It’s Baaaack

Now that PayPay has supposedly fixed all the security problems, and set some spending limits, they have have kicked off another 10 billion yen giveaway campaign that hopefully won’t melt down like the previous one. This time Reddit users are taking notice and have posted details in English. Happy shopping!

PayPay Troubles Quash QR Code Hype

SoftBank’s network meltdown was only the start of QR Code PayPay troubles. The 100 Million Yen giveaway startup campaign that was supposed to run December 4~March 31 was suddenly and unceremoniously shutdown at 11:59 pm December 13. The official excuse was that 100 million yen had been given away, but then Japanese tweets started appearing complaining of credit card holders charged for PayPay purchased items that they did not purchase. There were also reports that store staff were not checking customer IDs which they are supposed to do with PayPay purchases over 30,000 JPY. Last but not least once you register a PayPay account, there is no way to delete it.

2 days later top Japanese tech journalists Tsutsumu Ishikawa and Junya Suzuki started to pick up the story on Twitter. PayPay PR answers to Suzuki san’s questions were particularly damning: PayPay apparently allowed unlimited attempts to register credit card numbers and security code numbers, reported credit card fraud cases are “in the double digits” but PayPay does not have a handle on the problem and requests that anybody with suspicious credit card PayPay charges to contact the company (good luck with the user unfriendly ‘Help’ page). Yomiuri later reported that card frauders apparently used stolen card identities to register PayPay accounts with unlimited security code attempts. PayPay PR says this security lapse has been fixed.

Ishikawa san summed it up nicely: somehow it’s so ‘SoftBank’ that the very campaign meant to kick start a QR Code payment boon in Japan ends up destroying the opportunity to do so.

SoftBank Outage Outs QR Code Weakness

The December 6 Ericsson induced SoftBank network outage could not have come at a worse time for SoftBank. The outage took down voice, data and SoftBank WiFi hot spots along with the just launched SoftBank/Yahoo Japan QR Code PayPay platform which was already off to a rocky start. Line Pay experienced serious problems as well.

Many SoftBank iPhone users on Twitter assumed Apple Pay Suica wouldn’t work without a network connection and they would be stranded, but this was not the case, Apple Pay works fine without a network connection. As Apple says in Using Suica on iPhone or Apple Watch in Japan:

Your iPhone or Apple Watch must be turned on, but it doesn’t have to be connected to a network. You don’t need to wake or unlock your device or open an app when you enter or exit the ticket gates. You’ll see Done and a checkmark on the display.

A network connection is necessary only when recharging Suica with Apple Pay, but not for an old fashioned cash recharge which can be done at any convenience store checkout, JR station smart charge kiosk or 7-Eleven ATM.

The network outage clearly reaffirmed the strengths of stored value cards like Suica: payment transaction processing is local and works without a network, stored value money and adding cash works anywhere, anytime. The outage also highlighted the perpetual QR Code weak point, they don’t work when networks are down.

There is also an important but overlooked advantage in this age of digital wallets, Suica is also a plastic card, the ultimate portable hardware backup in case of emergency or for elderly people who don’t like using mobile phones for anything other than, you know, talking.

The lack of a physical backup is what ultimately kills QR Codes as the front end transit payment solution. QR Codes will always work best in the role they are suited for: a backup role for adding money to smart cards or one-off ticket/coupons when neither time nor speed is a concern.