Open loop wishful thinking trashes Apple Pay Express Transit reputation

The latest OMNY bump in the road perfectly captures the downside of making contactless credit/debit cards a one size fits all solution. As the New York Post piece (via MacRumors) points out, some Apple Pay Express Transit users are being double charged for fares. Perhaps they didn’t know that Express Transit was enabled in the first place, perhaps the iPhone passed too close to the OMNY transit gate reader. It’s a classic “you’re holding it wrong” situation that has nothing to do with Apple Pay Express Transit and everything to do with the current EMV architecture and how banks implement it.

Part of the problem is that OMNY is new, it’s not working across the entire MTA system yet, and open loop EMV bank cards will never replace all classic MetroCard fare options. That job is for the MIFARE based OMNY transit card due in late 2021. Until the system is complete Metro users will have to juggle different cards and deal with a very long transition. Transport for London (TfL) users have had MIFARE based Oyster cards since 2003, contactless credit/debit cards have been ubiquitous since the 2012 London Olympics when open loop was added to the TfL Oyster fare system.

To Biometric or not Biometric?
Open Loop credit/debit cards on transit gates instead of native transit cards always come with banking and credit industry baggage. Even in the contactless card heaven that is said to be London, there are a surprisingly number of gotchas: minimum limits for using cards, max limits that require PIN codes. It’s an endless loop of banks pushing one way and merchants pushing back.

The golden uptake for Apple Pay in Japan was Suica and is the same story everywhere: it’s all about getting rid of coins for transit, coffee, sandwiches, etc. The small stuff. This is the 20,000 JPY prepaid heavenly region where Apple Pay Suica sings and banks so desperately want to shut out all other players and keep all the marbles. But bank cards have an authorization problem: banks set spending limits not the card architecture. The line is always changing, what works today might not work tomorrow. The prepaid Suica architecture itself is the firewall that does away with user authorization because local processing transaction at the transit gate or store reader is all the authorization necessary.

Express Transit was developed for Apple Pay Suica in 2016, it remains the best matchup because the feature is a basic part of the Suica card architecture that is not a bank card. Apple Pay Express Transit for EMV payment cards that appeared with iOS 12.3 is a retrofit job that I predicted would have problems because retrofits are about dealing with baggage, not creating a better long term solution. 7 months later we are already there. This problem isn’t going away, not as long as banks and EMV keep operating the way that they do.

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2019 Tidbits

The end of the year season is down for the count. Barring any news items like Apple Pay Octopus really launching this year, this is probably my last news post for 2019. Not news really, just tidbits.

Lingnan Pass and ShenZhen transit cards coming to Apple Pay in 2020
This piece of news came from Twitter users noting that the Lingnan Pass will come to Apple Pay in 2020. The Lingnan Pass and ShenZhen Transit pages show announcements released today (December 11), a machine translation roughly says Apple Pay support is coming soon. China has had the PBOC 2.0~3.0 contactless standard and T-Union transit card architecture in place for some time, with local transit cards slowly being updated to the new format. Beijing and Shanghai transit cards arrived on Apple Pay with iOS 11.3. Additional China transit cards were tested in an early developer preview of iOS 11.4 but dropped before the developer beta. Beijing/Shanghai transit cards were labeled beta up until iOS 12.2. Apple Pay Lingnan Pass and ShenZhen Transit will likely follow the Beijing/Shanghai transit card model with bank card recharge limited to China Union Pay (Interesting side note: Octopus and Lingnan Pass have a dual mode transit card). If Tim Cook does visit Hong Kong and China on his trip, things might shape up to be an excellent Apple Pay transit card year end Asian adventure.

Tim Cook’s Excellent Asian Transit Adventure?
The Tim arrived unannounced in Tokyo a few days ago, his first public appearance here since September 2016 and the first public demo of Apple Pay Suica just before the service launch. With Tim’s arrival in Tokyo I noticed an odd uptick in views from Hong Kong. When Tim landed in Singapore, Hong Kong views ticked up again. Obviously Hong Kong iPhone users are hoping that Tim will visit Hong Kong and launch the long delayed Apple Pay Octopus. I hope so too. Update: Apple Maps Hong Kong Transit information is available to China mainland users after a long absence.

12/19 UPDATE: Apple Pay Octopus has been delayed to later in 2020.

1/8 UPDATE: Apple announces new transit cards for China but not Octopus

Apple Pay Ventra
This was promised as ‘coming later this year’ back in May. As of December 10 Ventra Twitter support is still promising users to “stay tuned.” Let’s hope Cubic is working overtime to make it happen. Update: Ventra has changed the Apple Pay Ventra blurb from ‘coming later this year’ to ‘coming soon,’ we’ll see Apple Pay Ventra in 2020.

JP POST going Cashless
This was announced some time ago but is worth repeating: Japan Post is going cashless starting February 2020 in select central post offices, rolling out to all branches by May 2020. Your favorite plastic credit cards, eMoney cards (iD, QUICPay, Suica, etc.) and QR Codes (The PayPayPay crowd) can be used to pay for postage, sending packages, stamps, postcards, catalog items, etc. It would be nice if cashless payments improve post office lines and wait times, but I guarantee that’s not going to happen.

The QR Code JR Gate Equation

The new Takanawa Gateway station transit gate pictured in the JR East press release

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.

Omron states the speed of their mag strip gate machine is within 600 Milliseconds, but how long will they be around?

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. I’m sure JR East will continue to offer the same basic choice: faster cheaper Suica fares with a wide range of attached services and discounts vs. slower more expensive paper ticket fares with fewer services and discounts. 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 or services. And don’t forget the ultimate Suica advantage: touchless walkthrough gates.

JAPAN CASHLESS: Cafe Veloce offers 5% cashless rebates

Finally! A cafe chain with JAPAN CASHLESS rebates and 5% at that. Sayonara Starbucks and hello Cafe Veloce, until July 2020 anyway.

UPDATE: as always some locations are not onboard yet even though Cafe Veloce parent company Chat Noir says they all are. Be sure to check for the CASHLESS logo on the door.

UPDATE 2: confirmed with Chat Noir that all locations are onboard.

Toyota Wallet: if there must be another Japanese Wallet app, please let it be this

As I have pointed out countless times on this blog, Apple Pay Suica is one of the best Apple Pay services that Apple has hosted on its platform so far. The first transit card on Apple Pay remains the best: it combines the speed of the Suica transit card FeliCa architecture, the convenience of the Mobile Suica cloud, and the flexibility of the Apple Pay recharge backend.

The Apple Pay Suica sandwich: an open flexible recharge backend, sandboxed stored value (i.e. not hot wired to an app account), NFC FeliCa frontend.

This last point is under appreciated. The deal Apple and JR East worked out is the secret sauce: Apple Pay cards in Wallet just work for recharge, from Japan or from abroad, with no extra fees across the board, users earn points for the card of their choice. And users still have the option to recharge with cash if they want to.

A new kind of Wallet app
Toyota Wallet for iOS unveiled on November 19 finally gets right what other QR/Bar Code apps like PayPay have not: a flexible backend matched with a flexible frontend. A version for Android is due in the spring of 2020.

Toyota Wallet is built using the PAYCIERGE platform from TIS. The user has a choice between payment with QR/Bar Code in the Toyota Wallet app with Origami Pay or Bank Pay accounts, or payment with a dual mode EMV/FeliCa iD Mastercard prepaid card in Wallet with the backend recharge hosted from Toyota Wallet.

An interesting side note here is that both PayPay and Line Pay have said that FeliCa cards are a possibility. Up until now this has just been lip service. It would be a welcome development if the Line Pay/Yahoo Japan merger produces a FeliCa/EMV dual mode payment option similar to what Toyota Wallet has done.

Toyota Wallet is still not open in the way that Apple Pay Suica is. All of the ‘recharge’ methods are in the SMBC orbit, even iD recharge credit cards have to be SMBC issue (such as Docomo dCard) Visa or Mastercard to avoid hefty recharge fees. It’s not perfect and remains chained to the SMBC financial ecosystem, but Toyota Wallet does point a way forward that I hope Toyota Finance Corp. continues to improve, and that other payment system operators follow.

Summary
The Toyota Wallet flexible backend/flexible frontend development is a step forward for digital wallet possibility. This is the first Japanese wallet app where the frontend technology is a simple user choice, not a straitjacket. It shows the innovation possible in Japanese payments market where the focus is on creative thinking. That this kind of innovation comes first on the Apple Pay platform says all you need to know about Apple Pay being open. Compare this approach to the Europe one where the focus is forcing others to solve problems that Europeans should be solving themselves. That approach is a political one, not an innovative solution, or progress.