Dear Jane, we fucked up, sincerely MTA

The piecemeal MTA OMNY rollout is a lesson how not to do a transition from old system to new system. A case where poor design, poor management choices and unanticipated user interaction, each insignificant in isolation, snowball into a nagging long term problem.

The problem goes like this:

(1) Apple Pay Express Transit is opted in by default and iPhone users don’t always know it’s on. They don’t care about using Apple Pay credit cards on OMNY anyway because fare options are limited and OMNY isn’t installed everywhere and won’t be until at least the end of next year. They use good old MetroCard and put iPhone away in the right pocket or purse carried on the right shoulder.

(2) When the user gets to a OMNY fare gate they swipe MetroCard with its peculiar forward swipe motion on the reader which is located above and behind the OMNY NFC reader, which is positioned low and angled at pocket level. As “MetroCard sucks, it may take several (forward) swipes to enter”, the user leans into the gate while doing this and boom: OMNY reader activates iPhone Express Transit and charges fare without the user knowing it.

Default opt in Express Transit has been with us ever since Apple Pay Suica arrived in 2016. But transit cards are not credit cards and everything was fine. Things got sticky when iOS 12.3 introduced EMV Express Transit that uses bank issued credit/debit/prepaid cards for transit on Apple certified open loop systems. Currently these are Portland HOP, NYC OMNY and London TfL.

HOP and TfL don’t have problems with Express Transit. Both systems use contactless exclusively. HOP has stand alone validators, not gates. TfL gates have the NFC reader located on the top. OMNY on the other hand will have MetroCard swipe cards around for years to come: the OMNY transit card replacement is still in development with no release date. With the slow transition pace and current gate design expect the OMNY Express Transit problem to be around until MetroCard is dead, and OMNY is complete with the new tap only card.

In retrospect MTA should have done it this way: (1) rollout out the OMNY card MetroCard replacement first and add open loop support as the very last thing, (2) design better OMNY gates in two kinds, dual mode NFC + swipe, and single mode NFC only. This way MTA stations could do what JR East stations do: start with single mode tap only express gates on the edges and dual mode gates in the middle. As the transition progresses the dual mode gates get fewer and pushed to the sides with single mode gates taking over.

Apple could help by keeping automatic Express Transit opt in only for native transit cards (Suica, SmarTrip etc.). EMV Express Transit should always be a manual opt in. I understand Apple’s perspective: they want to present Apple Pay Express Transit as a seamless one flavor service, not good/better/best Express Transit flavors. The reality however is that the current technology powering EMV open loop fare systems isn’t up to native transit card standards. Apple can’t fix that.

Unfortunately MTA has taken the dumb path of blaming Apple instead of fixing their own problems. New York deserves a world class modern transit system, OMNY is an important step in building one. MTA management performance so far doesn’t inspire much confidence. Let’s hope they focus on the rollout and deliver it without more delays or problems.


Apple Pay PASMO and the coming transit IC card rush to mobile

Mobile PASMO was announced in January 2020, launched on Android Osaifu Keitai in March and will land on Apple Pay with the iOS 14 update this fall. As early as April Apple was already dropping hints that Apple Pay PASMO was on the way.

9 months is a quick turnaround for announcing and launching an entirely new mobile transit service across 2 digital wallet platforms: Android (Osaifu Keitai) and Apple Pay. It sure beats Cubic Transportation Systems who have yet to get Apple Pay Ventra out the door more than a year after it was first announced in March 2019 on the far less complex Chicago transit area.

While many Apple Pay users in Japan are happy to have PASMO, there is always that nagging question: if I already have Apple Pay Suica that works nationwide, what’s the point of Apple Pay PASMO? All the major transit cards are cross compatible, the only difference is commuter passes…and reward points. As FeliCa Dude so astutely explained in his excellent Reddit post, Mobile PASMO is a boondoggle, the result of JR East and PASMO Association failing to cooperate and mutually host commute plans…and points.

All Japanese transit cards are slightly different versions of Suica. There could easily be one national transit card and Japanese users absolutely would love having it, but ICOCA, TOICA, manaca, SUGOCA, Kitaca, nimoca and Hayaken want to hang on to commuter passes…and points. The good news is that (1) Mobile PASMO got off the ground in a very short time, (2) JR East is providing Mobile Suica cloud assets. I suspect Mobile Suica is likely hosting Mobile PASMO as well but whatever deal they cut is hush-hush.

Suica growth, the CASHLESS tax rebate effect, COVID and all that
Junya Suzuki beat me to the punch today with an excellent piece that covers the Apple Pay PASMO announcement and several recent Suica trends including the recent addition of Suica to Square. The most important one to me is the July 2020 edition JR East factsheet Suica section: “Number of e-money available shops”. The number of Suica ready stores increased 50% YOY by 324,000 in the March 2019~March 2020 fiscal year with store growth outside of station areas increasing the most.

This is a direct result of the CASHLESS Tax Rebate program which provided merchant subsidies for cashless infrastructure. That program ended June 30 but there is talk in government circles of implementing a similar program to boost the economy and drive cashless use in the COVID era.

JR East factsheet Suica Section

Suzuki san points out what I have said in other posts, Mobile Suica growth from the October 2016 Apple Pay Suica start point is remarkable: 9.3 million users as of March 2020. And the growth rate is accelerating. Smaller and less expensive mobile devices like Apple Watch with Apple Pay Suica and Garmin Suica make the mobile transition attractive for a wider number of users.

JR East factsheet Suica Section

With restricted travel in the COVID era every single transit company in Japan is facing tremendous pressure to reduce costs. Moving away from high cost plastic transit cards with cut and past Mobile Suica IT assets and next generation Suica card architecture will be the easiest way to do that.

The rush to mobile
It starts now. Apple Pay PASMO marks the start point of a transit IC card rush to mobile digital wallets. Mobile PASMO is rebranded Mobile Suica. With next generation aka Super Suica coming in 2021, at the very least I think we’ll see similar arrangements from JR West ICOCA, JR Central TOICA and other major transit IC cards. With the addition of MaaS NFC Tag Suica, we’ll see a faster, wider uptake of Mobile Suica and sister services for payments everywhere.

And for those Open Loop advocates out there Junya Suzuki has some surprising analysis regarding the Japanese transit scene: despite some limited installation such as Okinawa Monorail, he does’t see transit companies going in for Open Loop in any big way. Mag strip paper ticketing will gradually be eliminated as next generation transit gates go into service over the next few years but mobile transit cards and paper QR Codes will be the replacement, not Open Loop.

As I have said before, the whole ‘Open Loop vs Closed Loop aka EMV contactless bank cards vs Native IC transit cards’ debate is pre-mobile plastic era out of date thinking. Mobile wallets and apps have tossed that whole game out the window for good. Why do you think QR Code payments and UWB Touchless are coming to Apple Pay in iOS 14? It’s a whole new crazy game. Better get used to it.

The Apple Pay Octopus Inbound Gouge

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.

People far smarter than me already editorialized Tim Cook’s opening statement at the Congressional antitrust hearing. I won’t go into it here except to say, what did they expect? The whole affair, on all sides, was a bad lip read parody, an awkward Handsome Anthony moment without the humor.

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?

T-POINT? We don’t need no stinkin’ T-POINT

In the ephemeral COVID era we live in assurance don’t come easy, especially with JP cashless market data. Half the fun is taking the crumbs you find, a 1000 person web survey here and there, and seeing what trends you can tease out of it.

First of all the usual disclaimer: cashless use is highly regional, depending on transit use and many other factors like age group, shopping habits, and reward points. It’s this last item that makes the CreditCard no Yomimono survey so interesting.

Reward points are the dangling carrot all Japanese cashless players use to drive card use. New comers like PayPay use them shamelessly to capture customers and build their platform. Japanese customers love to play the ‘what combo gets me the most points’ game but they are also notoriously cold shoulder when they feel gypped. And once they drop something, they never come back.

The survey skips over regional point systems like JRE POINT (though I think that’s debatable considering Mobile Suica on Apple Pay/Google Pay/Osaifu Keitai), and examines ‘national’ point systems: d POINT, T-POINT, Rakuten POINT and PONTA with a simple question. Which one do you use? 2,271 people said:

  • Rakuten POINT: 59.9%
  • d POINT: 18.4%
  • T-POINT: 14.4%
  • PONTA: 7.3%

It’s clear to see why JR East cut that special deal for Rakuten Pay Suica: the different online Rakuten businesses for shopping, travel, etc. mesh well and there are a lot of people invested in Rakuten POINT. The deal puts Super Suica in a good 2021 launch position for new local transit partners, MaaS NFC Tag Suica and more as the platform grows.

It’s a bittersweet deal however for JRE POINT. It’s a real shame and missed opportunity that the major IC transit cards (Suica, ICOCA, TOICA, etc.) are compatible for transit and eMoney, but not for points. Even if they all kept their own point branding and simply offered 1=1 point exchanges, people would use them more.

The decline of T-POINT is not surprising, dropping from 60% in a 2015 survey. Culture Convenience Club (CCC) and SoftBank ran T-POINT into the ground and it’s not coming back. It’s only a matter of time before SoftBank kisses T-POINT (and CCC) goodbye and unveils PayPay POINT.

PONTA is another major that has not gained much traction so far but this might change with the recent LAWSON Bank PONTA Plus branded credit card push. All of the point systems need to add Apple VAS and Google SmartPay support and drive acceptance on the merchant POS level. The less we have to deal with separate plastic point cards, all the better.

Japan Cashless X-Day

Anybody care to chart the Japanese cashless transformation?

Now that the CASHLESS Rebate program is over with transaction rates reportedly going back to ‘normal’ (an estimated 1% rise over rebate program rates), JP media outlets report that some smaller merchants might go back to cash to keep profit margins intact. Real transaction rates are always hush-hush but QR payment rates recently revealed in connection with the Japan QR (JPQR) unified code scheme give us an idea what goes on behind the curtain:

NTT Data already lowered basic CAFIS transaction rates in response to the stera payment co-venture from SMBC-Visa Japan-GMO. As the JPQR transaction rate chart makes clear, banks and payment players have plenty of transaction rate wiggle room. The Japanese government is pushing cashless. If necessary the push will become shove for lower rates and yet another cashless program but where do things stand right now?

July 2020 is the proverbial “X-Day” crossover point: Japan is cashless now, even though the transformation is uneven, ongoing and very messy. On the customer side cashless is the mindset and survival behavior for many Japanese, even for older folks who under normal circumstances would prefer using cash until they day they die.

Faced with the reality of handing money that carries the risk of infection, people are going cashless instead especially with contactless smartphone payments. Junya Suzuki was right all along: Apple Pay turned out to be “the black ship of payments” catalyst that finally nudged Japan from cash to cashless. That and COVID.

Market analysts will undoubtably demand chart data that clearly explains and quantifies the transformation before declaring a ‘winner’ but they have a long wait. That’s because the cashless transformation is sloppy with huge regional variations, all happening right before us. But all of this is an afterthought and our priorities are different now, getting accurate market survey information of any kind in the current environment is extremely difficult.

The Tokyo Olympics was supposed to be the event heralding the cashless era but the COVID crisis has forced much more change very quickly. Evidence is best found in the countless little rituals of daily life that have evolved and are not going back. Merchants who do go back to cash face the risk of fewer customers: when offered a choice people choose cashless.

This realization hit me yesterday when my partner complained about his Docomo dPAY points taking a hit because the Summit supermarket staffer tapped a wrong payment button on the new POS cashless menu options added on July 1. He wanted to pay with iD. A year ago he never used iD, dPAY or Apple Pay and never wanted to, but life changed.

These days I hear contactless reader sounds everywhere, FeliCa chirps and EMV beeps are common as clear plastic sheeting and foot position floor stickers at checkout. And just when posting this the Ministry of Land, Infrastructure, Transport and Tourism announced that Japanese Expressways will be going cashless only with ETC. If there’s anything that defines this sea change it is this: it’s not a ‘victory’ over cash that the media sometimes depicts, nor does it feel like progress. In the COVID era it merely feels like survival.