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 Suica Part

The arrival of Apple Pay Express Transit on Transport for London this month is getting a lot more press than the debut of Apple Pay Express Transit and Suica in October 2016. Local coverage at the time was focused on the arrival of Apple Pay in Japan, Express Transit was barely mentioned. TfL is also getting more press than the debut of Express Transit on the New York MTA OMNY system earlier this year. Apple even created a special page highlighting its arrival.

I suspect there are a few reasons for the brouhaha. The Oyster IC transit card has been around since 2003, open loop EMV contactless cards service started in 2012, Apple Pay support arrived in 2015. MTA on the other hand only started OMNY with very limited open loop transit service in late May. The majority of MTA users still do the MetroCard manual swipe thing. In short TfL users are very familiar with Oyster transit IC cards, contactless bank cards and Apple Pay. They are well aware of the Express Transit difference. The same is true for Apple Pay users in areas like Sydney with a similar transit card system.

MacRumors did a good job of reporting the initial Express Transit on TfL test ramp up before the official debut. Joe Rossignol’s explanation of Express Transit mode support in “parts of Japan” is rather odd though. Which parts does he think don’t work?

The Suica part covers JR East, but since Suica is part of the Japan Transit IC Mutual Use Association this means that Apple Pay Suica works with the PASMO, ICOCA, manaca, nimoca, Pitapa, Toica, Sugoca, Kitaca and Hayaken parts. The Okinawa part will be joining in April 2020. Maybe Rossignol means the parts outside of the blue/pink square mutual transit use area? Most of these are already transit compatible with Apple Pay Suica (the ones with IC arrows pointing at them). This leaves the ones without IC arrows, which will be joining with Super Suica in 2021.

With the exclusion of the soon to join Okinawa OKICA, Apple Pay Suica already covers all the major transit parts in Japan. I have no idea which Apple Pay Suica incompatible parts Rossignol is referring to. The Minobu line? The Oigawa Railway? It is a mystery.

File:ICCard Connection en.svg
Japan Transit IC Map, outside white area cards are due to join Super Suica in 2021

One down, two to go on Apple Pay Express Transit 2019 'coming later this year' list

Apple Pay Express Transit arrived on the Transport for London system over the weekend, some 6 months after it was announced. The other 2 remaining Apple Pay Transit cards announced for later this year are Chicago Ventra and Hong Kong Octopus. I already wrote about Octopus not launching this year. The Ventra odds seem a little better. On the bright side Ventra is run by Cubic, the same folks who operate the TfL and New York OMNY systems and already have EMV Apple Pay Express Transit support up and running. Also the Ventra Chicago Twitter account did mention Apple Pay Ventra as ‘coming later this year’ in a Nov 30 tweet.

On the not so bright side, Apple Pay Ventra is the native MIFARE transit card, the first native transit card that Cubic has ported to a digital wallet and a big complicated transit system at that. Nevertheless, Ventra is telling users that Apple Pay is coming this year. Let’s hope for a successful 2019 launch in the next few weeks.

Fields of Dreams: the endlessly looping open loop vs closed loop transit debate

MacRumors reported that Apple Pay Express Transit support is finally arriving, bit by bit, on the TfL system after being announced back in May. I only noticed the piece because somebody threw a link to my site in one of the forum comments and the discussion has some interesting, and deliciously snarky, open loop bank cards for transit vs. native transit card debate.

The ‘Japan has a transit IC card problem’ angle is interesting. Yes, Japan does have a transit IC card problem, if you work for a bank credit card operation that wants to promote open loop, which I suspect is the case in the forum debate. The counter argument presentation-like power points are just too glib: to date no major transit system has junked native transit cards for bank cards, not even Oyster. Transit is a license to print money and the huge transaction volumes in Tokyo alone are mouth watering. The ‘problem’ for bank card players is how to angle for a bigger cut of the action.

The debate perfectly represents the plastic era transit card vs credit card mindset. More interesting to me are the things people don’t discuss: the impact of Apple Pay and Google Pay digital wallet platforms and transit business models. My take is that smartphone digital wallets do away with old plastic era distinctions and create new business opportunities for transit companies, if they chose to pursue them. Most don’t.

Tech analysts love to talk about ‘value capture’. The current cashless payments frenzy in Japan is all about capturing users to sign on with a payment platform then growing the ecosystem with more and more services that users, hopefully, want to pay extra for. Nobody talks about this in the open loop vs closed loop debate. The bank that owns the credit card owns the customer going through the transit gate, not the transit company. Put it this way, JRE POINT that go back into free Suica recharges, Green Car upgrades, etc. are vastly different from bank card points, as are the business platforms they feed customers back into. Moving people are money in motion, who gets a cut and what businesses do with that cut is everything.

It an interesting paradox that Europe and America talk about privatizing public transportation in various degrees but to date only Japan and Hong Kong have built highly successful businesses based on ‘value capture’. The endless open loop vs closed loop debate always comes down to this: you can argue all you want about the parts but in the end it is meaningless. To truly understand things, you have to examine the whole business model, how everything fits together, and how that can benefit everybody while growing and evolving.