Tag: Visa Touch

The open loop mobile connectivity challenge

The recent additions of stera transit (Visa-SMBC-Nippon Signal-QUADRAC) open loop test systems in Kyushu covering Fukuoka metro, Kuamamoto city transit and JR Kyushu expand the VISA Touch transit boutique deeper into western Japan territory. Open loop based cloud processing advocates like to portray these developments as proof that local processing based FeliCa systems like Suica et al. are expensive bygones due for replacement.

There’s just one little problem that open loop advocates fail to mention: mobile connectivity, aka the Suica app problem, the QR Code payment problem, the Smart Navigo HCE problem, etc. Wide LTE and 5G deployment doesn’t mean reliable mobile and internet connectivity that mobile payment apps depend on, and carrier outages quickly bring down the cloud transaction processing side of the equation. This was proven, yet again, on July 2 when major carrier KDDI suffered a massive nationwide outage that lasted for 80 hours. Let’s make a quick reference graph for examining local processing vs cloud processing in the mobile era.

Stera is a mobile based payments platform from the SMBC group (basically the VISA JP group) that does away with the NTT Data CAFIS dedicated backbone and replaces it with the internet based GMO Payment Gateway. This is the same stera that powers the open loop stera transit initiative.

The weak point of course is that since mobile powers the gate reader side, when mobile service goes down, stera gate readers stop working. As everybody found out during the KDDI network meltdown, Mobile Suica kept right on working on the transit gate and the store checkout reader, while mobile app based code payments and point systems all stopped. Some vital services that depended on KDDI connectivity like ATM networks also stopped working.

Cloud based Suica will face some of these challenges when it goes online in March 2023. The only difference being how much local processing stays intact and how much system buffering there is (how much it needs to talk with the cloud server to do the job), we shall see. Which brings me to the point I want to make. The media almost always portrays the open loop/cloud vs closed loop/local match as a winner takes all, one size fits all proposition. As the KDDI meltdown proves, this is stupid, and dangerous. Never put all the eggs in one technology basket. I don’t think the risk will go away, not as long as telecommunication company corporate structures don’t foster and promote their engineering talent (the people who actually make things work) deep into the executive decision making forums.

Open loop in Japan is geared for inbound tourists the supplements, but does not replace, the old reliable Transit IC infrastructure which is evolving and reducing costs too. They compliment each other, address different needs and uses. One size doesn’t fit all. If it did, Oyster card would have died years ago.

VISA Japan and Apple still at odds over VISA Touch debit cards

Mastercard but no VISA

The April 19 launch of SBI Neobank Mastercard debit card support for Apple Pay was a bit unique: the first time that a plastic issue Japanese debit card came to Apple Pay and the first Apple Pay Japan debit card supporting the FeliCa iD payment network. Another interesting aspect is that only the Mastercard version supports Apple Pay, the VISA version is plastic only with VISA Touch (EMV contactless) support.

There are plenty of bank app issue digital only debit cards from JCB, Mizuho, MUFG and others on Apple Pay. These all work on JCB’s QUICPay (FeliCa) and J/Speedy(EMV) payment networks. Apple Pay Japan supports many different mobile payment network cards thanks to Mobile FeliCa support, by far the largest selection of Apple Pay payment networks in the world: EMV (VISA, Mastercard, AMEX, JCB), iD, QUICPay, Suica, PASMO, nanaco, WAON. But VISA issue debit cards are not supported even though there are many, not a single one on Apple Pay.

Wasn’t this taken care of by the May 2021 Apple and VISA JP agreement? For credit cards yes, one year later they are still at odds over FeliCa support in debit cards. VISA Japan brand debit cards are VISA Touch EMV contactless exclusive, single mode cards. VISA JP credit cards are dual mode EMV/FeliCa for plastic and smartphones, but not debit cards. We don’t know the reason but debit cards deifintely fit the budget customer category while credit cards come with credit checks, perks and card membership fees for upscale cards.

As an easily available budget card, VISA cuts costs by dumping the dual mode EMV/FeliCa IC chip and transaction fees for the convenience of using FeliCa iD/QUICPay payment networks. In other words VISA keeps all transaction fees for themselves while marketing the shit out of VISA Touch as the greatest thing since…whenever.

All of the other card brands in Japan have dual mode NFC as standard. Not VISA, they’re playing the long game of eliminating FeliCa payment network competition. This stupid polarizing single flavor NFC position only served to give QR Code payment networks (PayPay, Line Pay, etc.) a huge opportunity that they smartly played. End result: more payment network competition than ever before.

Apple on the other hand has a very simple rule for all Apple Pay Japanese issue cards: they must support FeliCa and all EMV cards are global NFC dual mode. Was this the price for adding FeliCa support to Apple Pay? Perhaps, I think it’s more to do with the Apple Pay vision of removing complex and confusing hardware choices, the Google Pay Japan mess, for standard ‘just works everywhere’ NFC. Has this been successful? Very...just ask Suica.

The Great Big Nankai VISA Touch Transit Boutique

VISA Japan has been busy this year marketing VISA Touch contactless cards with the SMBC group, leveraging the SMBC-GMO-VISA co-venture stera payment platform that launched in 2020. We have already seen a few VISA Touch stera powered ‘transit boutiques’: smallish inbound tourist centric transit companies that don’t support Transit IC cards like Suica and PASMO. This could be changing.

Nankai Electric Railway along with VISA Japan, SMBC and QUADRAC Co., Ltd., a SoftBank and hedge funded systems company that develops VISA Touch and QR fare systems among other things, announced a co-venture test of VISA Touch and QR Code open loop fares for ‘inbound tourists’ on Nankai transit gates in 2021. ‘Test’ not ‘rollout’. That will come later in 2022. The wording of the press announcement is vague with photo ‘images’ of what it might look like. It reads more like a VISA PR release than a Nankai one.

To understand why Nankai is testing this it helps to know a few things. Nankai lines service Kansai International Airport that up until COVID hit had a lot of inbound tourists from China visiting Universal Studio Japan in Osaka, amoung other things, the AliPay thing being the most important.

The other important thing to know is that Kansai area transit companies (Hankyu, Keihan, Nankai, Hanshin) never developed a PASMO like transit prepaid card for non-JR group transit companies. PiTaPa is a failure because it’s a post-pay transit card, a SMBC managed credit card with credit card checks. It cannot be bought from a station kiosk like any other transit prepaid card and is unsuitable for students and other commuting masses without credit cards or the patience to apply and wait for a PiTaPa card in the mail that is pretty much limited to transit and a few select participating merchants.

This is why Hankyu and Osaka Metro ‘borrow’ the JR West ICOCA card for issuing commuter passes. It’s a mess. But it also means that transit companies in the PiTaPa SMBC orbit are in a weaker position, open to SMBC pressure and loan incentives to try VISA Touch open loop (not really open loop when it’s an exclusive VISA Touch arrangement and nothing else right?).

The Japan Transit IC map. Post-pay PiTaPa based transit cards are in a weaker position than regular prepaid transit cards

It also helps to know that stera Panasonic JT-C60 NFC readers are the slowest transit Suica compatible readers I have every used. These same readers are used in VISA Touch transit boutiques and we all know that EMV contactless is slower than FeliCa.

So what is Nankai testing exactly?

(1) Transit gate friction. Transit IC card tap speed is less than 200 milliseconds (ms) while legacy mag strip paper ticketing is 600 ms. The stera Panasonic readers are far slower than 600 ms, if that’s what they end up using for the test…it’s hilarious to imagine Nankai retrofitting a bulky slow Android based NFC reader on a Omron transit gate.

(2) Fare system overhead. How much does the centralized fare processing and linking to VISA and AliPay cost and how does it perform versus local stored value transit IC cards.

The eventual rollout plan will be based on hardware and system cost balanced against the estimate of capturing more inbound transit revenue. There are also transit gate layout issues to consider, is it better to go with slow and fast lane transit gate layout, or retrofit every gate as cheaply as possible. Does any of this make sense in the COVID era when tap speed is more important than ever?

The Real Friction Point: Inbound and Privacy
We’ll see how it works out but since the advertised point of this effort is for the benefit of inbound tourists, I’ll come out and say it: one of the best things about COVID is the elimination of inbound tourists and their luggage on commuter trains in heavily trafficked areas like JR East Yamanote.

Large groups of people with lots of luggage riding commuter trains during rush hours without following common sense etiquette is a huge stress point for regular commuters. When doors are blocked by luggage and tourists who don’t know, or don’t care about other people using the train, it’s trouble in the making.

The hallmark of any good transit system is safety and reliability, a finely tuned balance of servicing all customers and wisely investing in infrastructure. And transit data privacy, one of the things that open loop advocates don’t talk about. There are risks of sharing transit fare data with outside companies, which is what open loop is all about. All too often in the grab for inbound tourists and in the rush of implementing open loop, transit companies ignore this balance at the expense of regular transit riders. Nankai must keep this in mind. If they do not it will end up being a ‘do less with more overhead’ endeavor, an expensive and security risk proposition for Nankai, but not for VISA, SMBC and QUARDRAC.

UPDATE 2021-03-01: The Nankai Visa Touch tests start April 3, QR Transit tests start April 15. Also: What’s next for PiTaPa?

  • PiTaPa is done, that’s the real Nankai Visa Touch/QR story

UPDATE 2021-12-01: Nankai and SMBC announced an extension, open loop tests will continue for another 12 months up to December 12, 2022. Test stations have also been added on the Koyasan line. It’s pretty easy to see that COVID related dramatic declines in tourists and transit use has delayed the rollout, which is exactly what the announcement outlines. In other words: we need more user data before spending a lot of money on a new ticketing system that might not recoup costs.

The real aim of Nankai open loop is the uptick in tourist traffic in connection with the Osaka-Kansai Expo 2025. Hopefully the state of world travel will be in better shape then than it is now.

VISA Japan finally signs on with Apple Pay (Updated)

UPDATE 5/11/21
Visa JP finally officially joined Apple Pay

Japanese credit card otaku tweeted late last night that the Apple Pay Wallet animation started displaying VISA, which it never did until now. Sure enough, VISA displays in the add card animation for the Apple Pay Japan region on iPhone, Apple Watch and iPad. Wallet only displays supported card brands for the selected Apple Pay region so the change indicates VISA JP is officially on board.

The trouble is we don’t know what that means without a press release from VISA Japan, Apple, or Japanese card issuers. So far we don’t have one. All we have are 2 questions that will hopefully be answered later today or the next few days.

Does it mean current iD/QUICPay VISA cards in Wallet fully support Apple Pay features?
A quick check adding a digital Kyash VISA prepaid card to my Wallet did not show anything new, just the same limitations: no VISA logo, no In App (Suica recharge) or web purchase support, no EMV/FeliCa dual mode. That doesn’t mean anything by itself: virtual Kyash VISA still has the limitations but it may be different for major VISA issuers like SMBC and MUFJ.

Does it mean that Apple Pay is simply matching the EMV only VISA Touch cards already on Google Pay from Sony Bank and others?
This seems more likely but also flies in the face of Apple Pay Japan encouraging ‘it just works anywhere’ dual mode EMV/FeliCa support for Wallet issue. If we don’t get announcements from VISA Japan or Apple, it could be a slow dribble of VISA Touch announcements from VISA JP card issuers, not much fun.

What I really want to know is: did VISA Japan blink, or Apple?

VISA Touch issuers currently on Google Pay

UPDATE 11/24
Somebody in Cupertino uploaded a new JSON payload to Apple Pay servers too soon. After showing in Wallet for almost 24 hours, VISA disappeared from the add card animation lineup around 6 pm JST. With a gaff this long at least we know VISA support is coming to Apple Pay Japan soon and likely with the Line Pay Apple Pay card announced in September for launch ‘later this year’.

VISA Touch Transit Boutiques

VISA Japan announced VISA Touch support on Kyoto Tango Railway, most media outlets simply ran edited versions of the VISA Japan press release. The infrastructure uses a slightly modified stera store reader platform, which VISA has a hand in. Willer Inc. is hailing this as the first ‘VISA Touch’ solution on Japanese train systems but they ignored the fact that stera VISA Touch was already announced for Ibaraki Transit highway bus service back in July.

Japanese journalist comments on Twitter were fun to read with the ‘let’s just dump FeliCa and Suica already and go all in with EMV’ supporters club checking in as usual. Nobi Hayashi asked good questions regarding real user convenience. Junya Suzuki said he plans a trip to investigate the new service, his next ‘Pay Attention’ column promises to be a good read.

Just what kind of end user are these VISA Touch transit installations targeting anyway? Let’s do a quick profile:

  1. VISA Touch JP plastic cards are being issued in Japan but they are new and few and dwarfed by the number of Transit IC cards (Suica, PASMO, ICOCA, etc.) that can be bought by anybody at any station kiosk machine with cash. Apple Pay Japan users cannot use it because VISA JP refuses to support Apple Pay JP FeliCa/EMV dual mode NFC switching. This service is not targeted for domestic transit users.
  2. Both of these VISA Touch installation transit areas market heavily to inbound tourists, neither of them support Transit IC cards.
  3. VISA Touch is not compatible with PBOC Union Pay cards technology, the installations also support QR Code AliPay and WeChat Pay for inbound Chinese tourists

The short summary is these installations are for inbound tourists with VISA Touch contactless credit cards, a transit boutique for marketing purposes more than real use.

Japanese media is quick to dismiss FeliCa as a technical failure in the face of EMV but I think that is the wrong analysis. Looking back it’s easy to see a huge mistake was that the big push for Mobile FeliCa credit cards on smartphones was not matched with an equally big push for plastic credit cards with FeliCa support.

And the big EMV push instead of FeliCa has not worked out so great either. Instead of making a technology agnostic unified push for NFC contactless, EMV bank card interests pushed their own agenda. All that did was provide a big opening for domestic QR Code payment players like Line Pay and Pay Pay which they took and continue to take.

What I find fascinating is that the mainstream Japanese IT media has not written much about the Super Suica 2 in 1 card strategy or rollout plans. Low cost transit IC card infrastructure sharing that delivers consistent and seamless transit service on mobile and legacy plastic while offering local area branding and services is a compelling vision that I don’t see bank card companies matching.

The challenge for JR group companies (JR West, JR Central, JR Kyushu, etc.) is working with JR East to offer Super Suica 2 in 1 card solutions in their own regions, because if they do not we’ll see more VISA Touch transit boutiques.