Apple Pay Octopus launch…for real

Good news for long suffering Hong Kong iPhone users: press invitations labeled ‘Redefining Mobile Payments’ that went out to local media outlets on May 28 signaled Octopus for Apple Pay would finally launch on June 2, which it did in tandem with Apple Maps Hong Kong Transit directions just before 1 am June 2 local Hong Kong time. The press event took place at 12:30 pm.

Didn’t we do this already?

OCL teased everyone when it first announced Apple Pay Octopus as ‘coming soon’ in July 2019, then ‘as soon as possible’ in September, finally postponing it in December for ‘later in 2020’ without explanation. This despite endless beta test leaks that indicated everything was ready to roll and endless launch rumors that never panned out. A timeline:

Global NFC iPhone and Apple Watch
Apple Pay Octopus is just like Apple Pay Suica with Express Transit. It can be used on iPhone 8 and later with iOS 13.5, and Apple Watch Series 3 and later with watchOS 6.2.5. Apple devices from anywhere can add and use Octopus thanks to Apple global NFC support but practical use is limited to having a Hong Kong issue Mastercard, Visa or UnionPay bank card already in Wallet.

iPhone 11 Pro/11/XR/XS have the A12/A13 Bionic exclusive Express Transit with power reserve feature that gives users an additional 5 hours of Express Transit use when iPhone is in low battery power reserve mode. A12/A13 Bionic powered transit card performance is also much improved over previous iPhone models because the Bionic Secure Element directly handles transactions that eliminate iOS overhead. If Octopus on iPhone X doesn’t work well, check this support post.

Apple Watch is the first time Octopus has landed on a smartwatch. As a long time Apple Pay Suica user I can tell you that it’s the Apple Watch killer app. Octopus users will really enjoy the experience on Apple Watch especially when hooked up with auto recharge/Automatic Add Value Service (AAVS).

Similarities with Suica
Octopus is based on the same FeliCa technology that powers Suica, both cards are very similar in scope and use for fast transit and contactless payments of all kinds. According to Wikipedia over 33 million Octopus cards were in circulation as of 2018 used by 99 per cent of Hong Kong residents. The ubiquity of Octopus with Express Transit for transit and purchases will drive Apple Pay use in Hong Kong far more than regular credit/debit cards.

Apple Pay Octopus and Apple Pay Suica both have the same fast Express Transit performance that no other Express Transit cards can match with faster gate performance than the recently added Apple Pay China T-Union mainland transit cards.

New virtual Octopus cards can be created directly in Wallet just like Apple Pay Suica cards or added via the Octopus app (v6). Plastic Octopus cards can also be transferred to Wallet but cannot be used after transfer.

Some attached services are not supported. Be sure to check Important Notes to Customers before transferring a plastic Octopus. Another issue to be aware of is that the Octopus card number changes when transferred which can cause problems with some card ID# linked services.

Not Inbound Friendly
OCL limits Apple Pay Octopus card creation and recharge to having Hong Kong issue Mastercard, UnionPay and Visa cards already added in Wallet. It’s clearly not geared for inbound visitors. This is a shame because Apple supports global NFC on all devices which Samsung and Android devices do not, a key difference.

In practice this means any iPhone 8 and later from anywhere can use Apple Pay Octopus but only when a Hong Kong issue bank payment card is already loaded in Wallet. Suica is very different in this regard: it can be created and recharged in Wallet with any Apple Pay loaded card no matter the brand or country of issue, all without service fees. It’s a very inbound friendly deal for Japan visitors with iPhone.

Unfortunately OCL was limited by restrictive Hong Kong bank agreements and didn’t offer any Apple Pay inbound friendly solutions at the press event. Hopefully they will expand inbound bank card support down the road as banks realize the value of enticing tourists to use Hong Kong transit (see Updates for Octopus for Tourists).

Octopus was the first real transit platform (contactless transit and eMoney) that had a tremendous impact on the development of other transit card fare systems around the world such as Transport for London Oyster. However, OCL needs to aggressively expand Octopus services on other mobile digital wallets like Google Pay especially as MTR moves to add QR Code payment Open Loop support.

Apple Maps Transit Integration
Hong Kong Apple Maps Transit directions launched in tandem with Apple Pay Octopus. It makes sense for Apple to offer both services as an integrated package as they did for the Apple Pay Suica. In Japan, Google Maps transit directions offer more detail and a better UI than Apple Maps Transit even though they use the same data suppliers. Your milage may vary but Google Maps transit directions for Hong Kong has been in place for some time and offers extras like crowding info. Another limitation shared with Apple Maps in Japan: no indoor station mapping.

Greater Bay Area Apple Pay Transit Compatibility
Apple Pay Octopus is the last piece of the transit puzzle that delivers Express Transit convenience to Greater Bay Area iPhone/Apple Watch users who, up until iOS 13.4.1, were limited to China Union Pay (CUP) cards without Express Transit and plastic Octopus cards.

The recently released Apple Pay China T-Union transit cards are interoperable transit cards that work across the country, some 257 mainland cities, similar to what Japan has with Suica, ICOCA, PASMO. China T-Union uses the PBOC 2.0/3.0 protocol, the Chinese variant of EMV with the slowest NFC transaction speeds, they are limited to UnionPay issue credit/debit cards for recharge and cannot be used for purchases. Octopus uses the faster FeliCa protocol and offers an open Apple Pay recharge backend for Hong Kong issue cards.

The advantage for wide area travelers is that they can now add both Apple Pay Octopus and China T-Union cards in Wallet. Having 2 different Apple Pay transit cards in Wallet may not be exactly the same as the dual mode Sold Octopus•Lingnan Pass but it should be close. It will be interesting to hear what the Apple Pay Greater Bay Area transit experience is like using both services.

Why the long wait?
There has been endless speculation regarding the reasons for the Apple Pay Octopus delay. Technically it could have launched on iOS 12 but was held back for an unbelievably long test period over 2 major iOS versions, running from December 2018 and iOS 12 all the way to May 2020 and iOS 13.5, the last major release before iOS 14.

Why? Personally I always felt the unexplained November 2019 Smart Octopus service outage was an ominous sign that OCL plans were under political pressure. Other possible delay reasons include Apple Pay recharge card support and fee negotiations, and lining up Apple Map transit data. There’s no question that the go-slow OCL approach was not helped by the ever-deteriorating political situation.

The Apple Pay Octopus launch story was a long winding road with many ups and letdowns in the very difficult year of 2019. 2020 is also a very difficult year in a different way, though I hope it can still turn out to be a time of recovery.

I’d like to thank all the readers who shared Octopus tips and comments that let me report a complex, ever changing situation. I learned many things, the most important of which is that Hong Kong people are very kind and very smart. Wish you all a safe, healthy and happy transit wherever you go.

‘Redefining Mobile Payments’ June 2 press event invitation
Mobile Suica has a long history dating back to 2007. Mobile use growth had stalled until the Apple Pay Suica launch in 2016. Octopus on Apple Pay will likely drive a similar spurt of mobile use.

UPDATES

July 30: OCL released the Octopus App for Tourists, this is an iOS app for inbound iPhone users to add a digital Octopus to Apple Pay and recharge it. The app requires a foreign issue Mastercard, Union Pay or Visa and the user must select a non HKD currency when adding the card. This is forced dynamic currency conversion and is a card compliance violation: card users should be able to make purchases in the local currency.

While OCL does not charge an upfront Octopus recharge fee, the forced currency exchange average adds 4% compared with direct HKD purchases. This is customer gouging. Why Apple allows this on their App Store and Apple Pay platforms is baffling. The app adds and locks an Octopus card to a non-HKD currency for recharge and cannot be changed. See the Octopus on iPhone and Apple Watch tourist page for details.

June 3 8:00 JST: Octopus issues apology, “Due to the overwhelming response to the launch of Octopus on iPhone and Apple Watch, some customers could not add their Octopus between 11:30 am and 12:19 pm on 2 June,” and compensating some Octopus users
June 2 12:00 JST: Octopus Card Limited site updated for Apple Pay Octopus and a press release
June 2 09:00 JST: Apple Pay Octopus page added to Hong Kong Apple site with instructions for creating, transferring and topping up Octopus cards in Apple Pay
June 2 03:20 JST: Octopus App v6 update released
June 2 01:50 JST: Apple Pay Octopus has launched, rollout expanding in stages
June 2 00:46 JST: Apple Pay Transit directions for Hong Kong appearing in advance of the Apple Pay Octopus

Garmin Pay Suica aka Google Pay on iOS

Garmin Pay Suica went live May 21, effectively breaking the 4 year Apple Watch/Apple Pay Suica monopoly. As any Apple Watch user in Tokyo will tell you, Apple Pay Suica is the killer Apple Watch app. The real secret of course is Express Transit payments. Even now I get the occasional oh and ah from store staff when I hold Apple Watch up to the reader. They really appreciate the speed and social distance. So do I.

Since Garmin only does smartwatches, there are inherent limitations and big differences from Apple Pay Suica: (1) there is no way to transfer a plastic Suica to Gamin Pay, users have to create an account and a new virtual Garmin Pay Suica card, (2) Garmin Pay Suica does not support Suica Commuter Passes, (3) Garmin Pay Suica can only be recharged with Google Pay, (4) Garmin Pay Suica is limited to Japanese Garmin models, it is not global NFC like iPhone and Apple Watch.

Outside of that Garmin Pay Suica is a regular Suica with ‘Rapid Pass’ instead of Express Transit, different name, same thing. It can be registered for SmartEX and Ekinet Shinkansen eTicket travel. iOS users setup and recharge via the Garmin Connect Mobile app.

Garmin Pay Suica limitations limit its appeal for iPhone users who already have the full range of Mobile Suica service on Apple Watch. It’s a boon for Android users who have lusted after a Suica smartwatch. It very weird that it has taken 4 years for Android based device makers to even attempt matching the killer combo of Apple Watch and Apple Pay Suica. I hope Garmin works to improve the service and remove the limitations. Android users would really appreciate having the full Mobile Suica experience on a smartwatch.

UPDATE: there’s some gray area whether all Asian models support Suica or just the devices sold in Japan. I’ll update any discoveries here. Other limitations like Suica Commuter passes are also interesting and suspect they shed some light on the Google Pay~Osaifu Keitai relationship. In many ways Google Pay Suica is a UI skin on top of the Osaifu Keitai stack. In the case of Garmin Pay, no Osaifu Keitai stack means no Commuter Pass support even though it depends on Google Pay for recharge.

UPDATE: All APAC models support Suica

Transit Platform Basics

I have attempted to explain the unique Japanese ‘transit platform’ business model in many posts scattered over 3 years. It’s a model that didn’t exist outside of Japan for a long time because Japan was the first country to move beyond plastic cards and launch them on mobile devices in 2006. There are transit systems that are very close to what the Japanese transit platform does, Hong Kong Octopus in particular, but none that combine the elements of private enterprise transit, a mobile platform and a nationwide footprint.

A reader asked some very good questions regarding JR East Transit Platform model basics and how they compare to Open Loop. I’ll try to summarize the essential points.

1) Thinking about this recently – is there a non-techie argument for introducing Suica-type cards in the current day in places with preexisting open-loop infrastructure, wide debit card adoption (even kids), and little overcrowding at ticket gates due to lower volumes?

2) As a tech & transit nerd, I obviously love them, but what could be a convincing, economically sound pitch to a transit operator for creating/adopting an integrated transit&e-money system, given the significant expense and questionable added value?

3) Answers to possible q’s about EMV contactless: 1. 定期券 (commuter passes) & discounts can be tied to card no.; 2. solution for visitors: in-app/paper/multi-trip tickets (like in SG). Obv., Suica has superior privacy & speed, but where speed is not an issue, what’s the killer argument?

My response:

Simple choice: moving people quickly and safely by transit, managed wisely, is a license to make money. A transit company can use that license to build something of greater long term value for the users and businesses of the transit region, a win-win, or give it away to someone else.

A transit platform is the best approach if a company wants to achieve the former. Investing everything in Open Loop as the only strategy is the latter.

Any argument for building a Transit Platform or going all in with Open Loop transit comes down to transit company priorities for safe operation, better customer service and long term business goals. A few crucial points to consider.

Who owns the customer?
A vital point many people miss in the Open Loop debate is that transit users end up as the bank card customer, not the transit company customer. This might seem like an insignificant difference but ‘owning the customer’ is the whole game and key to growing any kind of business, in our era or any era. There is also the question of what’s best for transit user privacy. Which brings us to the next point because one of the best ways to own the transit customer and build a business far beyond simple fare collection is a transit card.

Transit Cards: micro bank account without the bank
Prepaid transit cards are a delivery vehicle for all kinds of service goodies, a mini non-bank account if you will, from transit to points rewards and a growing portfolio of services. The beauty of a non-bank transit prepaid card is its flexibility and security. It can be a simple ticket that customers buy with cash from a station kiosk, or it can be linked to an online account for extended transit services and users can further extend it by attaching a credit card and earn reward points.

eMoney micro bank accounts for all kinds of payments and services that float
The important transformation here is evolving the card beyond transit fares to eMoney payments that can be used throughout the transit region, pioneered by Suica and Octopus. Japanese transit companies and Hong Kong Octopus have built those micro bank account transit cards into a very nice transit payment platform business that combines transit, payments and other services attached to the card which means there’s a lot more stored fare floating around than plain old transit-only cards.

One benefit not discussed much in the open is that by encouraging heavy use and ‘recharge’ of the transit/eMoney card, the transit company earns interest on the ‘float’, the combined total of all those unused prepaid balances sitting in all of those transit cards in the system. The next transformative step is mobile, which is key.

Digital Wallets: extending the reach
The most powerful transit card incarnation is the digital wallet transit card with a flexible recharge backend, where any bank card can attached in an app, or on the fly (Apple Pay, Google Pay, etc.), or even cash recharge at stations, convenience stores and such. The addition of digital wallets means there’s ever more e-money transactions moving through those cards with short term parking…more float for transit companies to earn interest.

Once the transit card goes mobile it can extend beyond the restraints of plastic card technology. It can have a flexible front-end that can be NFC, UWB Touchless or even QR. My basic position regarding open loop bank cards for transit is that doing so eliminates these options for the transit company. I say it’s better for the transit operator to decide what payment technology works best for their long term needs and how to deliver better customer service with new payment technologies, not banks. More on that in the open loop section below.

Value Capture
Value Capture applies to rail and transit operators with the rights to develop the land around their stations, I include station retail development and operations. Owning a transit + payment card like Suica or Octopus combined with retail opens up a whole new levels of value creation and capture.

It’s also important to remember a few other dynamics, (1) Transit is the golden uptake path for contactless payments, (2) Contactless payments are most successful when a transit payment platform, like Suica, is matched with a mobile wallet platform, like Apple Pay. The key is building better payment services tied to transit platform cards that benefit customers and businesses of the entire transit region.

The limitations of Open Loop ‘One Size Fits All’
Open Loop is sold as the cost effective future of transit ticketing but it adds a layer of complexity and cost that stymies native digital transit card support. Complexity and higher cost means fewer choices, delays, and mediocre performance. Steve Jobs explained it best in his last public appearance: a great product or service comes down to focus and choices, either you can focus on making certain technologies work great on your platform versus just okay when you’re spreading yourself too thin. Open Loop means transit system resources too thin, simple as that.

My basic position is that the arguments for open loop are plastic era constructs that ignore how mobile digital wallet platforms and mobile apps have changed everything. For example the oft cited open loop benefit of plastic smartcard issue cost savings completely overlooks the cost savings of digital transit cards on smartphones.

Regarding detailed questions such as attaching commuter passes to EMV cards and special ticketing, I am no systems expert but a few things come to mind. First of all we have not seen Open Loop commuter passes because the EMV spec doesn’t store anything locally and there are always security and performance issues to consider when everything is done in the cloud with soft-linked registration to system outside numbers.

The classic catch 22 here is that when the soft-linked number changes on one system, everything attached to it on the other system stops working. This is a constant weakness of the SmartEx and new JR East Shinkansen eTicket service. And what happens if the bank cancels a card mid-transit? These things happen. They are endless headaches when linking to any outside system, for this reason Open Loop sticks with the simple stuff while transit operators keep the more complex stuff in-house. In general the more complicated the fare configuration, the less likely it can be synced with an outside system or be hosted on Open Loop.

Paper ticketing and NFC passes
For low volume specialty ticketing, QR codes are the easiest step up from mag strip paper and QR can be printed on ordinary paper for transit users without smartphones. This is why JR East is deploying QR code readers in some gates as they prepare to end mag strip ticketing.

NFC Contactless Passes might sound like a good idea but Apple Pay VAS and Google Pay Smart Tap were designed for retail and are far too slow for transit use. The transit gate reader system has to juggle different protocols. It could be done, but from my experience of using Apple Pay VAS PONTA and dPOINT cards the technology hold promise but the current version isn’t there yet. QR Codes are faster and easier to implement.

Summary
In the long run there are no easy solutions which demands a clearly defined strong but flexible business vision. The most important take away is balance with each piece of technology doing what it does best to create a greater whole. For mobile transit this is: 1) a credit/debit/prepaid on the recharge backend, 2) a stored value micro bank account in the middle with a rich set of services attached, 3) a fast flexible NFC front end with fast tap times that can evolve to Touchless and other technologies.

The risk of Open Loop is that it is sold as a monolithic ‘fix all’ mobile solution, which it is not. This lulls transit operators into complacency instead of improving Closed Loop ticketing systems and services, extending them to the mobile digital wallet era for long term gain and sustainable transit.

The simplest sum up: if you ignore Closed Loop and mobile digital payments, you’re ignoring a business opportunity.

Relevant Core Posts
The Contactless Payment Turf Wars: Transit Platforms (an intro)
Transit Gate Evolution: Do QR Codes Really Suck for Transit? (a deeper dive into transit cards, gates and technology)
Road to Super Suica (evolution of the Japanese transit platform business)
Value Capture and the Ecosystem of Transit Platforms (the bigger picture)
The Japanese Transit Platform Business Model (an outside perspective)
The Open Loop transit privacy question

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.

Plastic era thinking in the Digital Mobile Wallet era
The debate perfectly represents the plastic era transit card vs credit card mindset that completely ignores the impact of digital wallets and mobile payments. 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 private transit ‘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.

Apple Pay Global NFC Lineup Updated with iPhone 11/Apple Watch 5

The Apple Pay Japan page has a special place in Apple’s web site galaxy. It is the only page that lists global NFC specs for Apple devices. This was the page where we learned about global FeliCa iPhone 8/iPhone X/Apple Watch 3 because Apple didn’t announce anything. So the Apple Pay Japan page check is a ritual and final word of global NFC support for every new Apple device.

There were no surprises after the latest new iPhone announcement. We all knew the Apple Pay Japan device spec list would be updated with iPhone 11/iPhone 11 Pro/Apple Watch Series 5 at some point, which it finally was this week. The ritual and peace of mind is always a good thing.

Just one last little question for Apple: when does the Hong Kong Apple Pay page finally join the Apple Pay Japan page for global NFC device specs now that iOS 13 Hong Kong Wallet mentions travel cards and Apple Pay Octopus is coming soon?