Apple Inc is planning a new iPhone feature for Japan that would enable users to pay for mass transit rides with their smartphones instead of physical payment cards.
A future iPhone will include technology called FeliCa, a mobile tap-to-pay standard in Japan developed by Sony Corp, according to people familiar with the matter.
The FeliCa chip will let customers in Japan store their public bus and train passes on their iPhones. Users would then be able to tap their smartphones against the entrance scanners instead of using physical cards.
While the FeliCa chip is the standard technology underpinning the service, there are several different providers of transit payment cards based on the type of transit and areas within Japan.
The near field communication (NFC) technology powering Apple’s mobile payments service, Apple Pay, is prevalent in North America, Europe and Australia, but the FeliCa standard dominates Japan with 1.9 million payment terminals, according to the Bank of Japan.
The terminals handled ¥4.6 trillion (US$45.78 billion) in transactions last year.
There were 1.3 million NFC terminals in the US and 320,000 in the UK last year, according to research from Let’s Talk Payments and the UK Cards Association.
Apple intends to work with multiple transit card providers, one person said.
The major players include the Suica and Pasmo networks.
Theoretically, virtual representations of transit passes would be stored in the iPhone’s Wallet application, said the person, who asked not be identified, because the planning is private.
The card companies sell access to transit services both as needed and via monthly packages.
Apple’s opportunity in Japan is significant, with the country alone representing 8 percent of the company’s total revenue and almost 11 percent of operating profit in the most recent quarter.
Apple plans to launch these new features with the next iPhone models, which it is set to unveil next month, according to people familiar with the matter.
However, Apple could hold back the transit card feature until next year’s model if discussions with the Japan-based payment networks fall apart, one person said.
The FeliCa chip is able to process a transaction in 0.1 seconds, according to Sony.
Superfast transaction speeds are critical for adoption in the fast-paced environment of Japan’s transit network, the person said.
Each sale over Apple Pay goes through a server and requires bank approval, which can slow the process.
In addition to supporting the transit pass network, the FeliCa chip can store e-money, an electric form of currency now widely accepted at vending machines, convenience stores and cafes in Japan.
Apple is in discussions with at least one major financial institution to support these e-money transactions, one of the people said.
Earlier this month, Apple struck a deal with Japan-based telephone carrier KDDI Corp to allow customers to bill iTunes purchases to their cellphone service bill instead of directly to their credit card.
Apple’s deal with KDDI is indicative of Apple’s payment-related negotiations with firms in Japan and follows up the company’s work on activating carrier-based iTunes billing in Taiwan, Germany, the UK, Russia and Switzerland.
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