JR East issued a Mobile Suica system maintenance notice, the downtime will run longer than usual: all services will be offline from midnight to 6:30 am March 21 JST. This includes Apple Pay Suica recharge so be sure to recharge before then, or use cash recharge at the nearest convenience store.
The chart below lists native transit cards on mobile digital wallets by service launch year, limited to reloadable virtual transit cards already in service or formally announced by wallet platform vendors (Apple/Google/Samsung/etc.) and/or transit operators. Best viewed in landscape mode.
Transit card payment mobile protocols are FeliCa, MIFARE and PBOC 2.0/3.0, the later is the Chinese variant of EMV which uses Type A NFC with the slowest grocery store checkout transaction speeds of the three protocols:
Each card organization has formed its own specifications based on the EMV specification based on its own business refinement and expansion, such as China UnionPay’s PBOC 2.0 specification…PBOC based on the EMV standard, combined with the needs of domestic banks, the People’s Bank of China promulgated the PBOC series of standards: 1 PBOC1.0: e-wallet / electronic passbook / magnetic stripe card function 2 PBOC 2.0: E-wallet extension application, debit/credit application, personalization guide, contactless IC card standard 3 PBOC 3.0: Cancel e-wallet and electronic passbook application, cancel downgrade transaction, multi-algorithm extension, multi-application extension, mobile payment standard
Compared to other contactless smartcards in use, the data transmission of <China T-Union> Yang Cheng Tong is criticized by commuters that it takes 1~2 seconds between the card and reader to complete the transaction, though the operator claims that the data communication only takes 0.5 seconds in its official site.
Some China transit cards used FeliCa and MIFARE protocols in the past but have been migrated to the PBOC 2.0/3.0 China T-union card spec for interoperable transit cards that work across the country, similar to what Japan has with Suica, ICOCA, PASMO, etc. Mobile FeliCa developed by Sony and NTT Docomo has been around the longest and works across multiple mobile hardware platforms from Symbian handsets, to Android, to iOS/watchOS. MIFARE and PBOC 2.0 have a shorter history on mobile. The key period is 2015~2016 which saw transit card debuts on Apple Pay, Samsung Pay and Huawei Pay. Initial Apple Pay support for Beijing and Shanghai transit cards was listed as beta on iOS 11.3. An NFC engineering source said the early Apple implementation was not the full PBOC 2.0 spec, apparently fixed in iOS 12.3 when the beta label was removed.
One of the biggest advantages of transit cards in digital wallets is the freedom of anywhere anytime recharge with credit/debit cards; transit users are no longer chained to station kiosks to recharge plastic smartcards or renew a pass. The more payment options supported on the recharge backend, the more convenient. These are great customer features, so why is it taking so long to get transit cards on mobile in America and Europe when there are many China T-Union transit cards already on mobile?
Many transit card fare systems outside of Asia are managed by Cubic Transportation Systems, including Oyster, Opal, Clipper, OMNY, Ventra and SmarTrip to name a few. Cubic and operators like Transport for London and Transport for NSW have focused primarily on Open Loop EMV card support as a mobile solution instead of native virtual transit cards.
Publicly run transit system resources are usually limited so using bank cards for open loop transit is seen as a way to reduce system costs. The downside is that banks get a cut from transit gate transactions and transit cards for mobile are slow in coming, if at all. Cubic’s very first virtual transit card effort, the long delayed Apple Pay Ventra, is all the evidence you need when open loop is a priority and transit cards are not. Despite the recently announced Google Pay and Cubic alliance, I think transit cards on mobile will continue to arrive in a slow trickle. Let’s face it, HOP is the only American transit card that has gone mobile so far, and it’s not managed by Cubic. It’s the same story in Australia with Melbourne myki Google Pay.
Putting aside the open loop fad for a moment, I think the large deployment of China T-Union cards on mobile comes down to one simple thing that has nothing to do with protocols or smartphone hardware: all China T-Union cards share a common recharge backend cloud provided by Union Pay. It’s the reason why China T-Union sports a similar logo, the Union from Union Pay, and can only be recharged with a Union Pay card. It’s all one package. From Apple Support:
Here’s what you need to create a new Beijing Transit or Shanghai Transit card in Wallet to use with your iPhone: An iPhone 6, iPhone 6 Plus, or later, set up with Face ID, Touch ID, or a passcode A China UnionPay debit card for Beijing, or a China UnionPay credit or debit card for Shanghai that you’ve added to Wallet
A common recharge backend cloud shared by all transit cards with the same card architecture makes hosting virtual cards much easier, the various transit operators don’t have to host everything directly or build a cloud backend from scratch, and there’s nothing to negotiate because Union Pay is the only payment network.
China T-Union in the cards for Hong Kong Octopus? China T-Union illustrates the power a national transit card standard backed with a shared cloud resource but it’s a straightjacket: Union Pay is the only payment network allowed. The real interesting development here is that QR Codes (AliPay/WeChat Pay) for transit, and everything else, are mainstream in China. There are many reasons for this outcome but on the transit gate QR Codes and PBOC-EMV transit cards are pretty much the same speed. There isn’t enough difference to care, and AliPay/WeChat Pay represent a choice outside the Union Pay straitjacket with all kinds of incentives to use QR.
Another interesting development is the pressure from QR Code players like Alipay for a piece of MTR transit gate action, and the Greater Bay Area transit card negoiations with Yangchengtong on the Hong Kong MTR/Octopus Card Limited mobile strategy roadmap. QR is mobile only of course, but a dual mode FeliCa/PBOC card approach for the Greater Bay Area is much cheaper and easier to implement on mobile than plastic.
Unfortunately in the face of pressure MTR/OCL, a world leading transit platform business model and innovator, has been surprisingly slow rolling out virtual Octopus cards on digital wallets to encourage the migration from plastic cards with new kinds of mobile services. It’s a troubling turn of events because OCL has had all the necessary transit on mobile infrastructure in place to move forward quickly for some time.
The recent Hong Kong protests followed now by the coronavirus crisis are certainly slowing things down. In the end however, growing mobile services is the best way forward for Octopus to remain a viable Hong Kong MTR business in these uncertain times. Because if it does not, Octopus risks becoming just another China T-Union card. Put it this way, if OCL doesn’t innovate and invest it its future as a world’s leading transit platform, it does not have one.
Apple’s decision to offer Apple Pay EMV style Express Transit as a iOS 13 feature when adding cards to Wallet may not have been a good idea after all, especially on the work-in-progress mixed environment that is MTA OMNY. Manual swipe MetroCards will be around for a few years, and with Cubic Transportation running the show it is anybody’s guess when OMNY, the system and the MIFARE MetroCard replacement, will completely in place and running smoothly.
For every tweet saying Express Transit is great, there are plenty of complaints of unwanted OMNY charges because iPhone users didn’t know Express Transit was turned on. The thing is iPhone and Apple Watch have to be damn close for a read. Unless the device is in a pants or coat pocket or wrist that brushes on the OMNY reader, accidental reads can’t happen. Nevertheless Apple would have happier New York City customers keeping EMV Express Transit off by default, and leave default on for the native OMNY transit card, whenever that arrives.
In Japan, iPhone purchases were traditionally subsidized, bundled with carrier contracts. Today, local regulations have significantly restricted those subsidies as well as related competition. We estimate less than half of iPhones sold in Japan in Q1 this year were sold via subsidy.
One year later Apple announced record earnings for Q1 2020 but Japan iPhone sales with down 10% y/y. Luca Maestri only explained the situation at the end of the earnings call, answering the very last analyst question:
So Japan was down 10 percent during the December quarter. It was primarily due to iPhone performance, which was challenged because there were some regulatory changes that took effect on the 1st of October, where essentially the regulators decoupled the mobile phone pricing from the two year contracts and they’re capping the maximum amount of carrier discounts that can can be made. At the same time, I would say that within a more difficult macro environment, iPhone did incredibly well during the quarter. Six of the top seven selling smartphone models in Japan during the December quarter were iPhones. So it was a very strong performance by iPhone in a difficult environment. Also in Japan, we had very strong double digit growth from services, stronger than company average, and very strong double digit growth in wearables, also stronger than company average. So we feel very good. You know, Japan is is a country where historically we’ve had great success. The customers are very loyal and very engaged. And we have a very strong position there and we feel we have a very good momentum.
I don’t think Japanese iPhone customers will stay loyal and engaged if Apple sticks with the same old sales strategies now that the era of carrier bundling is over. A new approach is needed. Maestri alluded to one clear advantage remaining for Apple in the Japanese market: Apple Pay Suica on Apple Watch, an advantage no other device manufacturer has matched yet. That advantage along with the golden opportunity of the Tokyo Olympics this year are market opportunities which Apple is not taking advantage of.
Every year my office sponsors a company trip. This ‘company spirit’ building practice used to be standard in Japan but the custom has eroded considerably since the end of the bubble era. It’s the first ‘unnecessary expense’ item inbound hedge funds always cut when they get a say in Japanese company management: it’s much easier to let staff go when said staff hasn’t spent any time getting to know each other outside of the company setting.
The Group Ticketing Dilemma Most of the company trips are by Shinkansen but the tickets are group tickets arranged through a travel agency who negotiate with JR East/Central/West depending on the final destination. Group tickets are paper tickets with no mag strip on the back. A group ticket or similar paper only items like special discount passes for the disabled have to handled by a station gate agent booth. The standard transit gate layout for JR East stations is a mix of Suica only ‘IC’ gates, mag strip paper ticket + Suica gates and a single gate agent booth.
Gate agent booths are choke points. Because they can only handle one special task at a time, one person with a problem holds everybody up. Our company group nearly missed a Nagoya station Shinkansen transfer connection on the return leg when a Chinese woman tied up the one and only station agent for 10 minutes with a problem that could have been taken care of at a ticket sales window, not a gate agent.
The next generation Suica architecture (aka Super Suica) in 2021 will solve many problems but it won’t solve everything. Group ticketing, special passes for disabled users, and other one-off tickets don’t fit in the Suica box, or even the regular mag strip paper ticket box. This is one problem I suspect the new Takanawa Gateway station Suica + QR Code transit gates are designed to fix.
Disposable paper tickets with a QR Code solve group ticketing very nicely: the travel agent can print them out instead of going to the JR station, they can be reprinted in case someone loses one. An app version is certainly possible but only an extra option for people with smartphones (think school children on a day trip). QR Codes might work well as a replacement for inbound paper Japan Rail Passes.
It’s not about speed, Suica or smartphones. It’s all about freeing up those increasingly rare and harried transit gate agents from the mundane task of validating one off paper tickets so they can take care of transit users who really need their help. I can’t think of a better use case for putting QR Code readers on JR East Suica transit gates.
Regular Mag Strip Ticket Costs The only question remaining in my mind is what strategy JR East will chose to retire regular mag strip tickets and reduce costs. Those intricate, and fast, OMRON mag strip ticket machines are an engineering marvel. However, even though QR Codes and central processing are slower, the front end machine is much less expensive and easier to maintain. The magnetic strip paper itself is also expensive and less environmentally friendly than other paper. We will find out what JR East is really planning when the new Shinkansen eTicket system launches next spring, just about the time that Takanawa Gateway station goes into operation.
Right now JR East has 2 basic ticketing systems:
Suica Fast, less expensive fare tier for regular transit, Mobile Suica support for Apple Pay and Google Pay credit/debit card recharge, Shinkansen eTickets and discounts, Green Car upgrades, commuter passes, etc.
Paper Tickets Slow, more expensive fare tier for regular transit, cash purchase only for local travel, credit card purchase for express train and Shinkansen tickets
I think the next step of migrating mag strip paper ticketing to QR Code is pretty clear. The real question is will JR East continue with the same transit tiers they have now: cheaper Suica IC fares vs. more expensive paper ticket fares. They will probably offer an app with QR Code support as but I see it as a simple extension of QR Code paper tickets, i.e. it won’t get the less expensive Suica fares. And don’t forget the ultimate Suica advantage: touchless walkthrough gates.