Visa Japan Finally Ready to Sign on to Apple Pay Japan?

IT journalist Junya Suzuki was answering a question of mine regarding dual mode (EMV/FeliCa) credit/debit cards which are somewhat mainstream, even on Docomo dCard, but the plastic issue Sumi Trust Visa contactless cards are EMV only.

I guess Visa Japan still wants to promote payWave (banded as Visa Touch in Japan) over better customer service. Because if Visa was promoting better customer service, they would offer dual mode for plastic cards and Apple Pay like Mastercard and American Express do.

Visa Japan has yet to sign directly with Apple Pay, the reason why Japanese issue Visa cards don’t work for Apple Pay Suica Recharge, but there may be hope. Suzuki san’s tweet suggests Visa Japan might finally sign with Apple Pay, “in the very near future.”

I certainly hope so, but given that Visa Japan has ‘been in discussions with Apple’ to officially join Apple Pay Japan since the service launched in October 2016, and have done nothing the whole time, I’ll believe it when I see it.

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What the Hell is VISA Up To in Japan?

VISA is the least consumer friendly card company in Japan. Period. Mastercard, American Express and JCB are making it easy for Japanese customers to use their cards in mobile wallets (Apple Pay, Osaifu Keitai) both domestically and abroad with NFC Switching. NFC certification requires both NFC-A and NFC-F. Smartphones can do it all, how nice.

Except VISA does not want to play nice, they want to play market politics. Witness VISA’s latest boneheaded move reported by Masakazu Tatara on his excellent EPayments JP site: Visa is pulling the plug on Mobile Visa payWave (NFC-A EMV contactless). The last holdout is Sumitomo Mitsui who will terminate service at the end of December 2018. VISA on the iD and QUICPay (NFC-F FeliCa) contactless payment networks remains in place as does plastic card payWave.

As Tatara san asks, what is VISA up to? His quick review of the Mobile VISA payWave spec is helpful and remarkably similar to the Mobile FeliCa spec.

The secure methods for storing Mobile VISA payWave transaction information are:

  1. A mobile device with an Embedded Secure Element (eSE)
  2. HCE (Host Card Emulation in the cloud)
  3. A “Mobile eSE” SWP SIM
  4. A NFC Contactless Payment Sticker

As Tatara san explains, it is the #3 SIM card option that is really being phased out.  #1 includes Apple Pay and Osaifu Keitai devices. The recently released Google Pay Japan is simply an alternative Osaifu Keitai front end that entirely dispenses with the dead HCE-F. As if this was confusing enough, VISA Japan has not signed on with Apple Pay Japan or Google Pay Japan, nor is VISA payWave compatible with the Osaifu Keitai standard. This leaves #2 and #4 as the only real Mobile VISA payWave Japan options going forward. Good luck with that.

Japanese media has speculated that the Sumitomo Mitsu and Mizuho financial groups want to promote QR Code contactless payments over NFC and the death of Mobile VISA payWave proves that QR is winning the contactless payment turf war. Don’t believe it.

In Japan, aka the contactless payment turf war epicenter, the battle line is stored value vs. credit card with stored value cards the clear winner. This week’s Mizuho Suica announcement is proof of that. There isn’t any money for Japanese merchant support of EMV contactless because most inbound tourist business is mainland Chinese who only want to use QR code contactless AliPay and WePay which Japanese will never use.

So where is VISA going in the Japan market? One guess: the success of Apple Pay Suica and the release of the Global FeliCa iPhone/Apple Watch has VISA at a momentary standstill. Because if Google follows Apple’s lead and releases a Global FeliCa Pixel 3 with NFC switching, things will get very interesting. The more Global FeliCa becomes a ho-hum checkbox feature with every smart device, the more VISA Japan will have to play nice with Apple Pay and Google Pay or risk being shoved aside.

Which brings us back to FeliCa again. To outsiders it looks like the Japanese contactless payments market goes round and round, but it doesn’t. VISA Japan goes round and round playing market politics never moving forward, and that does damage. Last month I wrote:

It would be much better for customers if smart device manufacturers bundled all the major middleware stacks (EMV, FeliCa, MIFARE, China Transit, CEPAS) and simply called it Global NFC. Real Global NFC.

Until the industry does a better job of integrating NFC hardware and the various middleware pieces into a virtual whole, NFC confusion will continue to be a problem.

It would be much better for customers if the credit card industry stopped the contactless payment turf wars and started delivering solutions that help customers instead of sowing confusion.

UPDATE: a reader reports says that payWave on SIM cards is pretty much dead everywhere because the “secure element wars are over.” That’s interesting in light of Huawei offering FeliCa Osaifu Keitai service via Docomo with a SIM card. But that is a Docomo thing more than a Huawei thing.

Why VISA Refuses to Join Apple Pay Japan

Apple Pay Wallet has an interesting animation that shows you exactly which card brands are supported in the selected region. The Japan region animation shows: Suica, American Express,  Mastercard and JCB. No VISA. But wait, you can use JP issued VISA cards on Apple Pay with QUICPay and iD payment networks right? Yes but only on QUICPay and iD payment in stores, not for Apple Pay In-App and Apple Pay Web purchases. This is why Japanese issue VISA cards don’t work for Apple Pay Suica Recharge in Wallet but VISA cards issued from other countries do.

Apple Pay Japan VISA cards are ‘backdoor’ indirect support because VISA is required to support QUICPay and iD store purchases and licensees from previous agreements. To date VISA has yet to sign on officially with Apple Pay in Japan even though VISA issued a comment that they ‘hope to support Apple Pay Japan soon’ when the service launched in October 2016.

I have long suspected that VISA simply does not want anything to do with Apple’s support of the Global NFC standard put in place by the NFC Forum and GSMA/GCF in 2017. It’s not only Apple either. VISA refuses to support dual more (EMV/FeliCa) Docomo iD/NFC for Android Osaifu Keitai users abroad which Mastercard, American Express and JCB do. VISA simply wants to bide time until NFC Pay/EMV contactless support in Japan is everywhere and then simply ignore FeliCa (NFC-F) all together.

In short, it’s a marketplace power play to bypass FeliCa payment networks and grab a larger share of the cash register processing fee with payWave. Unfortunately this strategy has only accomplished one thing: it provided an opening for QR Code payment system players like PayPay and others.

reddit user FeliCaDude has written extensively and authoritatively on all things FeliCa smartphone for a long time. His take on VISA’s Tokyo Olympic strategy matches mine, he also explains why Google’s HCE-F strategy for Google Pay in Japan is a dead-end:

If you want to talk about the Olympics, what you will see instead is more Contactless EMV terminals and Japanese issuers starting to issue Contactless EMV cards. That is the only thing acceptable to Visa and their huge piles of sponsorship money.

Google also has no interest in anything other than Android Pay. Their strategy will be to ride Visa’s coat-tails and wait for additional Contactless EMV deployment, at which point they will tie up with a major issuer and start Android Pay service in Japan. Currently what they have is a marketing sham that builds a thin veneer over Osaifu-Keitai. HCE-F cannot be used to emulate existing FeliCa-based payment systems because of the system code restrictions and lack of secure key storage.

Read the original posts on reddit, they are well worth your time. In Japan, aka the contactless payment turf war epicenter, the battle lines were stored value vs. credit card with stored value cards the clear winner on the card side, but now there are QR Code payment services too. Let’s not forget there isn’t any money in Japanese merchant support of EMV contactless because most Inbound tourist business is mainland Chinese who only want to use QR Code AliPay and Wechat Pay.

It’s a shame but not suprising that VISA wants EMV contactless and payWave to be the only game in the world but that is just their business model. For transit systems there are better business models out there. Global NFC (A-B-F) is just a platform to build new kinds of business models on. Diversity is strength, and offers better business opportunities in the long run. Who cares about NFC flavors when smart devices take care of it all. It’s as simple as that.