signed with Apple Pay, what about the last holdouts: Edy, nanaco and WAON? These have been on Google Pay for some time but like all things Google Pay Japan, it is courtesy of Osaifu Keitai rather than native Google support. Apple was smart to go for Suica first, then PASMO (which has yet to appear on Google Pay) but it’s time to complete the Apple Pay Japan lineup.

Google Pay Japan has 2 basic categories for adding cards: EMV bank payment cards (AMEX, JCB, mastercard, VISA) and Japanese eMoney cards (Suica, Edy, nanaco, WAON, iD, QUICPay). In other words, Google Pay arranges cards by NFC flavor. This is because many Android devices sold outside of Japan don’t include FeliCa even though they have the hardware to do so. Google Pixel 5 for example has Mobile FeliCa installed on every single device it sells, but only activates it for Japanese models. Perhaps this will change with Pixel 6, we will see.

Apple Pay doesn’t make a distinction between NFC flavors, just one global NFC. No EMV or FeliCa bank payment cards, just payment cards, period. Apple also encourages Japanese bank card issuers to use the NFC switching and dual mode features of iOS and watchOS Wallet for seamless use on any payment reader in Japan or abroad. The same thing applies to Wallet transit cards. Wallet can have multiple Express Transit cards and juggle between FeliCa (Suica, Octopus, PASMO) MIFARE (SmarTrip, Clipper, TAP) and PBOC (China T-Union cards).

So what is the Wallet category for non-transit stored value prepaid payment cards? I have no idea but for this exercise I’ll use eMoney (電子マネー). Apple Pay has everything in place to flip the switch since 2016, what’s the holdup? There’s a big problem using the Suica add card Wallet process for eMoney cards. This problem is on full display with Google Pay WAON: the user has to create an WAON account in Google Pay to add it. Worse, if the user deletes the WAON card they loose the Google Pay created WAON ID and card balance.

I don’t think Apple wants this ‘create an account’ nightmare scenario in Apple Pay, that’s what apps are for. Fortunately we have a growing collection of ‘instant issue’ apps for adding cards to Wallet and digital issue only is quickly becoming standard for Apple Pay Japan debit/prepaid cards: kyash, Minna no Ginko, Toyota Wallet, etc.

The digital issue app model is perfect for Edy, nanaco and WAON who want to be collecting accounts instead of selling plastic prepaid cards. And they already have iOS apps. Leave the account creation and management drudgery in the app so users curse the app instead of Apple Pay. Once done the user taps ‘Add to Wallet’ and presto, instant WAON or nanaco all ready to go with direct Wallet recharge. Other bonuses: (1) instant issue apps eliminate ‘I wanna transfer my plastic card to Wallet’ overhead, (2) if anything goes wrong and the balance is lost, it’s the fault of the app, not Apple Pay. Keeping things simple and streamlined is key for a good Apple Pay user experience, one more Wallet reboot challenge for iOS 15.

UPDATE
WAON and nanaco for Apple Pay have been announced for later in 2021. AEON also updated their iAEON App for issuing Mobile WAON cards on Osaifu Keitai Android smartphones, almost certainly the scenario described above for Apple Pay support when it launches after the release of iOS 15.1.

Japan mobile payment survey results

I gave the Twitter survey function a workout and asked 2 questions:

  • Which Japanese mobile payment do you use most?
  • Which Japanese reward points do you use most?

The results are not surprising but come with many caveats: the survey sampling was puny, in English and pretty much limited to a small group of Twitter followers, which means they are pretty much already invested in Mobile Suica. Also it is important to remember that mobile payment use profiles in Japan are highly regional, what’s convenient in Tokyo isn’t necessarily convenient in other areas. That said, there are some interesting and fun takeaways.

Japanese mobile payment takeaways and feedback

  • The 55% Suica/PASMO figure expresses the power of Apple Pay Express Transit (and similar for Osaifu Keitai) for store purchases in the COVID induced face mask era without the hassle of Face ID. It’s important to remember that the ballyhooed Unlock with Apple Watch Face ID feature introduced with iOS 14.5 is useless for Apple Pay authorization. Remember too that Mobile Suica has good support on wearables: Apple Watch, Garmin, fitbit, etc., the widest mobile payment platform in Japan.
  • Despite the heavy marketing VISA Touch from VISA Japan, the majority of users have been using Apple Pay and Osaifu Keitai for iD and QUICPay, etc. I suspect EMV ‘Touch’ (Visa, MC, AMEX, JCB) probably appeals more to plastic card users as VISA is pushing EMV only plastic cards vs. digital wallet dual mode Apple Pay.
  • QR Code payment apps (PayPay, dBarai, LinePay, etc.) are not as popular as you might think and are probably feeling the pain of recent bank account linking security problems, and the recent revelations of user transaction records being stored outside of Japan.

Changes quite a lot. Recently using EMV touch a lot because of SMCC 15% back campaign and Amex 20% at FamilyMart. Otherwise probably a little bit of everything just to get maximum reward. (Tokyo)

I don’t ride trains so I have no real use for Suica. Using it to pay in shops is too much of a PITA since you have to constantly recharge it. (Kagoshima, note that Suica Auto-charge only works in JR East transit region)

I do iD for the point rewards (none in JP CC recharge of Suica) otherwise Express Transit is perfect. (Tokyo)

Mostly Suica (via Garmin Pay), but I’ve been using au Pay (QR or barcode) a lot more recently. (Hiroshima)

Japanese reward point takeaway
Results are complicated. Twitter surveys are limited to 4 choices, I lumped the Japanese carrier reward point systems for docomo, au and SoftBank (dPoint, au•PONTA, T-POINT) into one category, the top choice at 43%. However if we break down the carrier number by carrier marketshare ratio we get the following:

  1. 21% JRE POINT
  2. 28% Rakuten POINT
  3. 19% dPOINT
  4. 14% au•PONTA POINT
  5. 10% T-POINT
  6. 8% V POINT

The key takeaway for reward points is the power of the Rakuten ‘Economic Zone’, i.e. where all the Rakuten pieces including shopping, banking/credit card/payments, transit (Rakuten Suica), mobile, stock trading, travel, etc., are glued together by Rakuten POINT and feed off each other. The Rakuten Economic Zone is the model that others will have to successfully emulate if they are going to be serious long term competitors. NTT docomo announced a tie-up with MUFG this month, the digital banking wars are just getting started.

Suica App 3D Secure authorization for all non-Apple Pay in-app purchases

More fallout from the VISA JP Apple Pay agreement: JR East announced they will implement 3D Secure in iOS Suica App, requiring authorization for all non-Apple Pay in-app purchases.

Suica App is convenient because it works hand in glove with Apple Pay and app registered Japanese issue credit cards, giving users the widest possible card coverage. Since 2016, Suica App was the only work around solution for using VISA JP cards for Apple Pay Suica recharge.

With the VISA JP Apple Pay deal however, we are seeing a bunch of credit card backend changes, like merchant code changes that eliminate Suica recharge 3x travel points for Chase Sapphire Reserve VISA holders. JR East is changing how Suica App works, 3D Secure authorization for all non-Apple Pay in-app purchases is part of that. For users this means doing Suica recharge and commute plan renewal in Wallet instead of Suica App to avoid 3D Secure login hassles. Wallet is the hands down easiest way to recharge Suica and renew commute plans.

We’ll see a Suica App v3.0.4 update when 3D Secure is in place, likely after the new Eki-Net launches June 26. PASMO App already uses 3D Secure for registering cards but not for in-app purchases.

With direct Wallet addition of Suica cards starting with iOS 13 coupled with last year’s migration of Shinkansen eTicket functionality to Eki-Net, and the addition of VISA JP Apple Pay in-app support, Suica App is less essential than ever. The only reason for using it now is new commute plan purchases, Auto-Charge setup (which remains the 3D Secure free way to recharge) and receiving Suica Pocket recharge rewards.

There are some VISA JP cards that still don’t support Apple Pay in-app, MUFG holders still have to recharge the old Suica App way. Whatever the reason, the across the board change will be likely be very unpopular with iOS Suica App and Android Mobile Suica users.

UPDATE July 20, 2021
3D Secure is now required for registering credit cards in Suica App. So far there are no reports of 3D Secure confirmation required for Suica App in-app recharge or Green Car Seat upgrades. This matches my own limited testing. I’ll update this post if anything changes.

Any purchase in Suica App can be made with Apple Pay instead of the app registered card that bypasses 3D Secure, Suica App registered CC on the left, Apple Pay on the right