Contactless Payment: The future of public transportation

When it comes to moving forward, what type of payment structure can customers count on from public transportation? Jed Danbury, vice president at Computop, a global payment service provider, shares his thoughts on how customers can benefit on transit

For more than 150 years, local and long-distance public transportation has become an integral part of the infrastructure of almost every country in the world. Driven by industrialization and numerous technical innovations, increasingly sophisticated subways, trams and buses create a virtual network that connects all parts of city centers with urban areas on the outskirts. Major cities would collapse without subways and buses, as more and more people depend on these safe, fast and reliable methods of transport.

In order to ensure that the efficiency of the public transport system is maintained in the future, there are innovations emerging beyond the actual physical infrastructure of these systems, including regarding new styles of payment, in particular, electronic and mobile ticketing.

The future for some is now

In many parts of the world, the future of public transportation has already become reality. Cities like New York, London and Tokyo are leading the way with these new types of digital or contactless ticketing. Anyone boarding a bus or train in these cities can swipe their credit card or payment app on their mobile phone over a corresponding sensor in the station or on the bus. Waiting in front of ticket machines is no longer necessary, nor is fumbling for small change.

Paper tickets, as well as the proprietary travel passes of network operators, are becoming things of the past. All that passengers need to carry is a credit card or smartphone.

And the travel operators are also benefitting. They can deploy their staff more efficiently and guarantee their customers the best price without the need to update or amend ticket price lists.

How does this work?

Mass Transit Transaction is the name of the process that enables passengers to move quickly through ticket turnstyles and manage payment on the fly, which has clear advantages not only for customers, but also for the travel companies. There are basically two different approaches to setting up the infrastructure for electronic and mobile ticketing.

The companies process the payments either in a closed loop or an open loop. In a closed loop, passengers may pay within a proprietary system. In most cases, they receive credit card-sized smart cards on which they can add money for payment.

The disadvantage of the closed loop method is obvious: the dollar amount remains on the card and can only be used for the intended purpose. In addition, passengers have to remember to add money to their cards frequently, and operators have to take care of card issuance and ongoing management of payments.

In an open loop, passengers simply use their credit or debit cards, their smartphones or other mobile devices with payment functions, like wearables. There is no need to carry yet another card, which they might forget to take with them or lose. All they have to do is tap their card or device on the corresponding sensors. Thanks to Near Field Communication this is done on the fly, and there is no additional waiting time at ticket machines.

The system captures the station from which the customer starts his journey the moment he taps the card or device on the sensor. At the destination station, he taps the card again on the corresponding sensor, and the system calculates the fare.

Pay-as-you-go… and more!

The method behind the system is called Pay-as-You-Go, however, it allows you to go much further than you think. If a customer travels several routes in one day and the total price of the individual tickets exceeds the price of the day ticket, he only pays the lower amount.

During processing at the end of the day, the system automatically selects the best option. Similarly, passengers cannot exceed the payment amount of a monthly ticket for one month. This results in an unprecedented increase in convenience and time, not to mention the potential financial savings and flexibility gained. In addition, special discounts can be granted as part of a loyalty program or during a special promotion.

And it’s not only regular commuters who benefit. Occasional travelers don’t need to worry about carrying anything more than their usual credit or debit card to take advantage of the lowest price guarantee.

Win-win for all

The benefits to both consumers and operators of an open loop, digital ticketing payment system are plentiful. Consumers never pay more than necessary, don’t need any additional cards for payment and have reduced wait times. Transport companies don’t need to radically change their infrastructure to accept digital payments, reduce their operating costs, increase customer satisfaction and bolster payment security and consumer privacy.

The companies don’t store passenger information on proprietary cards or have to handle everything through the credit card. Thanks to security measures such as tokenization, sensitive data remains confidential and cannot be stolen.

For the many reasons mentioned, if you’re part of a public transport business – or, really, any business that involves ticketing, an open loop system for contactless payments is something to strongly consider.