The 1st data point is a survey from Yumenomachi that ranks the different cashless payment methods:
Credit cards: 88.4%
Transit cards: 49.7%
Apple Pay/Google Pay/Osaifu Keitai: 35.4%
Prepaid Reward Cards (nanaco, WAON, Edy): 31.7%
QR Codes (Line Pay, PayPay, etc): 25.6%
The 2nd data point is a survey from One Compath. This survey reports 56% of the respondents as using cashless more than a year ago, with slightly different ranking:
Credit cards: 71.4%
Transit cards: 31.7%
Prepaid Reward Cards (nanaco, WAON, Edy): 53.0%
The 3rd data point from the same One Compath survey is very interesting but not surprising. It ranks prepaid card use separately for transit and reward cards by prefecture. Transit card use for payments in the Kanto Area (Tokyo, Kanagawa, Chiba, Saitama) is 85%, while prepaid reward cards are the overall winner on a national basis. This is because of the reach of AEON supermarkets and convenience stores in rural areas where people don’t use transit cards or the local transit cards do not support purchases. The next generation Super Suica format is aimed specifically at incorporating these small rural area transit cards so they can be used anywhere as Suica.
One take away is that in the Kanto area Suica is easily the most used contactless card at checkout (Suica issuance is twice that of PASMO). Credit cards lead in cashless, but are still mostly swipe or Chip and PIN at checkout. When prepaid cards are totaled together, credit card and prepaid card use is almost equal. The surveys do not look at average purchase amounts for the different cashless methods. I suspect that Suica and other prepaid card use leads for smaller purchases while credit cards are used for larger purchase items.
Only 27% of iPhone users who can use Apple Pay use it
50% don’t use Apple Pay but are interested in using it
22% don’t use Apple Pay and don’t care about using it
These numbers jive with the 35.4% digital wallet use figure in data point 1. The short summary here is that there is still plenty of opportunity for Apple Pay to grow in the Japanese market, and the Super Suica format in 2021 has the potential to break down the regionality and shake up the market.
Now that full 3rd party NFC access is reportedly coming with iOS 13 tag support for ISO7816, FeliCa and MIFARE, does this mean developers get supercharged Core NFC and PassKit NFC Certificates generously handed out like condoms at a gay sex party? Probably not, the only new things in the rumors are ‘full access’ and ‘ISO7816’, but let’s take a look at some possibilities based on the 3 NFC Forum defined NFC Modes: Card Emulation, Reader/Writer and Peer to Peer.
It’s useful to remember that A12 Bionic powered iPhone is one of the most compelling ‘Global NFC’ devices on the market, with all the important technologies in one package sold everywhere: NFC A-B-F hardware and EMV, FeliCa, MIFARE, PBOC and VAS (value added service protocol) software. Android is fragmented, especially when it comes to FeliCa support.
The big frustration for developers has been that iPhone NFC is all dressed up with no place to go. iOS 12 NFC supports Card Emulation and Reader/Writer but severely limits the Secure Element access necessary for Card Emulation with NDA covered PassKit NFC Certificates, while Core NFC is a limited Reader/Writer Mode sub-set.
The Apple Card UI and Wallet UI design language in iOS 12.2 and later, is so different from the rest of iOS 12 that I’m surprised nobody in the Apple tech blog space has picked up on it yet. There are lots of useful card options and information, like EMV Transit Card option in iOS 12.3 for Portland TriMet, that can be piped into Wallet cards from the card provider cloud, instead of sitting in a separate app. Customized dynamic card artwork, such as individual Suica card names and commute plan routes displayed on Suica cards in Suica App for example, would be great to have in Wallet.
I do have one request for the iOS 13 Wallet UI: please integrate the separate iPhone and Apple Watch Wallets into a single Wallet. It’s incredibly convenient to control all card options on iPhone instead of fiddling with the tiny Apple Watch screen to recharge a Suica card for example. Suica App manages separate Suica cards on iPhone and Apple Watch incredibly well in one place. It is a super convenient design.
Easy Card Emulation: I am less sure how Apple plans to make card emulation easier for developers:
New functions in PassKit that do more
Less stringent and easier to obtain PassKit NFC Certificates
A combination of the two or
Something new altogether
I hope for a combination approach that keeps everything secure while making it easy for developers to add all kinds of non-EMV cards to Wallet, the major categories include…
Regular Reward Cards: There are tons of these everywhere. My real wallet has JRE POINT, WAON POINT, Tomod’s, plus a crazy collection of stamp/point cards. How nice it would be if it was super easy for developers to add these to Wallet.
ID Cards: This is where ISO7816 tag support fits in. Contactless Student ID cards in iOS 12 were a MIFARE only custom in-house job, transit cards without transit, by Apple in cooperation with Blackboard. Hopefully Apple will greatly extend ID card support in all NFC flavors for many companies and institutions, for all manner of ‘company only’ Wallet ID cards.
Android has a huge advantage over iOS because Android apps have the NFC access to do what they want. From RFID Insider:
Below are all the abilities/formats available for writing to a tag:
Business Card Link/URL Wi-Fi Bluetooth Email Telephone Number Geo Location Launch an Application Plain Text SMS
A fully functional Core NFC could do all this, but the important question is how would Apple want to do all this. NFC tags are great technology but they remain deeply geeky for the majority of users. The key is making NFC tags as friendly, easy and secure to use as Apple Pay. This is exactly what Apple plans to do.
The easiest way to think of it is that instead of tapping a reader to pay with Apple Pay, NFC tag Apple Pay turns your iPhone into the reader. An NFC tag and iPhone is all that you need to Apple Pay at a store.
What does this sound like to you? Yep, this is exactly what QR Codes do and NFC tag Apple Pay is aimed right at the ‘but the store doesn’t need an expensive NFC reader to use QR’ sweet spot that QR Codes have occupied up to now. NFC tag Apple Pay levels the play field, neatly eliminating the QR advantage while offering security that QR Codes cannot match.
However don’t assume that the QR players are chained to QR Codes, it’s an inexpensive and convenient technology for building payment system app services, not particularly sacred. NFC tag Apple Pay also works in an app and this offers Japanese QR Code payment systems such as Line, PayPay, etc., a way to incorporate Apple Pay NFC support in their app, if they choose to do so.
A12 Bionic iPhone XR/XS are the only devices that support background NCF tag reading and the native ability to read tags without an app. The big question in my mind is how Apple plans to implement NFC tag Apple Pay on older devices
Peer to Peer
iOS 12 does not support NFC Peer to Peer. I don’t see that changing in iOS 13 if it can’t be part of a new Apple Pay service. AirDrop already works well across devices that do not have NFC capability. That’s probably enough real world peer to peer for most people.
The Apple Pay theme for WWDC18 was ‘move Passes into Wallet, get rid of the QR Codes and replace them NFC.’ The new Apple Card UI improvements in Wallet and NFC tag support suggest the Apple Pay theme for WWDC19 will be: ‘move card functionality out of apps and into Wallet cards with new iOS 13 PASSKit controls, or get rid of apps altogether and replace them will all kinds of NFC enabled cards and NFC tags.’
It certainly makes sense. Apple Pay is NFC for the majority of iPhone users, the NFC thing that people use. Apple devoting iOS resources into making card emulation easier and better for 3rd party developers to add all kinds of cards to Wallet, and migrate functions out of separate apps to the Wallet card itself, will give the most bang for the development buck. NFC tag Apple Pay will finally bring NFC tags into the mainstream while eliminating the remaining advantages of QR Codes. It’s going to be a very interesting WWDC for all things Apple Pay.
If you were hoping for a streamlined cashless payment roadmap for Japan, forget it. Things are just going to get more complex as various reward point ecosystems (Rakuten point, d-Point, Ponta point, etc.) slug it out for dominance across smartphone apps (QR Codes) and digital wallet platforms (NFC). Mercari joined the fray with MerPay on Apple Pay, a virtual prepaid Mastercard provided via the Sumitomo Mitsui bank group and hosted on the iD contactless payment network.
Mercari was founded by a former Rakuten employee and follows their basic business model of hosting a virtual marketplace for buyers and sellers. The idea behind MerPay is that sellers can use money earned from sales or points via the virtual prepaid card for store purchases, Suica recharge, etc. Users can also recharge MerPay from a linked bank account.
Hachimaki san of Kanmu Ltd. has dug into MerPay details with a helpful flowchart.
Recruit’s AirPay POS system for small stores deftly navigates the entire Japan cashless map and is running an TV ad campaign featuring Joe Odagiri and rich visitors from abroad in various roles with credit cards. The punch line is “Do you take cards?” to which Joe Odagiri the store owner invariably replies, “cash only”. The rich customers walk away and Joe says, “I wish we had AirPay.” It pokes fun at the Japanese penchant for cash.