Huawei released the Mate 20 Pro in Japan November 30 with a clear goal of offering a lower priced smartphone in the Japanese market where carrier subsidies are going away and iPhone XR sales rumored to be so-so. IT Media Mobile reports that Huawei’s Jeff Wang, regional president for Japan and Korea said that, “long-term the Japanese mobile market is becoming a fair and level one” competitively, with opportunities to offer users “revolutionary products.” The remark clearly alluded to the Japan Fair Trade Commission investigation of Apple iPhone sales strategy in Japan which resulted in the call to end carrier subsidies.
Wang said Huawei recognizes the need for FeliCa in the Japanese market and is working to add global FeliCa to all Huawei smartphone models. If this turns out to be true, Huawei will first smartphone manufacturer to follow Apple’s lead in adding global FeliCa. The sooner global FeliCa becomes a boring standard check box item for smartphone manufacturers everywhere the better.
Note: I’m updating and consolidating everything here instead of separate posts
Pixel 3 FeliCa related information is trickling in as devices get ready to ship. Pixel 3 details will give us a good idea of the Google Pay roadmap and answer some lingering questions:
Do Pixel 3 JP models have a Google custom FeliCa embedded Secure Element (eSE) implementation or use Sony FeliCa chips, and is the hardware the same across all SKUs?
The Pixel 3 JP models have a different hardware configuration. Google did the quickie solution of sticking a FeliCa chip in it, i.e. one Pixel 3 hardware configuration for Japan, another Pixel 3 hardware configuration for everywhere else. Not exactly the elegant long term vision thing that does not bode well for a global FeliCa Pixel 4: if Google is not creating its own custom Embedded Secure Element (eSE), the prospects of a global FeliCa Pixel next year are dim.
On the plus side Express cards with power reserve are a given as this feature already exists on Android Osaifu-Keitai smartphones with FeliCa chips. The down side is that this means Google Pay on Pixel 3 is exactly what it is on Android Osaifu-Keitai: a candy colored UI wrapper around the Osaifu-Keitai stack, an alternative front end. All icing, no cake. You get what Google Pay Japan supports but you have to add missing pieces like iD on your own. Even worse Pixel 3 apparently locks users into SIM free MVNO Osaifu-Keitai apps and their limitations, i.e. full Docomo iD support cannot be added.
Does Google Pay in Pixel 3 Japanese SKUs implement NFC switching?
iOS 10 didn’t have NFC switching support and was a big reason that Apple only activated FeliCa Apple Pay in the Japanese iPhone 7 and Apple Watch 2 models. NFC switching was necessary to support Global FeliCa iPhone 8 and later/Apple Watch 3 and later so that users could mix different card types (EMV, FeliCa, China Transit) in Wallet and have it all ‘just work’. If Google Pay does not support NFC switching then we have another reason why Pixel 3 is not global FeliCa.
Does Pixel 3 have express cards with power reserve?
As noted above Pixel 3 JP SKUs have a dedicated FeliCa chip like any other Japanese Android Osaifu-Keitai smartphone out there, the answer is yes.
Update: iFixit posted a Pixel 3 teardown, content and title updated
Update 2: the hardware for Pixel 3 JP SKUs has a dedicated FeliCa chip, major rewrite.
Update 3: Google Pay Japan on Pixel 3 is ‘pure’ Google Pay with the current limitations like no iD support and only allows installation of the ‘SIM Free MVNO’ version even on Pixel 3 devices from Docomo.
Global FeliCa iPhone,FeliCa Pixel, Super Suica and all that
Apple Pay Japan arrived just 2 years ago and has clearly disrupted the Japanese contactless payments market in many important and interesting ways. Things can change quickly and the disruption isn’t one way. Here is a timeline:
September 2016 Apple announces FeliCa support for iPhone 7 and Apple Watch 2 Japanese models, Japan Transit IC card e-money use is approximately 5.5 million transactions a month with a 10% YOY growth rate.
October 2016 Apple Pay Japan starts with Apple Pay Suica as the centerpiece.
September 2017 Apple announces iPhone X, iPhone 8 and Apple Watch 3 that have global FeliCa support: anybody coming to Japan can add and use Apple Pay Suica.
October 2018 Google announces Pixel 3 with FeliCa support, a first for Google hardware. Google Pay matches Apple Pay but only on a Pixel 3 JP models further splintering the Android platform between haves and have-nots.
And now because of the success of Apple Pay Suica, JR East and Sony are taking it to the next level developing the next generation Suica container format, which doesn’t have a real name yet (local coop transit smartcard?). I call it Super Suica and it’s due to launch April 2021. Super Suica will change Japanese contactless payments and transplant the Apple Pay Suica transformation from the Suica Tokyo home area to all transit regions nationwide. Everything transit will be on Apple Pay, everybody everywhere can use it for transit and e-money. Google Pay and Osaifu-Keitai will be there too.
With a single seamless NFC standard and certification process in place, JR East roadmap goals are very clear:
Japanese customers with Mobile Suica devices can use their devices for public transportation and transit payments abroad.
Global specification certified NFC devices from abroad can use Mobile Suica.
NFC certification and global FeliCa smartphones are taking care of the hardware side, but NFC transit payments interoperability isn’t there because there hasn’t been a roadmap. Super Suica is the first step to create one. Japanese transit cards have been compatible with each other for transit and e-money since 2013 but important pieces are missing: commuter passes and point systems are still chained to local transit cards and have to be managed locally. You can travel with Apple Pay Suica anywhere, but you can’t add a commuter plan for an area outside of the Suica transit network.
Because of the costs associated with maintaining local data and account management it’s very difficult and expensive for large transit companies to host systems on mobile digital wallets. Nobody outside of JR East has managed to do it. It’s expensive for smaller local transit companies to issue smartcards and impossible to host them on mobile. Super Suica containers will solve these problems and greatly reduce costs not only for plastic card issuance and operation but also for hosting them on mobile digital wallet platforms.
Development is divided between Sony, JR East and JR East Mechatronics (JREM), the JR East subsidiary company that manages Mobile Suica.
Sony: updating FeliCa OS for the new format
JR East: coordinating the deployment effort with the other transit companies
JREM: physical card development, providing background services for issuance and mobile
The press release is terse and light on details but 3 points are very clear:
Support for local commute plans, points, branding and more in addition to the regular stored fare transit and e-money features of current issue cards
Everybody on board
The aim is clear: instead of complicated expensive account management systems that babysit all the extra functions the cloud magically attaches to current transit cards, with every transit company doing it differently, Super Suica will be a universal container that takes care of the extras on the card itself. There will be established protocols and one common format with a new FeliCa OS version to handle everything.
This approach will streamline and simplify the entire Japan Transit IC system process for plastic cards and mobile, significantly lowering costs without sacrificing the great things about Suica: blazing speed and local processing without a network.
Functions that are geeky and complex like setting up auto-charge or purchasing Shinkansen e-tickets will become much easier and accessible. Missing functions like discount tickets, special fares, and regular line express train ticketing will be possible on mobile. JR East has talked about raising the current 20,000 JPY Suica balance limit, Super Suica is the perfect opportunity to finally do it.
The outcome for Japan
The change for Japan is obvious: the success of the Suica transit payment platform in the Tokyo region is made available everywhere. Actually it already is available everywhere but Super Suica will supercharge it. JR East will offer to host everything on mobile so that everybody in Japan can use Apple Pay, Google Pay or Osaifu-Keitai for local transit, purchases, while offering all the local goodies and incentives.
Other big players like JR Central and JR West may not opt-in for hosting on Mobile Suica for political reasons but the incentives are certainly there and the cost of getting somebody else’s cloud service to do it will be much easier and cheaper than it is now. JR East looks eager to go the extra distance to get everybody on Mobile Suica cloud and should make clear that Mobile Suica is only managing containers, not account data.
The outcome outside of Japan
The possibilities outside of Japan are going to be interesting. Could the Hong Kong Octopus system opt for the new format and could it be made cross compatible? It’s nice to think that sister systems like Octopus and Suica could do that some day. Even if that doesn’t happen, the Super Suica container format will offer Octopus the same benefits of lower costs and make it easier to deploy on other digital wallet platforms outside of the currently exclusive Smart Octopus in Samsung Pay.
More than cross compatibility however I think Super Suica will shine a much brighter light on the shortcomings of using ‘Open Loop’ EMV contactless credit card payment networks for transit: non-existent account management, simple fares only, no commute plans, no points that tie in with other transit company services, etc. These are problems that are prohibitively expensive for any transit company to fix on their own and the banking industry payment networks will not.
A handy tip for anyone wanting to get around with Apple Pay without causing a fuss is to authenticate Apple Pay as you approach the gate. Doing it in advance helps remove the awkwardness of holding up other people if your fingerprint or face isn’t recognized first time, for instance.
This is a perfect example of dead-end last century credit card vs. smartcard, open loop vs. closed loop thinking and where it has brought us. Digital wallet platforms like Apple Pay and Google Pay collapse the differences of open loop vs. closed loop and destroy the old arguments while combining different NFC technologies and middleware software into one compelling new whole the creates an entirely new game: Build a transit payment platform instead.
A stored value native transit card on the front end with a credit/debit card on the backend for Apple Pay or Google Pay recharge is the best arrangement that leverages the strengths of both approaches working together instead of the old antagonistic and wasteful A or B arguments. In the long run it’s a win-win for transit companies and the banking industry.
For Asian countries that already have FeliCa transit systems (India, Indonesia, Hong Kong, Vietnam) Super Suica will let them do more. For transit companies in America and Europe, Super Suica will be a great chance to re-examine long-term goals and choose the best mix of technologies in light of the new business opportunities and models that digital wallets and Super Suica roadmap will offer.
One thing is clear: transit companies that stick with the old ways of thinking will miss unique new business opportunities offered by native transit payment platforms hosted on digital wallet platforms, opportunities that build on transit but also extend it into new places.
Apple doing nothing about the iPhone X Suica problem in Japan is a dangerous proposition that’s gives Google a wonderful business opportunity. The danger is that Apple does not realize that Japanese users are the savviest NFC users in the world: Suica and Osaifu-Keitai smartphones have been around a long time, far longer than Apple Pay Suica. Even if Japanese users know nothing about the iPhone X Suica problem, they immediately and instinctively know a NFC lemon device from a good one.
Forcing NFC savvy Japanese iPhone X users to stumble in the dark and deal with the Apple Support “we have never heard of the iPhone X Suica problem” runaround is terrible short term get-rid-of-the-problem vs. long term vision thinking. I guess it means that Apple is OK giving Japanese business away to Google and that giving away some business is less expensive than fixing a problem. Anyway you look at it I think the current approach is a mistake but especially so in the Japanese market.