Road to Super Suica: 2 in 1 shared infrastructure and mobile transit card expansion update

The JR West Osaka Expo 2025 transit vision looks exactly like the Super Suica one

The October 21 announcement from JR East-Hachinohe City-Northern Iwate Transportation is the 3rd Super Suica local transit card and follows earlier Super Suica local transit card announcements for Utsunomiya Light Rail and Iwate Transit Co. Ltd. These fit neatly into the narrow definition of Super Suica as a local area ‘2 in 1’ transit card within the JR East region that hosts different transit company commute plans and reward points on a single card. New FeliCa chips announced in September have new features like ‘Extended Overlap Service’ to support the ‘2 in 1’ model.

The real test of Super Suica is the wider definition and how it plays with both private transit companies inside and outside of the JR East (JRE) region, JR Group companies and what infrastructure resources JRE is sharing to eliminate needless duplication and save costs for all players. In the COVID era of constrained public travel, reducing costs while maintaining good service is more important than ever.

On the mobile front I think we can safely say that Mobile PASMO is an unannounced joint effort between JR East and PASMO Association. Mobile PASMO service and software is Mobile Suica dressed up in PASMO colors, the penguin character swapped out for a robot. The JR West announcement of Mobile ICOCA one week after the Apple Pay PASMO launch is no coincidence. The Super Suica mobile template is in place and road tested, PASMO and ICOCOA are the first 2 customers.

Who’s next? Junya Suzuki pointed out that Suica and PASMO together account for 80% of Japanese transit card issue, ICOCA added in makes that 90%. The next largest market and logical choice is manaca, the Nagoya area equivalent of PASMO. Forget about the Kansai area PiTaPa, the credit card as transit card concept was a bust and will likely never go mobile unless it’s repositioned as just a credit card. JR Central’s TOICA has deep pockets, and it’s said that TOICA runs on Suica servers, but JR Central has a sibling rivalry thing with JRE that might get in the way.

I’m taking a wild guess but I think manaca will be the next mobile service announcement with the Kyushu area transit cards (SUGOCA and nimoca) following soon after. The next development to keep an eye on is the ‘2 in 1’ Super Suica local transit card model and if other major JR Group members offer a rebranded version of it in their respective transit regions.

From a western perspective people wonder ‘why not just have one national transit card and be done with all this nonsense’. A national transit card has been discussed by various Japanese governments from time to time, and gone nowhere. The shared infrastructure Super Suica model that aims to lift all boats certainly plays more to the traditional Japanese business mindset. In these challenging times that can be a good thing.

We all float

The float is essentially double-counted money: a paid sum which, due to delays in processing, appears simultaneously in the accounts of the payer and the payee.

Individuals and companies alike can use float to their advantage, gaining time or earning interest before payment clears their bank.

Investopedia

One of the great tragedies of the NYC MTA is that it’s a too-much-public-not-enough-private transit cash pipe with too much exposure to local NY politics. NYT has a wonderful video on YouTube that explains the critical MTA flaw: politicians cleverly borrow against the MTA cash pipe for pork barrel projects that have little or nothing to do with MTA, but leave it highly leveraged and helpless to fix it’s own problems or invest in infrastructure.

Think of what MTA could really do if it was effectively protected from political interference, with full control of its own money and a Suica-like transit+payment empire, free to use the float of all those MetroCards soon to be OMNY transit cards.

One of the many things never discussed about open loop is who uses the float, but banks hold the money until the user account is settled with the transit company and they take a cut of the fare. It doesn’t take much imagination to see why banks and credit card companies really like promoting open loop.

Closed loop Japanese transit companies don’t talk about the float either but Japan IC Transit cards are like micro bank accounts with unused e-money balance and plastic card deposits sitting in all those Suica, PASMO, ICOCOA, manaca, etc. Japanese transit companies love to put all those micro bank accounts to work earning interest.

Japanese transit companies and Hong Kong Octopus have built those micro bank account transit cards into a very nice transit payment platform business that combines transit, payments and other services attached to the card which means there’s a lot more stored fare floating around than plain old transit-only cards. The addition of digital wallets like Apple Pay Suica and Apple Pay Octopus means there’s ever more e-money moving through those cards with short term parking…more float for transit companies to earn interest.

It’s a wonder why more transit companies haven’t followed the transit payment platform model to capture more business in the digital wallet era, but it’s testament to how little control they have over their own business destiny. Next time when you hear the praises of open loop over closed loop, remember to think about who’s floating in that business arrangement…and who’s not.

Transit Platform Basics

I have attempted to explain the unique Japanese ‘transit platform’ business model in many posts scattered over 3 years. It’s a model that didn’t exist outside of Japan for a long time because Japan was the first country to move beyond plastic cards and launch them on mobile devices in 2006. There are transit systems that are close to what the Japanese transit platform does, Hong Kong Octopus in particular, but none that combine the elements of private enterprise transit, a mobile platform and a nationwide footprint.

A reader asked some very good questions regarding JR East Transit Platform model basics and how they compare to Open Loop. I’ll try to summarize the essential points.

1) Thinking about this recently – is there a non-techie argument for introducing Suica-type cards in the current day in places with preexisting open-loop infrastructure, wide debit card adoption (even kids), and little overcrowding at ticket gates due to lower volumes?

2) As a tech & transit nerd, I obviously love them, but what could be a convincing, economically sound pitch to a transit operator for creating/adopting an integrated transit&e-money system, given the significant expense and questionable added value?

3) Answers to possible q’s about EMV contactless: 1. 定期券 (commuter passes) & discounts can be tied to card no.; 2. solution for visitors: in-app/paper/multi-trip tickets (like in SG). Obv., Suica has superior privacy & speed, but where speed is not an issue, what’s the killer argument?

My response:

Simple choice: moving people quickly and safely by transit, managed wisely, is a license to make money. A transit company can use that license to build something of greater long term value for the users and businesses of the transit region, a win-win, or give it away to someone else.

A transit platform is the best approach if a company wants to achieve the former. Investing everything in Open Loop as the only strategy is the latter.

Any argument for building a Transit Platform or going all in with Open Loop transit comes down to transit company priorities for safe operation, better customer service and long term business goals. A few crucial points to consider.

Who owns the customer?
A vital point many people miss in the Open Loop debate is that transit users end up as the bank card customer, not the transit company customer. This might seem like an insignificant difference but ‘owning the customer’ is the whole game and key to growing any kind of business, in our era or any era. Which brings us to the next point because one of the best ways to own the transit customer and build a business far beyond simple fare collection is a transit card.

Transit Cards: micro bank account without the bank
Prepaid transit cards are a delivery vehicle for all kinds of service goodies, a mini non-bank account if you will, from transit to points rewards and a growing portfolio of services. The beauty of a non-bank transit prepaid card is its flexibility and security. It can be a simple ticket that customers buy with cash from a station kiosk, or it can be linked to an online account for extended transit services and users can further extend it by attaching a credit card and earn reward points.

eMoney micro bank accounts for all kinds of payments and services that float
The important transformation here is evolving the card beyond transit fares to eMoney payments that can be used throughout the transit region, pioneered by Suica and Octopus. Japanese transit companies and Hong Kong Octopus have built those micro bank account transit cards into a very nice transit payment platform business that combines transit, payments and other services attached to the card which means there’s a lot more stored fare floating around than plain old transit-only cards.

One benefit not discussed much in the open is that by encouraging heavy use and ‘recharge’ of the transit/eMoney card, the transit company earns interest on the ‘float’, the combined total of all those unused prepaid balances sitting in all of those transit cards in the system. The next transformative step is mobile, which is key.

Digital Wallets: extending the reach
The most powerful transit card incarnation is the digital wallet transit card with a flexible recharge backend, where any bank card can attached in an app, or on the fly (Apple Pay, Google Pay, etc.), or even cash recharge at stations, convenience stores and such. The addition of digital wallets means there’s ever more e-money transactions moving through those cards with short term parking…more float for transit companies to earn interest.

Once the transit card goes mobile it can extend beyond the restraints of plastic card technology. It can have a flexible front-end that can be NFC, UWB Touchless or even QR. My basic position regarding open loop bank cards for transit is that doing so eliminates these options for the transit company. I say it’s better for the transit operator to decide what payment technology works best for their long term needs and how to deliver better customer service with new payment technologies, not banks. More on that in the open loop section below.

Value Capture
Value Capture applies to rail and transit operators with the rights to develop the land around their stations, I include station retail development and operations. Owning a transit + payment card like Suica or Octopus combined with retail opens up a whole new levels of value creation and capture.

It’s also important to remember a few other dynamics, (1) Transit is the golden uptake path for contactless payments, (2) Contactless payments are most successful when a transit payment platform, like Suica, is matched with a mobile wallet platform, like Apple Pay. The key is building better payment services tied to transit platform cards that benefit customers and businesses of the entire transit region.

The limitations of Open Loop ‘One Size Fits All’
Open Loop is sold as the cost effective future of transit ticketing but it adds a layer of complexity and cost that stymies native digital transit card support. Complexity and higher cost means fewer choices, delays, and mediocre performance. Steve Jobs explained it best in his last public appearance: a great product or service comes down to focus and choices, either you can focus on making certain technologies work great on your platform versus just okay when you’re spreading yourself too thin. Open Loop means transit system resources too thin, simple as that.

My basic position is that the arguments for open loop are plastic era constructs that ignore how mobile digital wallet platforms and mobile apps have changed everything. For example the oft cited open loop benefit of plastic smartcard issue cost savings completely overlooks the cost savings of digital transit cards on smartphones.

Regarding detailed questions such as attaching commuter passes to EMV cards and special ticketing, I am no systems expert but a few things come to mind. First of all we have not seen Open Loop commuter passes because the EMV spec doesn’t store anything locally and there are always security and performance issues to consider when everything is done in the cloud with soft-linked registration to system outside numbers.

The classic catch 22 here is that when the soft-linked number changes on one system, everything attached to it on the other system stops working. This is a constant weakness of the SmartEx and new JR East Shinkansen eTicket service. And what happens if the bank cancels a card mid-transit? These things happen. They are endless headaches when linking to any outside system, for this reason Open Loop sticks with the simple stuff while transit operators keep the more complex stuff in-house. In general the more complicated the fare configuration, the less likely it can be synced with an outside system or be hosted on Open Loop.

Paper ticketing and NFC passes
For low volume specialty ticketing, QR codes are the easiest step up from mag strip paper and QR can be printed on ordinary paper for transit users without smartphones. This is why JR East is deploying QR code readers in some gates as they prepare to end mag strip ticketing.

NFC Contactless Passes might sound like a good idea but Apple Pay VAS and Google Pay Smart Tap were designed for retail and are far too slow for transit use. The transit gate reader system has to juggle different protocols. It could be done, but from my experience of using Apple Pay VAS PONTA and dPOINT cards the technology hold promise but the current version isn’t there yet. QR Codes are faster and easier to implement.

Summary
In the long run there are no easy solutions which demands a clearly defined strong but flexible business vision. The most important take away is balance with each piece of technology doing what it does best to create a greater whole. For mobile transit this is: 1) a credit/debit/prepaid on the recharge backend, 2) a stored value micro bank account in the middle with a rich set of services attached, 3) a fast flexible NFC front end with fast tap times that can evolve to Touchless and other technologies.

The risk of Open Loop is that it is sold as a monolithic ‘fix all’ mobile solution, which it is not. This lulls transit operators into complacency instead of improving Closed Loop ticketing systems and services, extending them to the mobile digital wallet era for long term gain and sustainable transit.

The simplest sum up: if you ignore Closed Loop and mobile digital payments, you’re ignoring a business opportunity.

Relevant Core Posts
The Contactless Payment Turf Wars: Transit Platforms (an intro)
Transit Gate Evolution: Do QR Codes Really Suck for Transit? (a deeper dive into transit cards, gates and technology)
Road to Super Suica (evolution of the Japanese transit platform business)
Value Capture and the Ecosystem of Transit Platforms (the bigger picture)
The Japanese Transit Platform Business Model (an outside perspective)

Fields of Dreams: the endlessly looping open loop vs closed loop transit debate

MacRumors reported that Apple Pay Express Transit support is finally arriving, bit by bit, on the TfL system after being announced back in May. I only noticed the piece because somebody threw a link to my site in one of the forum comments and the discussion has some interesting, and deliciously snarky, open loop bank cards for transit vs. native transit card debate.

The ‘Japan has a transit IC card problem’ angle is interesting. Yes, Japan does have a transit IC card problem, if you work for a bank credit card operation that wants to promote open loop, which I suspect is the case in the forum debate. The counter argument presentation-like power points are just too glib: to date no major transit system has junked native transit cards for bank cards, not even Oyster. Transit is a license to print money and the huge transaction volumes in Tokyo alone are mouth watering. The ‘problem’ for bank card players is how to angle for a bigger cut of the action.

Plastic era thinking in the Digital Mobile Wallet era
The debate perfectly represents the plastic era transit card vs credit card mindset that completely ignores the impact of digital wallets and mobile payments. My take is that smartphone digital wallets do away with old plastic era distinctions and create new business opportunities for transit companies, if they chose to pursue them. Most don’t.

Tech analysts love to talk about ‘value capture’. The current cashless payments frenzy in Japan is all about capturing users to sign on with a payment platform then growing the ecosystem with more and more services that users, hopefully, want to pay extra for. Nobody talks about this in the open loop vs closed loop debate. The bank that owns the credit card owns the customer going through the transit gate, not the transit company. Put it this way, JRE POINT that go back into free Suica recharges, Green Car upgrades, etc. are vastly different from bank card points, as are the business platforms they feed customers back into. Moving people are money in motion, who gets a cut and what businesses do with that cut is everything.

It an interesting paradox that Europe and America talk about privatizing public transportation in various degrees but to date only Japan and Hong Kong have built highly successful businesses based on private transit ‘value capture’. The endless open loop vs closed loop debate always comes down to this: you can argue all you want about the parts but in the end it is meaningless. To truly understand things, you have to examine the whole business model, how everything fits together, and how that can benefit everybody while growing and evolving.

Suica and Octopus Compared

Hong Kong’s Octopus is coming to Apple Pay soon, it shares the same FeliCa technology base with Suica but there are some interesting differences.

Branding
The mobile version of Suica is Mobile Suica across 3 different payment platforms: Osaifu Keitai, Apple Pay and Google Pay. The current mobile version of Octopus is called Smart Octopus in Samsung Pay but it’s not clear yet if the Smart Octopus branding will stay with Samsung Pay or be set free.

Deposits
Mobile Suica does not have deposits. Plastic Suica cards have a ¥500 deposit but is automatically returned to the stored value (SV) balance when transferred to Apple Pay or Google Pay. Octopus has a HK$50 deposit on both plastic and mobile versions. An interesting difference is that the Octopus deposit will be used temporarily if the SV balance is insufficient to pay transit fare at the exit gate.

Stored Value Balance Limits
Suica has a SV balance limit of ¥20,000. Octopus Cards Limited (OCL) just raised the Octopus SV balance limit for cards issued after October 1, 2019 from HK$1,000 to HK$3,000. In JPY this is roughly double the current Suica limit, about ¥40,000 which puts it inline with other Japanese e-money card balance limits like WAON. Suica balance limits will likely be doubled when the next generation ‘Super Suica’ card architecture arrives in April 2021.

Number of Cards
Smart Octopus is limited to a single card per Samsung Pay user account. Mobile Suica/Apple Pay Suica can have the multiple Suica cards up to the device Wallet limit.

Recharge Fees
One of the many innovations that Apple Pay Suica brought was elimination of the annual Mobile Suica ¥1,050 ‘membership fee’, Google Pay got the same deal and Mobile Suica membership fees are disappearing altogether next year. Mobile Suica does not charge any upfront fee for recharges, but Smart Octopus does: 2.5% a pop for the luxury of recharging in Samsung Pay with Visa and Mastercard card brands although Union Pay cards are apparently free.

The differences in this last section are interesting. JR East charges nothing for recharging Mobile Suica, while OCL does for Smart Octopus. Mobile Suica has been around far longer and JR East has many more online services, such as EkiNet, to offset cloud expenses. Smart Octopus only started in December 2017 and the footprint of Samsung Pay devices compared with everything else is probably small and doesn’t drive enough transaction volume to offset Smart Octopus cloud startup costs. Apple Pay will growth the transaction size of Smart Octopus considerably, hopefully enough for OCL to reduce or eliminate the Add Value Service Fee at some point.

I look forward to digging through service details when Octopus finally launches on Apple Pay.