Note: For simplicity and convenience I have migrated and merged older Octopus related posts here. All new Octopus related developments will be posted separately.
I assumed the Octopus Coming to Apple Pay post would be ignored in the end of year rush period. However the timing perfectly coincided with an Octopus Cards Limited press conference where the CEO demurred any Octopus tie-up with Apple and the post got much more attention than I ever anticipated. Obviously there are lots of iPhone users in Hong Kong who want Apple Pay Octopus. A few readers were confused by the situation and asked for some clarification.
First of all the source who correctly predicted last years Smart Octopus on Samsung Pay launch tipped me about the Apple Pay launch. That in itself was enough for me but here’s the thing: if Octopus Cards Limited (OCL) is really serious about expanding Octopus use on mobile platforms, taking the next step of getting Octopus on Apple Pay is the only way to achieve that.
Digital Wallets like Apple Pay and Samsung Pay are the most tightly integrated NFC software and hardware digital wallet platforms out there with integrated FeliCa, but Apple is the only one to implement the necessary Secure Element on their own A Series/S Series hardware with FeliCa Networks keys, and sell the package globally. All the major NFC technologies are standard on Apple Pay: NFC A-B-F, EMV, FeliCa, MIFARE, VAS.
Octopus on Google Pay might look nice on paper but it can’t achieve anything of scale yet because of the highly fragmented nature of Android: to date hardware manufacturers have yet to produce an answer to Apple’s global FeliCa iPhone and Apple Watch, even though everybody’s smartphone has a NFC A-B-F chip. Not even Google has pulled it off. Huawei says they are planning to add global Felica but it will take time.
OCL is playing coy because majority shareholder Hong Kong MTR has added QR Codes and EMV contactless to the transit gate mix removing the exclusive Octopus Card franchise, but the technology and market politics don’t mesh. On one hand you have a fast, established and ‘open’ in-house contactless payment system (as in anybody can buy a plastic Octopus card and ride) basically run by public transit companies. On the other hand you have slow and ‘closed’ contactless payment systems (as in only people with certified credit cards and bank accounts can ride) run by major outside credit/debit network companies chipping off money from both customers and transit companies.
In this context putting Octopus on Apple Pay isn’t just adding a card to a digital wallet platform, it is also a statement of who ultimately controls, operates and benefits from the public transit gates. It’s more about market politics than technology, in other words another battle in the contactless payment turf wars. The outcome will be fascinating to watch but determines whether Octopus will remain a great transit payment platform for Hong Kong with a future, or not.
Apple has never issued an iOS update that specifically mentions Suica or Express Transit Card performance, so each update becomes a guessing game of what’s fixed and what’s not. iOS 12.1.1 was released December 6 in Japan and there has been very little mention of Suica performance on Twitter. Not necessarily a good thing, if performance has changed dramatically, good or bad, people tweet about it.
I reached out to a few trusty Revision B iPhone X Suica user sources. They report no change from the buggy Suica performance they’ve experienced since upgrading to iOS 12. A few iPhone 8 users have also complained about buggy Suica performance. My experience with Suica Express Transit on iPhone XS continues to be excellent though Apple Pay Suica recharge performance is poor when recharging from a Suica notification short cut.
Here’s the iOS 12.1.1 performance score as I see it:
Suica Express Transit performance on pre A12 Bionic iPhone: B-
Occasional error flicker at transit gates
Unresponsive Apple Pay Suica recharge, 50% failure rate when recharging via Suica notifications
Suica Express Transit performance on A12 Bionic iPhone: A-
Unresponsive Apple Pay Suica recharge, 50% failure rate when recharging via Suica notifications
EMV Open Loop 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. That’s a value capture gold mine to build an empire, budget problems solved. Unfortunately TfL gives that gold mine away to the banking industry 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.
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.
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.
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.
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.
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. Let’s take a look.
You might assume that Apple Wallet Ponta is FeliCa because it’s only in Japan 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.
The same eligible device specs that only support NFC A-B across all devices
The only technology that fits this profile along with Express Cards for Student ID cards is 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 PBOC China Transit.
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 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, the only conclusion is that Student ID cards on iOS 12 are MIFARE which is NFC-A/B (technically NFC-A).
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 relaxes 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”.
Apple Wallet Ponta Notification with point summary after successful Apple Pay transaction
The Ponta rewards card for Apple Wallet launched at LAWSON Japan right on schedule and without a hitch. iOS 12/watch OS 5 users with any Apple Pay capable device: iPhone 6 and later, Apple Watch Series 1 and later can add the Ponta rewards card operated by the Recruit Group to Apple Wallet and automatically earn Ponta points with Apple Pay purchases at LAWSON without having to use an app or show a bar code. Apple Pay purchases earn 4X Ponta points during the launch campaign running through March 6, 2019. You can also make purchases with Apple Wallet Ponta points.
NFC Apple Wallet passes are a new feature of iOS 12/watchOS 5. Apple is encouraging developers to use NFC instead of QR or bar codes for Apple Wallet passes, and has been showcasing contactless NFC passes at recent Apple Events. Ponta Apple Wallet hopefully marks the beginning of other NFC enabled reward cards such as JRE POINT joining Apple Wallet.
Create a digital Ponta card with iOS Ponta Card App then add it to Apple Wallet as shown here and in the above screenshots. Say “Apple Pay” to the LAWSON cashier and use Face ID/Touch ID with the card you want to use. Ponta automatic points don’t register with Suica Express Cards, iD or QUICPay, be sure to say “Apple Pay”. The reader does a double read, first for Ponta then for Apple Pay, so hold iPhone to the reader until it gives you a transaction complete sound, the linked Tweet video below gives you the idea. It’s slower than a regular FeliCa transaction because of the double read and the poky Ponta NCF-A protocol.
With a successful Apple Pay transaction the Ponta logo flashes briefly confirming purchase reward points, shown in the GIF Tweet, followed by a Ponta Wallet point summary notification. If you pay close attention to the GIF you’ll notice that LAWSON accepts NFC Pay in addition to FeliCa, iOS NFC switching in action again as Apple Wallet Ponta uses NFC-A. Whatever the NFC flavor is Apple Pay takes care of it, just as it should be.
Update: the LAWSON POS is 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”. Apple Wallet Ponta is Apple’s implementation of the VAS protocal for contactless NFC passes, reward cards, etc. and is NFC A. The Panasonic reader reads Ponta then selects the correct FeliCa payment method (Suica, iD, QUICPay). Users are complaining that LAWSON did not train store staff well but are getting up to speed quickly.