Debit Cards Finally Arrive on Apple Pay Japan Wallet…Virtually

The Mizuho Suica Apple Pay card released just a year ago was an odd product. It was a Mizuho branded virtual Suica card linked to a Mizuho Bank account created in the iOS Mizuho Wallet App, a card that lived exclusively in Apple Pay Wallet without a plastic counterpart. Android users did not get Mizuho Suica, they got the JCB Smart Debit card instead and that remained an Android exclusive…until today.

The Mizuho JCB Smart Debit card joined Mizuho Suica in Apple Pay Wallet today without any fanfare or press release. The JCB Smart, as in smartphone only, Debit card works on the QUICPay+ payment network. Just like Mizuho Suica, users create the JCB Smart Debit card in Mizuho Wallet which adds it to Apple Pay Wallet. Apple Pay compatible Japanese issue plastic debit cards are still missing, but the virtual Mizuho JCB Smart Debit card is an indication that they should be arriving soon. Hopefully it also means that other major Japanese payment cards missing from Apple Pay, such as WAON, nanaco, Rakuten Edy, will join soon Apple Pay with the upcoming iOS 13 release.

Japanese Twitter users are scratching their heads about the stealth update, and Android users are apparently not getting Mizuho Suica in the bargain. Mizuho and is holding a press conference shortly, hopefully it will clear up the questions. I’ll update any details that come out of it to this post.

UPDATE
And the details…

  • JCB Smart Debit is FeliCa/EMV dual mode for use with FeliCa QUICPay in Japan and EMV JCB Contactless/JCB Speedy internationally. Readers report that JCB Contactless also works where the Apple Pay Discover is accepted for payment.
  • Startup campaign: 20% cashback and Mizuho Suica recharge cashback, entry required via the Mizuho Wallet app, running 8/29~12/15
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Rakuten Pay branded Suica for Android in 2020

Apple Pay users got the Mizuho branded Suica in 2018, so it’s only fair that Android Suica users get a digitally branded Suica too. JR East and Rakuten announced Rakuten Pay Suica today. Starting next spring, Rakuten Pay users on Osaifu Keitai Android (no mention of Google Pay, ahem), will be able to create a virtual Rakuten Pay Suica card in the Rakuten Pay app and rack up Rakuten points when recharging it with Rakuten Pay.

Rakuten founder Hiroshi Mikitani is a former bank executive and his buildup of the Rakuten payments service empire is impressive. The whole point is to remove credit cards and banks from the Suica recharge process for Rakuten Pay users, and there are lots of them. So much so that some Apple Pay users might be tempted to switch to Android just to use Rakuten Pay Suica.

All things Suica will change with the arrival of Super Suica in 2021. Until then this is another nice, and strategically important, expansion of the Suica Transit Platform, extending the usefulness of Suica in the Rakuten Pay point universe that has a deep user base in rural areas. Come to think of it, this is JR East getting their ducks in a row for the Super Suica rollout that will incorporate all those local rural transit IC cards that have been left out the e-money and digital wallet revolution. It’s a perfect matchup.

UPDATE
Rakuten and JR East are examining iOS support in addition to Android. Jennifer Bailey and the Apple Pay crew had better get cracking on negotiations with Rakuten, Rakuten Pay Suica is going to be way bigger and more important than Mizuho Suica can ever be.

For the Rakuten Pay app, FeliCa is just one payment protocol sitting alongside barcodes, Bluetooth and QR Codes

Value Capture and the Ecosystem of Transit Platforms

AppleInsider Daniel Eran Dilger’s very long editorial Apple Services and the ecosystem of value capture has an interesting bit at the beginning:

The term Value Capture applies to rail and transit operators that are given the rights to develop the land around their stations. America’s intercontinental train routes were developed by railroads that were deeded land along their planned rail lines. These plots were then sold off or developed, capturing some of the value added by the fact that that land was adjacent to the transportation service the railroad had built and was operating.

Today, while most of America’s current transit systems (from Amtrak to BART) are now on the brink of failure and are often in worse shape than what you find in third world countries—despite the high tax subsidies paid to sustain them—there are many examples around the world of public and private transit operators performing extremely well simply because they were given the rights to develop the land around their stations, leading to extremely lucrative revenue sources that sustain their operations and growth while they provide efficient transportation services to the public.

Dilger goes on to explain value capture in the App Store ecosystem but misses important transit connections with Apple Pay:

The most successful value capture transit model in the world is the Suica Transit Platform business model on full display at  Tokyo Station. The shopping experience both inside and outside the transit gate is mind-boggling (the Drip Mania coffee softcream is to die for if you can find it) as is the cash flow. If JR East offered business tours in English the waiting lines would look like the lines at Tokyo Comic Con. It’s very strange that other transit agencies around the world, ahem in the west, ignore studying the Suica Transit Platform business model.

Tokyo Station is the Suica card epicenter for transit (regular trains, Shinkansen, buses), shopping, and other services like vending machines and coin lockers. You can buy Shinkansen tickets on the go on your smartphone. Every single store register has a Suica reader and the payment choice is either cash or plastic credit cards but contactless payment is strictly Suica. That is not a problem because Inbound Apple Pay users can join the Suica fun.

There has been a lot of overblown media hand wringing that Japanese cashless payments usage rates are far below what they are in China and Korea, and the Japanese government hopes to raise contactless payment usage rates to 40% by 2025 over the current 20% rate. This “problem” is remarkably easy to fix: create an open shared mobile transit cloud infrastructure that follows the Japanese Transit IC Card Interoperability model. Get the big Japanese transit cards on mobile. This unlocks the commuter pass and loyalty point goodies associated with the plastic IC cards, and the problem is solved. It’s that simple.

If that cannot be accomplished the Japanese government could talk JR East into hosting everybody else’s transit card on the Mobile Suica cloud with agreeable terms for big and small players. A concept just like the recently released Apple Pay Mizuho Suica. With all the important transit cards on mobile wallet platforms, contactless payment usage rates in Japan would quickly skyrocket beyond 40%. I guarantee it.

The Big Implications of Apple Pay Mizuho Suica Branding

Apple Pay Branding Model
A diagram of how Mizuho plugs into Suica and how it could work with branding schemes like PASMO

Mizuho Suica for Apple Pay raises questions and fascinating possibilities way beyond yesterday’s announcement. Why now and why only Apple Pay? Is this the first of many Suica branded cards coming to Apple Pay?

The announcement was short, small and caught Japanese IT journalists off guard. Nobody anticipated Apple Pay Suica branding just appearing and working with a wallet app update. It’s slick and in true Apple fashion ‘just works’, but journalists missed important points with huge ramifications:

  • Mizuho Suica only exists as a virtual card hosted on the Mobile Suica Cloud, there is no plastic equivalent
  • DNP provides the Mizuho Wallet app backend

Put together this means the Apple Pay Suica branding vehicle is complete and ready to roll. Almost exactly the model outlined earlier.

The only remaining question is how many other transit companies and banks are going to get on? It’s tempting to think that with another Apple Event approaching, Suica’s eight sisters will join the Apple Pay branding parade: PASMO, ICOCA, TOICA, manaca, Kitaka, SUGOCA, HAYAKAKEN, nimoca. That’s probably a long shot but the vehicle is ready and waiting if they decide to join and time is running out if other transit areas want to benefit from the flood of inbound visitors anticipated for the 2020 Tokyo Olympics.

The Apple Pay Japan strategy of focusing on the stored value Suica transit card more than credit cards has been a tremendous success. Transit truly is the golden uptake path for contactless payments, exactly as the recent and widely regurgitated Juniper Research piece pointed out but everybody seemed to miss that point.

None of the other Japanese transit cards are on mobile but everybody building their own cloud infrastructure is out of the question. If JR East, DNP and Apple can coax the other Japanese transit cards to join the Suica branding scheme that finally offers commuter plans and more for everywhere and not just Tokyo, Apple Pay will easily become the de facto mobile wallet for Japan.

UPDATE 1: the Apple Pay Suica branding program is underway, sources say ‘stay tuned’ for more Apple Pay Japan payments and apps in the near future, September and October are the usual suspects.

UPDATE 2: I think one reason why Japanese journalists missed the virtual only Mizuho Suica point is because the Android Mizuho Wallet App release earlier this year also had virtual cards with one very important difference. Android Mizuho Wallet creates virtual Mizuho QUICPay JCB Debit cards not Suica. Mizuho Debit cards are hosted on the Mizuho system just like their credit cards. Virtual Suica branded cards are hosted on the JR East Mobile Suica Cloud, a completely different system with completely different implications.

UPDATE 3: I hate the blog title and am utterly clueless trying to find a better one that exactly captures why this is an important development.

Apple Pay Mizuho Suica and Mizuho Wallet for iOS

Mizuho Wallet iOS App

Mizuho Bank and JR East announced and released Mizuho Suica for Apple Pay along with a new 2.0 version of the Mizuho Wallet iOS App this morning in Tokyo. Mizuho Wallet v2 allows Mizuho Bank account holders to create a virtual Suica for Apple Pay and recharge Mizuho Suica directly from their linked account in Mizuho Wallet. Users can also recharge Mizuho Suica with any Apple Pay credit card or with cash and use it just like any Apple Pay Suica for transit and purchases.

The Mizuho Wallet App splash screens illustrate setup and use. Mizuho Wallet is unique in that it is the first 3rd party iOS app that Apple and JR East has allowed to create ‘virtual’ Suica. Up until now only Suica App could do that. Unfortunately both apps are still only in Japanese language. There are other limitations: only Mizuho Bank account holders can create a virtual Mizuho Suica and Mizuho Suica can’t be used in Suica App for commuter plan, Shinkansen e-ticket and Green ticket purchases. The press release implies Suica App compatibility will be coming later.

The Mizuho Bank group has been making a lot of noise recently about creating a cashless Japan by the 2020 Tokyo Olympics with QR Codes getting most of their attention. Today’s Mizuho Wallet App and Mizuho Suica release proves that transit is the golden uptake for contactless payments and QR Codes have no part in that in Japan. Another interesting point is that Mizuho Suica is only on Apple Pay.

Japanese reactions on Twitter are a hoot: “this is great, now I don’t have to go to the trouble of applying for a Mizuho Debit Card,” “This looks like Mizuho is just skimming cream off of JR East,” “Does this mean the Mizuho JCB QUICPay debit card is dead or what?” “Argh! I want a green Apple Pay Suica but don’t have a credit card so have to do with a blue Apple Pay Mizuho Suica.” “No auto-charge? Forget it.”

UPDATE
Seriously though this kind of Suica branding for Apple Pay has interesting possibilities with far more important implications than today’s announcement: PASMO Suica, ICOCA Suica, TOICA Suica. A neat solution for getting all the other plastic only Japanese IC transit cards onto Apple Pay. One interesting detail from today’s announcement backs up that possibility: DNP provides the technology back end of the Mizuho Wallet App. Print giants DNP and TOPPAN have deep connections to smartcard and credit card manufacturing and supply most of the Japanese issue IC cards. It makes sense for DNP and TOPPAN to provide app backends for Japanese transit companies who don’t have the means to roll their own apps. More details here.