The Contactless Payment Turf Wars: why Oyster is missing from mobile

  1. Contactless Payment Turf Wars: Transit Platforms
  2. Contactless Payment Turf Wars: PiTaPa Pitfalls
  3. >Contactless Payment Turf Wars: why Oyster is missing from mobile
  4. Contactless Payment Turf Wars: tapping the potential of TAP

Open Loop EMV
It is very strange that the TfL Oyster card, which completely transformed London area transit still isn’t hosted natively on Apple Pay or Google Pay. Other MIFARE based cards are hosted on both digital wallet platforms and TfL has an Oyster app for account management and online recharge (top-ups). From a technical standpoint there doesn’t seem to be any particular problem preventing them. Perhaps it is a political thing.

TfL decided in 2011 to put their resources into the emerging EMV contactless standard. The reason was simple:

The current Oyster system, though very popular, is expensive and complex to administer. Contactless bank cards use existing technology, responsibility for issuing cards would lie with the banks rather than TfL, and the operating costs should be lower.

That is politician think, not business think: everything is a budget problem, not a business opportunity that needs investment, reduce costs by letting someone else pick up the tab but let them take their cut first. I wonder if TfL publishes how much they pay out in transaction processing fees to banks and Cubic? Perhaps not. Meanwhile budget pressures are not letting up as Londonist notes:

In 2017 there was a push to nudge people away from their Oyster cards and towards contactless. One announcement rang out all over London’s tube stations: Why not use your contactless bank card today? Never top up again, and it’s the same fare as Oyster.

The die was cast in 2014 and probably won’t change. Instead of putting resources into hosting Oyster on Apple Pay or Google Pay, TfL and Cubic already have a mobile solution which is ‘open loop’ ticketing with EMV contactless bank cards. Open loop does not address the finer issues of different fare schedules (children, seniors, etc.), commuter passes, season tickets, nationwide transit interoperability, regional promotion, nor does it offer the business advantages of a transit payment platform, Express Cards with power reserve or any kind of future vision. That’s the end of the open loop story because EMV contactless is a very dumb smart card.

It’s a shame really because TfL loves to say they generate the most transactions in all of Europe. To me that’s a gold mine to build an empire, budget problems solved. Unfortunately TfL gives that gold mine away to banks and Cubic.

You can see the same thinking with Oyster’s Australian cousin, the Opal card system, built and managed by Cubic, just like Oyster. Opal is also going the ‘open loop’ route instead of transit cards on mobile.

Open Loop QR

Hong Kong’s Octopus (FeliCa) and Singapore’s EZ-Link (Ex-FeliCa now CEPAS) are going open loop but in different ways. EZ-Link has been testing EMV contactless for over 2 years now, users report a less than smooth experience. Kaohsiung Rapid Transit in Taiwan which uses MIFARE based iPASS and EasyCard is also considering EMV contactless open loop while the recently opened Taoyuan Airport MRT offers QR Codes and a cute YouTube video.

Hong Kong going the QR Code route shows how badly AliPay wants in on Hong Kong transit, and MTR Corporation in on China transit, bad enough that Hong Kong will sacrifice a great transit payment platform for AliPay, another gold mine giveaway. Judging by the AliPay branding and retrofitted QR Code readers on Hangzhou Metro gates in the pictures above, what AliPay wants, AliPay gets, but the fast FeliCa based Octopus smart card stands in the way. Instead of improving Octopus or extending mobile Smart Octopus, it looks like Hong Kong will invest in very slow and very dumb QR. The Hong Kong Economic Journal had this to say about the development:

MTR has set its sights on a major revamp of its fare collection system, accepting new electronic payments methods rather than just single journey tickets and Octopus Cards. From the passengers’ perspective, it means there will be no need to have an Octopus card on hand for a journey on local trains, if MTR’s new fare collection system supports all the mainstream contactless payment methods such as Visa payWave and MasterCard PayPass, or mobile payment means like Apple Pay, Samsung Pay and Google Pay.

Japan in the middle
TfL/Oyster and Transport for NSW/Opal, Octopus, EZ-Link are government held transit authorities, not private independent companies. Publicly run transit authorities are subject to politics and special interests like any government agency, this sometimes leads to poor decisions and short-term thinking.

Japan was fortunate that major transit players like JR East, are private companies with strong technology partners, like Sony and NTT Docomo. Out of this fortunate set of circumstances Suica was created and finally reached  the market in 2001 (a fascinating engineering story). Suica became the Japan IC Transit card template which evolved into the ubiquitous Japan Transit IC Mutual Use Association project for transit and e-money use. Mobile Suica was introduced in 2006 by NTT Docomo and now resides on the Apple Pay and Google Pay platforms.

The ubiquity and scale of interoperable transit IC cards sets Japan apart from all other countries. China copied the Japanese model for China T-Union but the cards cannot be used as e-money and have been upstaged by AliPay and WeChat Pay which, surprise, can be used for e-money and transit.

Japan occupies a very unusual middle ground between EMV contactless from the West and QR Codes from China, neither of which play well together. The scale of Suica provides the breathing space for Japan to pick and chose what works best for, and enhances their transit payment platform. The result is an incredibly rich and varied contactless payments market anchored around Suica and similar FeliCa prepaid cards.

Future trends
For every marketing report that predicts QR Code payments growing into a 70 billion USD sized market by 2023, someone else calls it nonsense because Suica is becoming the card for everything. In many ways Suica already is. MITI said it is investigating using QR Codes for small rural transit systems that cannot afford IC card systems. This loops back to TfL complaint that IC cards are expensive to issue and manage.

Low-cost QR Codes certainly make sense for lightly used rural transit operations but they have a fatal weakness: they don’t have plastic card versions that work anywhere and seniors prefer the simplicity of plastic, QR Codes require a high cost network connected smart device, an app and are strictly one way read with no offline processing.

JR East and Sony have announced that they will solve cost problems for rural transit and much more in early 2021 with Super Suica.


Update: Open Loop QR Code Security Risks
One issue that was in the back of my mind while writing this post was the privacy and security implications of letting AliPay inside with direct transactions on transit gates. Japanese customers are very sensitive about where and how transaction records are held and used but I have yet to see any security discussion in connection with Hong Kong MTR opening up transit gates to AliPay and WeChat Pay. QR Code transactions are very different from offline FeliCa Octopus transactions. Where and how does the QR Code transaction data from Hong Kong MTR transit gates get stored, does the Chinese government has access to it to gather intelligence from transaction and location records?

If there is one thing we do know about Chinese companies is that they do what they want when nobody is looking. Witness China Telecom spoofing the BGP protocol to poison internet routes and suck up massive amounts of American and Canadian internet traffic for intelligence analysis. If I was living in Hong Kong I would be concerned about the privacy implications of MTR going open loop with QR codes.

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iOS 12 Apple Pay Wallet pulled a MIFARE and nobody noticed

The Apple Wallet Ponta card launch at LAWSON presents another dilemma: just what exactly is Apple using for iOS 12/watchOS 5 Apple Wallet Passes and Student ID cards? Student ID cards and Apple Wallet Ponta have the same device eligibility specs: iOS 12/watch OS 5 running on iPhone 6 and later/Apple Watch Series 1 and later.

You might assume that Apple Wallet Ponta is FeliCa but the eligible device list tells a different story. You might also assume that everything in Japan is FeliCa but this is also not the case. Doutor Coffee shops sell a handy little Doutor pre-paid card that is MIFARE and it works flawlessly side by side with FeliCa flavored Apple Pay Suica on the same NFC reader.

Altogether we have an interesting spec list for Student ID and Mobile Ponta cards.

  • The same eligible device specs that only support NFC A-B across all devices
  • Stored value
  • iOS 12 PassKIT NFC Certificates
  • Express Card capable
  • Local offline transactions

I’m calling it (again): the only technology that fits this profile (for Student ID cards but not Ponta) is MIFARE iOS 12 PassKIT Wallet passes are simply MIFARE. Only Apple could pull this kind of ‘under the hood thing’ off in iOS 12 without anybody suspecting and it neatly puts all the major NFC technology pieces on Apple Pay: EMV, FeliCa, MIFARE and China Transit.

Blackboard supplies the technology and backend services for Student ID cards on iOS 12. I contacted Blackboard PR to confirm if the card technology was FeliCa or MIFARE but did not receive an answer. However I did run across an interesting Blackboard press release from 2015 Blackboard and NXP Semiconductors Collaborate to Strengthen Campus Card Technology:

Blackboards’ push to adopt NFC in addition to their existing MIFARE-based solutions, back in 2012 showed incredible insight into the potential of this technology. The security, convenience and flexibility that NXPs NFC and MIFARE solutions bring truly reflect the student lifestyle. Now access to campus services can be simply enabled via a smart watch or smart phone.

Based on this and the fact that it came 2 years after a FeliCa demo of Blackboard Student ID cards with a rumored migration from FeliCa to MIFARE, plus the eligible device specs, my conclusion is that Student ID cards on iOS 12 are MIFARE HCE (Host Card Emulation) which is NFC-A.

Apple Wallet Ponta cards on iOS 12 are VAS protocol contactless passes outlined at WWDC18 , WWDC16, and in the Contactless Passes section of the iOS Security Guide:

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.

This is also NFC-A. Contactless passes have been around for a while on iOS but adoption has been slow. With iOS 12 PASSKit, Apple is encouraging developers to migrate from QR Codes to NFC contactless passes and hopefully lowering the NFC Certificate requirement bar a little. Part of the reason for the slow uptake is poor NFC reader support. LAWSON has a new POS system built around Panasonic JT-R600CR readers which are Apple Pay savvy and Apple Wallet Ponta cards only work correctly when you tell the LAWSON cashier to use “Apple Pay”.

Update: A highly trusted NFC engineering source contacted me that I got it partly wrong. The correction edit above explains that Wallet Ponta cards are Apple’s implementation of the VAS protocol and not MIFARE. Student ID cards are certainly MIFARE/PASSKit NFC Certificate Host Card Emulation (HCE), Apple has not publicly announced MIFARE support but it is the only technology compatible with Blackboard IC card formats that could power the express card features of iOS 12 student ID cards across all eligible devices. Research and confirmation efforts are ongoing.

Update 2:
Apple has announced support for Portland’s HOP transit card and Chicago’s Ventra transit card, both of which are MIFARE

Global FeliCa vs Galapagos Syndrome QR Codes

Back in the pre-iPhone era Japanese manufactures were busy churning out internet connected, e-wallet capable handsets with high quality cameras (for that time) that most of the western IT media pooh-poohed: ‘nobody needs all that fancy stuff’.

Unfortunately the Japanese IT media paid way too much attention to it all endlessly handwringing over the Galapagos Syndrome of Japanese technology that nobody seemed to need or want. Worse than that, people actually bought the media con. Then something strange happened in 2016 when Apple unveiled FeliCa Apple Pay and went global with it in 2017.

Google is now following the same path with a FeliCa Pixel 3 in Japan. Why would Apple and Google do that if FeliCa was stranded in the Galapagos? There is business value there, otherwise they would not be spending resources to do it. Most of the Japanese IT media has ignored this fascinating turn of events, focusing instead on the new darling of manufactured “QR Code mania” payment platforms: AliPay, Origami Pay, Docomo d-PAY (d-HARAI), Line PayRakuten Pay, Pay Pay. The merits are dubious:

Demerits of OR Code Payments

  • QR requires a good network connection
  • Slow transaction speed
  • Weak Security and QR Code Chinese payment apps keep transaction records in Mainland China
  • Device needs be on and screen active
  • No ‘on the spot’ refunds

Merits of FeliCa (NFC-F) Payments

  • Works without network connection
  • Very fast transactions
  • High security and transaction records stay in Japan
  • Device can be in battery reserve mode sleep or screen off
  • On the spot refunds

Fortunately there is one Japanese journalist who is calling it: Masahiro Sano. Sano san’s latest piece on Nikkei notes the irony of Japanese companies falling over each other to roll out useless redundant QR Code platforms because QR Codes are “standard in China” (and nowhere else), while Apple and Google are deploying FeliCa as one more standard checklist item on their digital wallet platforms.

Fake QR Code payment mania confuses customers. Put another way QR Code payment platform apps are about de-centralizing the digital wallet into an ever-growing collection of apps while Apple Pay and Google Pay are about centralizing different technologies into a unified and smooth user experience for payments, tickets, IDs, reward cards and more. Which approach do you think will win in the long run?

Sano san thinks QR Code payment platforms in Japan are not about public demand or customers actually using them. They’re just a fad that will fade and eventually be shipped off to the Galapagos. I think he is right. The evidence so far certainly backs him up.

Express Cards with power reserve reveal Apple global FeliCa strategy

A12 Bionic NFC powers the new Express Cards with power reserve on iPhone XS/XR

Westerns were a little perplexed in 2016 when Apple unveiled FeliCa Apple Pay but only on the Japanese model iPhone 7 and Apple Watch Series 2. Industry experts assumed that the credit card consortium created EMV contactless standard would conquer everything NFC and that FeliCa was non-standard and headed for oblivion. Why would Apple go to all that trouble if FeliCa was headed for the scrape heap?

In 2017 Apple quietly incorporated global FeliCa into all iPhone 8, iPhone X and Apple Watch Series 3 models. Anybody with those devices could add Suica to Apple Pay and enjoy cutting edge contactless transit and payments while visiting Japan. Global FeliCa is something that Android still hasn’t come up with.

And now in 2018 Apple has added Express Cards with power reserve that work with Apple Pay Transit Express cards in Japan and China, and Student ID Cards in America. The interesting thing is that outside of China, all Express cards with power reserve are FeliCa NFC-F. An unexpected twist in an unexpected story. Blackboard is working with Apple to deliver Contactless Student ID Cards to Duke, Oklahoma, Alabama, John Hopkins and Temple.

What I find fascinating is how Apple lists the new A12 Bionic powered Express Card feature. At first Apple limited mention of Express Cards with reserve power to iPhone XS/XR spec pages in just a few countries but later updated it to pretty much every market (Apple Canada for some reason omits it for XS but lists it for XR, a glitch?). Apple didn’t do that for the 2017 global FeliCa rollout. It only mentioned the feature on their Japan site.

If Express Cards with power reserve can only be used in China, Japan and a few universities in America, why list the feature everywhere? Is it just marketing, or is it something else? I’ll go with something else. Maybe not now, or even this year, but more Express Cards with power reserve for transit and ID cards are coming to more places.

Apple obviously saw more strategic long-term value in adding the FeliCa middleware stack to iOS first rather than MIFARE which powers a lot of transit card systems around the world. TfL Oyster may be big but Suica is Godzilla with e-money attached. Add China Transit into the mix and Apple’s strategy is clear: transaction volume. Apple Pay credit cards recharging all those stored value Express Cards in China, Japan and American universities is what Apple is really after. It’s a well-defined and enriching technology bundle that Apple can spread to other markets and segments, an intriguing mix of transit and higher education.

Apple’s global vision is also unmatched by the competition. Samsung Pay for example isn’t available in Japan simply because Samsung want to make more money selling Galaxy as a JP carrier locked Osaifu-Keitai premium device. The Google Pay Japan flop was also because Google wants to promote Android as a premium JP carrier locked device. Samsung and Google strangle their own children for money and market share.

Apple’s focused long-term strategy and global vision for Apple Pay and all things NFC remains a very intriguing one. I think it’s going to be another interesting year.

Update: a review of iPhone XS Apple Pay Suica Express Cards with power reserve

Why iPhone XS/XR have Express Cards with power reserve and Apple Watch Series 4 does not

Apple Pay Suica on iPhone XS and Apple Watch Series 4 are a little different

Have you noticed that iPhone XS and iPhone XR have proper tech spec pages and Apple Watch Series 4 does not? There are lots of pretty pictures though. Apple is not hiding anything but there are some unflattering comparisons: Apple Watch Series 4 does not have Express Cards with power reserve. Why not? The simple answer: A12 Bionic powered NFC. Apple Watch 4 doesn’t have it.

A12 Bionic looks amazing and I really look forward to testing Apple Pay Suica Express Card with power reserve performance on iPhone XS. Apple Watch 4 looks amazing too but there was no way the stellar Apple Chip design team could squeeze the A12 Secure Enclave power reserve features into the Apple Watch S-Series constraints. At least not yet.

Express Cards with power reserve and bulletproofed Apple Pay Suica would be lovely to have on Apple Watch but it is a very different device than iPhone with a very different battery use profile. A dead battery ‘call security so I can get back into the college dorm’ scenario is less likely with Student ID Cards on Apple Watch than it is with iPhone. A dead iPhone battery is the bigger concern. It’s a good reason for iPhone getting Express Cards with power reserve first.

‘The ID card works without the power on’ is a great sales pitch for iPhone XS even though Express Cards are just so much more natural on Apple Watch. I wonder how many college kids will use it to get mom and dad to pop for both devices?

Update: a review of iPhone XS Apple Pay Suica Express Cards with power reserve