The future of e-payments, thanks to made-in-Japan technology.

Apple will roll out its Apple Pay contactless payment service in late October in Japan. The FeliCa chip installed in the iPhone 7, which was released in September, and the Apple Watch series 2 model sold in Japan allows the user to pass through automatic ticket gates at train stations and make payments at stores in an instant, simply by holding the device over a card reader.

What is FeliCa?

The name refers to technology developed by Sony that is used in contactless smart cards, although it is also a brand name, and some people think it is the name of smart cards. Sony says on its website that its FeliCa technology has made “contactless” convenience possible.

Smart cards that read and write information on built-in chips safely have become common in our daily lives. Many cash cards and credit cards are contact smart cards that are swiped in a card reader to read information. In contrast, FeliCa and other contactless smart cards are called “contactless” because information is read and written with the user holding the card over a card reader and writer with no need of any physical contact.

A smart chip comes with a microprocessor and has no power source of its own and uses power supplied wirelessly by a card reader to complete transaction.

FeliCa is now used in various kinds of cards including the smart train pass Suica and electronic money such as the Rakuten Edy, Seven & i Holdings’ nanaco and Aeon’s Waon as well as membership cards. The global shipments of FeliCa IC chips totaled 955 million units as of March 2016 and are expected to top 1 billion by the end of this fiscal year. There are believed to be over 100 services that use FeliCa.

FeliCa was developed in Japan but used for the first time in Hong Kong. It was first adopted in 1997 in the Octopus card, a card for accessing public transportation such as buses and subways. It was then introduced in Suica in 2001 and mobile phones in 2004.

One of FeliCa’s strengths is that a single chip can be compatible with several services. Embedded in an employee ID card, it can be used to enter or exit rooms and can also be used as e-money. It boasts high security and prevents information from being rewritten illegally.

Speed demon

The most notable feature of FeliCa is the speed at which it reads information. It takes only 0.1 second to finish reading and writing data after the card is held over a card reader. Usually information is exchanged between a card and a card reader a number of times. “We have made it possible to safely complete the process by exchanging (between a card and a card reader) only five times by working out solutions to the rules for a place to store data and a mechanism that sends a key to decode encrypted data,” said Masayuki Takezawa, senior manager at Sony. It is the fast processing speed of FeliCa technology that enables commuters to pass through automatic ticket gates smoothly, simply by holding their Suica train passes over the gates at major stations such as Tokyo’s Shinjuku Station, whose passenger numbers surpass 3 million a day.

However, the advanced feature that realizes the high processing speed turned out to be an obstacle for FeliCa to become widespread outside Japan. The technology needed overseas is not as high as that in Japan. The high performance technology pushed up the smart card production cost and ended up being not very accessible costwise.

One popular contactless chip is the Mifare developed by NXP Semiconductors, a Dutch manufacturer. The shipments of the chips have topped 10 billion units, including simplified versions that are incapable of keeping track of an account balance. In addition, the company makes chips designed for use in mobile phones and smartphones. Google’s Android Pay, Samsung Electronics’ Samsung Pay and Apple’s Apple Pay are primary examples.

All these contactless smart cards comply with the standards for near-field communication, a short-range high-frequency wireless communications technology that uses a frequency of 13.56 megahertz and enables data exchange between devices over a distance of about 10cm. However, FeliCa is different in how it transmits information, and this is why FeliCa readers have been incompatible with the iPhone’s Apple Pay until now. Apple must have concluded that to increase the number of its contactless payment service users it would be better to adopt FeliCa, which is already widely used in Japan, instead of trying to newly introduce Apple Pay readers.

A FeliCa chip in a smartphone can run up to 20-30 different services. The FeliCa-enabled latest iPhone is expected to be used on a wider range of occasions in Japan. For starters, starting in October it will be usable at Suica-compatible ticket gates and stores, as well as with QUICPay and iD-compatible readers.

Until now, e-money developed in Japan has not been in the global mainstream, almost completely isolated from the rest of the world. But the introduction of FeliCa to Apple Pay may open up a new opportunity to spread to the world the efficient, made-in-Japan technology.

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