Japan Cashless Map for 2019

The Crowd Cast cashless map illustrates the rich variety of Japanese payment platforms

Because of its long history pioneering many of the technologies used for contactless payments, Japan is one of the most interesting, complex and difficult markets to study and analyze cashless payment trends. Accurate analysis of Japanese cashless/contactless payment trends is challenging because of fragmentation and regionality. Every market report or survey is just one tiny fragment of a much larger moving picture. An accurate map is good starting point.

Fintech startup Crowd Cast, Ltd. CEO Takashi Hoshikawa has a blog and posted a handy helpful cashless map for 2019. It’s not perfect however so I tweaked it a bit to clearly outline the 3 basic cashless groups: plastic cards, NFC, QR.

Digital wallets like Apple Pay and Google Pay work with all the NFC flavors (A-B-F) but Apple has made a much deeper investment integrating FeliCa into the basic technology bundle that powers Apple Pay alongside EMV, delivering it globally as a payment solution that “just works”. EMV contactless is called NFC Pay in Japan and is slowly being deployed alongside existing FeliCa payment networks so that POS systems and readers “just work” with everything. Hopefully it will all be up and running in time for the 2020 Tokyo Olympics.

QR Codes are not big outside of China and I don’t see conservative markets like Europe or the US taking them up. Japanese QR Code payment platforms are cropping up thick and fast but availability has not translated to actual use. ICT Research & Consulting has released a market report on mobile cashless payments (for ¥95,000) that basically covers 2018 with a web survey of 4,062 participants. The teaser page offers a few interesting free data tidbits. I don’t trust web based surveys as a tool for analyzing a highly regional and fragmented market, but the cash vs cashless chart illustrates exactly what I wrote in the Apple Pay Japan One Year Mark: people use contactless payments like Apple Pay for coffee and train fare but do not use Apple Pay for buying a couch. However the chart offers an interesting point: Japanese people use (plastic) credit cards for larger purchases and cash for smaller ones.

3EF3A55A-CFA7-42E9-B26C-9BB848735FEE

The Apple Pay Japan Story so far
Japanese IT journalist Junya Suzuki predicted that Apple Pay would be the ‘black ship’ that would revolutionize contactless payments in Japan. Apple Pay turned out to be the match that finally lit the fuse of the huge Japanese contactless transit and payments infrastructure investment and launched it into orbit. The global FeliCa iPhone is a inflection point that many people have yet to recognize, one that will soon provide Apple Pay another growth opportunity in Hong Kong. A year ago I wrote:

Apple Pay in Japan is all about Apple Pay Suica which we already knew. In the Suica home base area, the Kanto region, contactless payments grew from 20% of total transactions to more than 40% in the year that Apple Pay Suica has been available… What used to be ‘some people some of the time’ is quickly transitioning to ‘most people most of the time’.

Stores and businesses interviewed for that post report that contactless digital wallet payments (Apple Pay, Google Pay, Osaifu Keitai) use continued to grow throughout 2018 but nothing is simple or straightforward:

  • Apple Pay Suica continues to drive the Apple Pay story in Japan but is highly regional as initial uptake is tied to commuter passes which are currently restricted to the JR East rail network. Nevertheless Suica issuance continues double digit growth. Japanese customers prefer easy to use prepaid cards, they will always be the gateway to cashless for the majority.
  • Only 30% of iPhone users with Apple Pay Japan capable devices (iPhone 7 and later) use Apple Pay. I suspect Osaifu Keitai and Google Pay uptake is similar or lower.

The upcoming 10% consumption tax increase will offer incentives and tax discounts for cashless purchases. The cash vs cashless trends outlined above are positive signs that change is possible with the right set of incentives and ease of use environment:

  • Plastic will continue to be king with prepaid cards the king of kings. One of the many advantages that digital wallet platforms like Apple Pay have over QR Code platforms is that plastic cards are always there as a last resort physical option. This is very important for many customers, especially the elderly. And they don’t need a battery.
  • Reward point systems and cards need to be digital (such as VAS powered Ponta) that automatically link with the appropriate transactions. Digital wallets only replace physical ones when everything can be matched and loaded on smartphones.

For Apple the key will be getting more Japanese iPhone customers to use Apple Pay by making different service parts work together in new ways that don’t play together well, i.e. the sum must be greater than the total of the parts. Think Rakuten. Rakuten has done an excellent job building an ecosystem of e-commerce, travel reservations and other services that offer members large discounts and points. This approach will pay huge dividends when the 10% consumption tax arrives October 1.

Advertisements

iPhone 8 Logic Board Replacement Program: Next Up iPhone X

1️⃣ iPhone X Suica Problem Q&A Exchange Guide
2️⃣ iPhone X Suica問題Q&A交換ガイド (Japanese)
3️⃣ Apple Denial and iPhone X Users
4️⃣ iPhone X Suica Problem Index


From Apple:

Apple has determined that a very small percentage of iPhone 8 devices contain logic boards with a manufacturing defect.

Affected units were sold between September 2017 and March 2018

As always these things are “a very small percentage.” The September to March window is a perfect fit with iPhone X NFC problem units and the Rev-B iPhone X production switchover.

Hopefully it will not be long before the other shoe drops and Apple issues a iPhone X Logic Board Replacement Program for the “very small percentage” of iPhone X units with defective NFC. The iPhone 8 Replacement Program came first because its logic board is much easier to replace, not so for iPhone X which is considerably more complex, and costly.

Until then, this will have to do for wrangling a Rev-B iPhone X from Apple.

NFC Wallet Passes for September 12 Apple Event (U)

Apple is using it’s just announced September 12 event to show off the new NFC Wallet Pass feature of iOS 12 and watchOS 5 to invited journalists and guests running the iOS 12 beta. The new feature was unveiled at WWDC and will be used for the Student ID Passes that Assa Abloy and Blackboard are developing with Apple.

Apple clearly wants to promote NFC Passes in Wallet over clunky QR Codes and showed NFC Passes on Apple Watch in action with a Wembley Stadium NFC ticket gate in the WWDC18 Apple Pay session video. In the same session Apple software engineers explained how to strip out QR Codes in Wallet Passes and easily replace them with NFC.

It’s also clear that Apple wants to promote NFC Passes on Apple Watch over iPhone, the new Wallet feature will be shown off in the Apple Watch segment of the upcoming event.

UPDATE
Japanese IT journalist Junya Suzuki is saying there could be more NFC goodies and partners on tap for the September 12 event and the iOS 12 GM. Back at WWDC18 I wrote:

NFC Certificates should be the ticket for developers to gain NFC access that was not possible up to now… It will be fascinating to see what developers do with wider NFC Certificate distribution and what NFC passes/reward cards, and hopefully much more, that come out of it with iOS 12 and watchOS 5.

It would be in line with expectations if Apple announced some extra NFC Wallet goodies, such as NFC reward cards in addition to NFC Passes and Student IDs, during the keynote. It would be beyond expectations, but not far fetched, if Apple also announced Apple Pay Transit for MIFARE based Taiwan transit cards, FeliCa based Octopus Hong Kong transit cards or perhaps something else…like Apple Pay PASMO. We won’t know until the event as Apple has certainly cut code references out of the iOS 12 beta mix to keep the 9to5 Mac code spelunker elves at bay.

Enjoy the show.

NFC Passes and NFC Certificates for iOS 12 and watchOS 5 (U)

Apple revealed details of NFC improvements coming to iOS 12 and watchOS 5. Contactless Student ID Cards for Wallet were announced at the WWDC18 Keynote on June 4. Apple clearly wants to promote NFC Passes in Wallet over clunky QR Codes and showed a video of NFC Passes in action on Apple Watch at the Wembley Stadium contactless NFC ticket gate. In the same Apple Pay session Apple software engineers explained how to strip out QR Code references in Wallet Passes and replace them NFC. NFC Passes were previously shown at WWDC16 but uptake has been slow and Apple seems eager to push them more aggressively with iOS 12.

The recently updated iOS Security guide for iOS 12 has more details:

Contactless passes

Wallet supports the value added service (VAS) protocol for transmitting data from supported passes to compatible NFC terminals. The VAS protocol can be implemented on contactless terminals and uses NFC to communicate with supported Apple devices. The VAS protocol works over a short distance and can be used to present contactless passes independently or as part of an Apple Pay transaction.

It’s also clear that Apple wants to promote contactless passes on Apple Watch over iPhone: NFC passes were unveiled during the watchOS segment and are gorgeously displayed exclusively on the watchOS 5 page. Assa Abloy and Blackboard are working with Apple to make those happen. You might remember Assa Abloy from The Information rumor piece about door locks and ID Passes coming to Wallet but the actual ID card format and associated backend services are all Blackboard.

Temple University’s OWLCard and John Hopkins J-Card offer some clues how they will work in Wallet:

  1. Contactless Student ID cards are Stored Value (SV)
  2. Because they are SV cards, they can be recharged

Since they will reside in Apple Pay Wallet this means contactless student ID cards can be ‘recharged’ with an Apple Pay credit card instead of running to the nearest ‘refill/recharge’ station. Anytime, Anywhere Recharge.

Sound familiar? It’s just like Apple Pay Suica that you can recharge on the go and use for JR East Suica coin lockers. The only real difference is that Student ID Cards cannot be used for transit. At least not yet. The Apple Pay Developer page says, “discover how to create contactless passes for rewards cards, gift cards, tickets, and more.” Contactless passes for reward cards eh? Sounds like that JRE POINT card in Apple Pay Wallet will be possible after all.

An interesting aspect of implementing NFC Passes in Wallet is the “NFC Certificate” requirement that are issued by Apple to the developer and strictly controlled for security purposes. PassKit NFC Certificates were previously available, covered by NDA and extremely limited. Since door locks and ID passes are involved, the NDA is still central to the application process. However, if Apple is opening up NFC access to more developers wider NFC Certificate distribution could be the ticket for developers to gain NFC access that was not possible up to now. At least for mere mortals.

It will be fascinating to see what developers do with wider NFC Certificate distribution and what NFC passes/reward cards, and hopefully much more, that come out of it with iOS 12 and watchOS 5.

UPDATE 1
Apple is issuing NFC Wallet Passes at their September 12 Event announcing new iPhones, Apple Watch Series 4 and the official release of iOS 12

UPDATE 2
Welcome to the new era of A12 Bionic NFC and iOS 12

UPDATE 3
Contactless Student ID Cards are MIFARE Host Card Emulation via PASSKit NFC Certificate

Of Course In-App Payments Are Bigger Than Apple Pay! In America That is…

The eMarketer blog post making rounds on Apple Insider and other sites basically says Starbucks in-app payments are bigger than Apple Pay and that in-app payments will probably grow faster than Apple Pay, Google Pay, etc.

That’s not surprising for the American market where credit cards are the norm. There is no stored value card you can use everywhere for purchases and transit while racking up points, like Apple Pay Suica.

For people who use Starbucks all the time in-app recharge is basically a stored value card, it’s just not sitting in Apple Pay Wallet. And it’s a barcode (sigh). If a Starbucks card existed in Wallet, eMarketer would be reporting that Apple Pay is a hit.

Apple Pay Suica proved that small purchases are the no-brainer starting point for digital wallets. Anybody will use an app, or Apple Pay, to pay for the 3.05 cup of coffee because nobody wants to bother with coins. Nobody uses Apple Pay to purchase a 600 dollar couch.

The real golden uptake path for a digital wallet platform like Apple Pay is when it is matched with a stored value card that includes transit and purchase with points, in short a transit platform. America doesn’t have one yet so the in-app recharge with reward points approach will continue to be more popular than Apple Pay by itself.