Apple Pay Japan 2020 Wrap Up Wish List

A two word summary for people in a hurry: COVID and PASMO. As everybody in Japan knows at this point, COVID drove cashless payment use more than any government program could, or anything else for that matter. Cashless went from being the perennial ‘next big thing’ to first choice at checkout in a surprisingly short time with a growing number of ‘cashless only’ places. Here’s a short recap of the best and worst all things Apple Pay Japan in 2020.

The Worst: Face ID Apple Pay
COVID meant mandatory face mask wear outside the home. iPhone Face ID users outside of Asia quickly learned that Face ID and especially Face ID Apple Pay really sucks with face masks. Apple tweaked Face ID slightly to alleviate the issue but this is a long term problem with no short term workaround. Apple had the foresight to resurrect Touch ID in iPhone SE 2, the right device coming at the right time. For the time being it will hold up the middle and lower range iPhone user base in Japan. Face ID is such a marketing embarrassment right now that Apple only features Touch ID recharge on the Apple Pay PASMO page. The real short term future proof Face ID Apple Pay fix is Apple Watch.

The Biggest: Apple Pay PASMO
Mobile PASMO finally joined Mobile Suica, first on Osaifu Keitai Android then Apple Pay, the biggest and most important launch for Apple Pay Japan in 2020. Suica and PASMO combined represent 80% of the entire transit IC card market. In terms of pure usability, a large and diverse installed base, with Express Transit powered transit and purchases on iPhone and Apple Watch, PASMO easily beat all other Apple Pay service rollouts this year. Apple had VIP execs and foreign media on hand at the press event, something they haven’t done since the Apple Pay Japan launch in 2016.

The Most Influential: Toyota Wallet
The Toyota Wallet App rollout I wrote about a year ago turned out to be the model everybody is doing now: ‘XX Pay’ or ‘XX Wallet’ app consisting of a user account linked to a bank or credit card with a flexible payment dual mode front end offering QR Code payment via the app and a ‘instant issue’ prepaid card in Apple Pay Wallet. The Apple Pay Line Pay card launched on December 22 is the exact same model. Instant app issue debit and prepaid Wallet cards do away with plastic issue costs and lower the user entry bar, amount other things. Expect more of this in 2021, actually expect everybody to do this in 2021.

The WildCard: App Clips
iOS 14.3 App Clip Code support completed the picture for App Clip developers, but it will take time to see how they play out in a market overcrowded with mobile payment options. I think there is always a chance for a low cost high quality service which intelligently designed App Clips can deliver. The key will be solving the Japanese Softcream Cashless Index (SCI) Challenge: can App Clip cashless do a faster more reliable job than good old food ticket vending machines, without an app and without an account? How streamlined can it be and still be an App Clip? I hope we can find the answers to those questions in 2021… but there’s one more thing.

The Missing: Apple Pay Code Payments
The iOS 14 Apple Pay AliPay/Apple Pay Code Payment has been in open secret test mode for nearly a year with no firm release in sight. If screenshots are anything to go by, Apple Pay Code Payments are done with a virtual Wallet ‘card’ like any other and Apple Pay Wallet cards have certain properties:

  • Direct side button Wallet activation with automatic Face/Touch ID authentication and payment at the reader.
  • Device transactions handled by the eSE without a network connection.
  • Ability to set a default main card for Apple Pay use.

Supporting QR Code payments with an Apple Pay Wallet ‘card’ moves QR payments out of the app and removes some, but not all, of the QR payment friction points. It makes App Clips a better user experience too when all payments can be accomplished with Apple Pay.

Ultimately I hope the Apple Pay Wallet card model moves away from single mode technology and evolves to multimode awareness that encompasses NFC, Ultra Wideband, QR, etc. It has too. Our smartphones must be smart and take care of any payment technology for us. They have to because things are only going to get more complicated. People ridicule the Japanese payments landscape but that will be everywhere. Card companies and banks push EMV as a ‘global standard’ but EMV already comes in different flavors like PBOC, so does NFC (NFC A-B-F-V), and Ultra Wideband is joining the mix.

That’s what digital payments are all about: combining complex things into ‘it just works’ simplicity. Anybody can create or load a Suica, Octopus or PASMO into Apple Pay, without signing up or creating a new account, and start using it for lots of different instant payments. That’s how simple it should always be. That’s my 2021 Apple Pay wish.

Best wishes for a happy and safe 2021.

UPDATE: Reader Apple Pay Wishes for 2021

>Mine would be for VISA Japan to support Apple Pay.

>Mine are resurrecting #FeliCa-based @VisaJP TOUCH (can be rebranded), @id_credit re-attempts @ #FeliCa network expansion overseas starting w/ equipping end-users w/ the technology in new card distribution (via digital & physical), & @JCB_CARD expands @QUICPay_PR network overseas.

Is there an App Clip Code for that?

Embedded NFC integrated App Clip Code (L) and Scan-only App Clip Code (R)

iOS 14.3 is the big coming out party for App Clips now that App Clip Codes are in place. Apple posted App Clip Code HIG documentation, App Clip Code Generation tools and more. There are lots of interesting tidbits and 3 ways to engage:

  • iPhone XS and later models with NFC reader mode: “The NFC-integrated variant uses an iPhone icon at its center that guides people to hold their device close to the App Clip Code.”
  • Pre iPhone XS models without NFC reader mode: “scan it using the NFC Tag Reader in Control Center.”
  • All iPhones using Camera app or Code Scanner: “scan-only variant uses a camera icon in its center to let people know to use the Camera app or the Code Scanner in Control Center to scan the App Clip Code.”

The guideline also states, “for NFC-integrated App Clip Codes, choose Type 5 NFC tags.” Type 5 tags are ISO 15693/NFC V used for library books, medical packaging, ski passes etc., but choose instead of use is a recommendation not a rule. Core NFC lists ISO7816, ISO15693, FeliCa, and MIFARE tag support. NFC Forum Tag definitions are:

NFC Forum TagISOJISNFCProducts/Protocol
Type 1ISO 14443-3-AATOPAZ, various
Type 2ISO 14443-3-AANXP MIFARE Ultralite
Type 3ISO 18093JIS X 6319-4FSony FeliCa
Type 4ISO 14443-4-A
ISO 14443-4-B
A/BNXP MIFARE DESFire
Type 5ISO 15693VNXP ICODE, various
The Wikipedia NFC tag table is also helpfully detailed

So why is Apple going to all this trouble to market App Clip Codes? They could have done it all with QR Codes and NFC tags but App Clips are mini apps, App Store quality apps without the App Store. The branding of App Clip Codes defines a different and unique user experience. The NFC reader mode App Clip experience is slick ‘point and run’ fun, but the 2 for 1 ‘scan only or NFC embedded’ in one App Clip Code is practical: (1) physically accessible and close = NFC, (2) physically inaccessible or far away = code scan.

There will be many different App Clip user experiences running from general app launches to specific actions. Based on my Kitasando Coffee App Clip experience I would say, the quicker and more focused the App Clip experience, the more likely the user will use it again or go in for the full app. Apple’s HIG documentation emphasizes clarity and simplicity…good advice.

Now all I want to know is when can I finally buy softcream with an App Clip.

Practical advice from App Clip HIG

Contactless Payment Turf Wars: EMV closed loop transit dumb cards

  1. Contactless Payment Turf Wars: Transit Platforms
  2. Contactless Payment Turf Wars: PiTaPa Pitfalls
  3. Contactless Payment Turf Wars: Why Oyster is missing from mobile
  4. Contactless Payment Turf Wars: Tapping the potential of TAP
  5. Contactless Payment Turf Wars: Apple Card and the Prepaid Innovation of Apple Pay Suica
  6. >Contactless Payment Turf Wars: EMV closed loop transit dumb cards

Prepaid transit smart cards are micro bank accounts on a card. What started as plastic in the mid 1990’s first transitioned to the cloud based mobile digital card era with Mobile Suica in 2006. Transit cards on mobile digital wallets are much more powerful and malleable than their plastic forebears, and occupy a coveted position in the mobile payments market. Credit card companies and banks spend enormous resources and effort to capture this transit fare business.

Background
Many smart cards use FeliCa and MIFARE. The technology has been on the market since 1994 and one of the reasons for platform popularity and longevity are the rich application development environments they offer (Calypso is also popular but limited to transit applications).

Developers can design a card architecture as ‘smart’ (like Suica) or as ‘dumb’ (like iD) but they are all smart cards because they contain an IC chip. In Japan FeliCa powers not only company ID cards, but also transit cards (Suica, PASMO, etc.), bank payment cards (iD, QUICPay) and rechargeable prepaid eMoney cards that anybody can buy and recharge at convenience stores (WAON, nanaco, Edy). Mobile FeliCa has been in place since 2004.

Smart/Dumb card architecture depends on use case, system processing cost efficiency and need. In a transit fare system, a dumb card use case is slower centralized processing, like waiting at the store checkout for card verification to clear. A transit smart card use case is instant locally processed stored value to keep people moving through the gates because centralized processing isn’t up to the task. This is why transit cards have used the stored value local processing model…until now.

Open Loop 1.0
EMV contactless credit cards arrived on the payments scene starting in 2007 but uptake was slow. Since EMV contactless uses the same NFC A as MIFARE based transit cards, the big EMVCo members (VISA, Mastercard, American Express) came up with a great marketing idea: use EMV contactless credit cards as a transit card. Thus EMV open loop transit was born.

EMV Open Loop 1.0 transit that debuted on Transport for London (TfL) Oyster system in 2014 filled mutual needs for TfL and bank card companies. Despite the success of Oyster, TfL wanted to reduce plastic card issue and management costs:

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.

The Future of Ticketing London Assembly (2011)

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.

How Long Does The Oyster Card Have Left? Londonist (2018)

Using bank cards in place of MIFARE Oyster cards accomplished that and because MIFARE was late to the mobile party TfL management decided decided their mobile strategy would be Apple Pay and Android Pay EMV card support. Meanwhile the bank card companies captured transaction fees from mundane transit fares at the gate, got the benefit of using the float instead of TfL, and got people into the habit of using credit cards for tiny purchase amounts. Our parents thought buying coffee with a credit card instead of small change was ridiculous because credit cards were reserved for ‘serious purchases’. Not anymore.

TfL Open Loop was judged a big success and got rave reviews from tech journalists around the world who hailed it as the future of transit ticketing: time to dump those proprietary transit smart cards and go all in with ‘open standard’ EMV open loop if you want the latest and greatest transit fare system. This gave transit agencies and the governments that run them the wrong idea that EMV is a cure all transit fare system solution.

1.0 shortcomings
The problem is that EMV is not an open standard, it is owned and managed by the proprietary EMVCo that is wholly owned by the major credit card companies. EMV is a ‘one size fits all’ payments technology created for the needs of credit card companies and banks. It was never designed as a transit fare solution and will never evolve to incorporate transit needs. Experts agree:

A universal truth is that each transport market is highly unique. While EMV may be the best solution for some, the reality is that a standardized deployment of this model is not best suited to everyone.

Transit systems shouldn’t confuse open loop pay with EMV

The U.S. has been a tough market for transit agencies to deliver successful open-loop systems into, as banks have not been in step with these ambitions.

Is now the time for open-loop transit in the United States?

There is no escaping the basic reality that EMV is a slow dumb smart card. It works well for what it was designed for: store purchases where card transaction latency is not a problem while the checkout terminal communicates with the bank system that has your account information.

Transit fare systems don’t have your bank account information on file, and there are limits with what the backend transit fare system can do when an anonymous bank card number appears on gate reader where long transaction latency is unacceptable. There are tradeoffs: the card gets verified but the transit bill gets settled long after the transit. This is why EMV open loop 1.0 only works for simple or flat fare structures. The result was a 2 layer fare system on London Oyster, Sydney Opal and Chicago Ventra:

  • Plastic and digital EMV open loop dumb card with basic fare transit for users with approved bank cards
  • Plastic transit MIFARE smart cards covering all fares including special fare discounts, commuter passes, etc., for everybody else

Oyster, Opal and Ventra wanted to add mobile support across the board but this meant supporting EMV and MIFARE. All of these are managed by Cubic Transportation Systems who worked with the bank card companies and came up with a new product to solve the dilemma: EMV closed loop transit dumb cards.

Open Loop 2.0
Apple Pay Ventra is this new EMV closed loop mobile transit card product, the launch gave us a first glimpse of the 3 layer fare system:

  • Plastic and digital EMV open loop dumb cards with basic fare transit for users with approved bank cards
  • Digital EMV closed loop dumb cards that cover regular fares and commute passes with special fares to be added later
  • Legacy plastic MIFARE transit cards for everybody else

It’s still a mixed EMV and MIFARE environment but MIFARE is limited to legacy plastic transit cards that can be bought with cash at station kiosks. But we can be sure that MIFARE will be phased out at some point.

The Apple Pay Ventra model is being used for digital Opal trials on Apple Pay and Samsung Pay, and is on tap for digital Oyster and digital OMNY. A basic outline:

  • The transit card is actually a EMV Mastercard prepaid debit card issued by 3rd party bank
  • The Mastercard as transit card is ‘closed loop’ and can only be used for transit and nothing else
  • The user must create an account to use the digital card. The transit account and prepaid/debit information is centralized and managed by the card issuer, nothing is stored value
  • All digital transit card management and housekeeping (adding or transferring cards, recharge, checking the balance, etc.) must be done in a separate app (Ventra App, Opal App, etc.), nothing can be done directly in Wallet
  • Express Transit is not part of the native EMV card architecture and has to be added as part of broader open loop support on the backend fare system by the operator and Apple, this is why Express Transit is missing in the initial test phase of digital Opal: the current Opal fare system does not support it

As this is an EMV bank card dressed up as a transit card, it is still limited by EMV card architecture and bank card network protocol. In place of local stored value it uses the bank card account model. On mobile this means all card housekeeping is in the app, users can’t create, transfer or recharge transit cards directly in Wallet like Suica, PASMO, SmarTrip or TAP. Apple Watch users can’t recharge EMV transit cards without the iPhone app. And like all cloud dependent services everything stops when networks goes down.

Mobile Suica does an excellent job of balancing and combining the strengths of local processed stored value performance, usability and reliability with the power of cloud attached services. It’s the gold standard of what a transit payment platform on mobile can achieve: leveraging transit card micro accounts to attach services and build business instead of giving it away to banks. Digital Opal testers familiar with Suica notice the difference and missing features:

Open Loop 3.0?
For centralized cloud proponents, including Junya Suzuki, the ultimate dream is having one cloud based account using facial recognition for all payment and transit needs. Cubic and centralized account proponents are already looking to speed up London transit gates beyond slow EMV card technology with barrier free face recognition transit gates:

according to CUBIC…their ‘fastrack gateless gateline’ concept, which is currently conducting small user testing, eliminates physical barriers to form an extended corridor-like gateway that between 65 and 75 users can walk through in a minute, whilst their faces are being scanned and synced for payment with their smartphones

Facial recognition to be your future ticket on the London Underground

The joke here is that, (1) JR East achieved those over 60 people per minute walk through levels with FeliCa based Suica cards and open barrier transit gates long ago, (2) the COVID face mask era is a huge challenge for face recognition systems, (3) Touchless transit, Express Transit on steroids, is already in the works.

Personally I think the Ultra Wideband Touchless approach that leverages personal biometric authentication from the user’s smartphone secure enclave instead of having it hosted on somebody else’s cloud system is the safer and more practical way to go. Privacy advocates will agree.

Speed is safety
Tap speed matters more than even in the COVID era

The next installment of the Contactless Payment Turf Wars
If nothing else closed loop EMV transit dumb cards reveal how bankrupt the ‘open loop is open’ argument really is. All Cubic and the card companies did was swap MIFARE for EMV, neither of which are open. And tap speeds are slower than ever with EMV the supermarket checkout protocol, so now we need Face ID transit gates to speed things up.

It’s fake debate. The real debate is online centralization for fare processing where everybody is forced to have a mobile account whether they need it or want it or not. And once everybody is forced to have an account to use transit the next step is forcing facial recognition.

The short term lesson here is that when transit agencies let banks and card companies run the transit fare concession they will never be free of them: there’s too much private money to be made off of running the backend services attached to public infrastructure. The long term lesson is that the mobile digital wallet solutions for Ventra, Opal, Oyster and OMNY are not about transit user convenience and all about convenience for misguided transit operators and their subcontractors.


Reader Questions
Instead of answering questions or comments via Twitter etc., I’ll answer here for the benefit of all readers.

Q: Not being able to recharge within Apple Pay has nothing to do with EMV vs. stored value though, right? If anything, that should be easier (just move money between accounts).

A: It’s true that MIFARE stored value transit cards such as HOP Fastpass force users to recharge via the app. The point of the piece is that EMV transit card features are defined by the EMV format, bank card protocols and how it’s all implemented on digital wallet platforms. In short, bank issuers control the feature set on the backend. I have yet to see a recharge button on any EMV prepaid card in Apple Pay Wallet, I suspect we’ll always see most operations limited to bank issuer apps, even for transit.

C: The open loathing of banks and credit card companies is honestly quite nauseating (but understandable, considering what Japanese banks are like, apart from the credit card companies).

A: Banks and card companies have an important place in transit, but card company ‘one size solves all’ open loop marketing is misleading and profitable mischief. A good transit fare system is all about balance, flexibility and incorporating innovation such as mobile wallets, for the benefit of transit users and safe operations. Bank cards for example are a wonderfully convenient recharge backend, this is where they shine and add real value to the transit user experience.

But swapping out a native transit fare system with an outsourced bank card account system and tech package that the transit company doesn’t ‘own’ is asking for trouble. How much is the long term cost when it doesn’t solve everything as promised? Who really benefits: the transit user, the transit company, or the system partners and consultants?

These are the questions I think people should be asking and discussing. Hopefully my posts outline the issues clearly so people can discuss them to find the best fit long term solution based on local transit region conditions.

Huawei Pay Octopus: global NFC = custom eSE

Huawei Pay Octopus launched on December 9, the second digital Octopus 2020 launch after Apple Pay Octopus on June 2. The device list is interesting: Huawei Mate 40 Pro, P40, P40 Pro, P40 Pro+, P30, P30 Pro, Mate 30, Mate 30 Pro, Mate 20, Mate 20 Pro, Mate RS Porsche, Mate Xs, Nova 7 5G. A wide range of Huawei models sold in Hong Kong have global NFC support, at least on the smartphone side but does not include the G2 Pro smartwatch.

In Japan the only Huawei models with global NFC/Mobile FeliCa/Osaifu Keitai support are the P20 and P30 and only with a Docomo sim. Huawei Pay is not supported in Japan. The Huawei Pay Octopus device list tells us what we suspected all along: Huawei Pay is global NFC capable but Huawei kneecaps it so they can sell devices via Docomo. Huawei Pay can turn things on and off because, just like Apple Pay, Huawei has a custom embedded Secure Element (eSE), so does OPPO and so will Xiaomi in 2021.

The gist of all this is that Google’s Android Pay era HCE and HCE-F technology lost out to eSE long ago. As FeliCa Dude said, ‘it’s all eSE or nothing now,’ to which I would add, ‘it’s all custom eSE + XX-Pay or nothing now.’

So where does Google Pay fit in this scheme? It doesn’t. And it could be one of the things Google hopes to address with their own SoC, but a custom eSE is probably a long shot. That is unless Google is serious about making global NFC Google Pay work seamlessly on Pixel and Fitbit devices by dumping Osaifu Keitai and going all in with a custom eSE. If Google persists in wanting it both ways, limited NFC Google Pay for everybody and global NFC Google Pay in Pixel for Japan only, expect more of the confusing Android global NFC support mess we have now.

SEIYU Stores finally add NFC payment support for Apple Pay Suica • PASMO

That didn’t take long. The announcement Walmart was selling majority control of SEIYU over to KKR and Rakuten was made November 16. And what was the first new management move? Adding Suica and Transit IC payment support which means Apple Pay Suica • PASMO and Google Pay Suica can finally, finally be used for paying at checkout. QR Code PayPay has been in place for awhile already. SEIYU also rolled out a new system recently for self checkout and EMV IC chip payments for SEIYU brand Saison cards (other cards have to be signed…yuck). NFC anything has been entirely missing from the SEIYU payments lineup despite the COVID crisis and a huge push for all things cashless, but Walmart has a long antagonistic history with NFC digital wallet payments.

I only noticed the change this evening when I heard the store announcement over the PA. Sure enough Suica signs were plastered at every checkout. It’s weird but somehow fitting that SEIYU is soft launching long overdue NFC contactless payments with Suica. More will come. I’m sure Walmart leaving town had nothing to do with it. Yeah, nothing at all. SEIYU stores were much better under the pre-Walmart Seibu management. Hopefully this marks a return to better service and clean modern stores.