From Cash to value stored cards: What’s next for mass transport contactless payments?

From Cash to value stored cards: What’s next for mass transport contactless payments?

According to Global Mass Transit report 2020, still more than 30% of passengers use traditional fare media and a significant part of those prefer to pay for the ticket just before the journey. It can be one-way or two-way tickets, payment by cash or even a small amount of top-ups. Operators get creative with new fare packages, loyalty systems and discounts in order to push people towards “long” ticket values but this cannot significantly change the reality: passengers dislike ticket top-us in advance and prefer the Pay-As-You-Go model. How will this evolve in a Covid19 world?

Cash – is a pure open loop. With coins in your pocket, you can pay for your lunch, your bus ticket or a phone plan. What can be easier? New technologies changed dramatically our everyday life and our daily choices by prioritizing convenience. It is obvious that making a phone call now has become much simpler than using a street payphone but did the transport card have the same effect on mass transit ticketing?

Transport contactless cards are already strongly associated with life in the modern metropolis around the globe. From London to Hong Kong, Moscow, New York, Singapore, New Delhi or any other major city, if you plan on using public transport you have to consider buying a contactless transport card. The contactless card has become the key to the city's transport system which opens for you a quick, relatively inexpensive and comfortable way to reach any end of the city (and even return back), avoiding most traffic jams. In the UAE, in 2019 RTA announced a partnership to quickly advance the smart payment options for Dubai, mostly in the context of the long awaited Expo 2020, however in 2020 the global pandemic accelerated the necessity of contactless payments across the country.

The simplicity of technology made it so popular and common everywhere, regardless of the size of the city. Passengers either purchase or receive for free a contactless smart card (or any other carrier of electronic chip), “charge” it with equivalent of the money (in fact it is a digital value “recorded” on the chip) and then use it (tap it) to pay for the services. Smart cards are also widely called – value stored cards. Each time the card is tapped the read-write operation is done, balance on the card is deducted and updated with the new value.

When chip transport cards appeared 25 years ago, it was not just a breakthrough technology, but it was also so practical, that in a relatively short period of time, a smart card became a new standard for mass transit ticketing. Benefits were significant: transparency of fare collection, reduction of cash handling, safety for the user, improvement in station’s performance and finally a new quality level of mass transit.

However, the shortcomings of such systems were immediately revealed.

Firstly, it is the cost of implementation. Smart card system requires a huge infrastructure to be deployed: card issuance and distribution, readers, station and depot servers, automated ticketing machines (kiosks), balance check machines and so on. It means that only big players can afford this type of ticketing while smaller transit operators stay aside from implementation or will be invited into the game on less attractive terms.

Secondly, the most obvious drawback – the smart card is just an equivalent of money – and losing a card leads to loss of balance on it.

Thanks to the new technologies, it has become possible to partially move away from the “value on the card” approach by implementing Account Based Ticketing Systems (ABT).

In ABT, the balance is no longer stored on the card. Alike banking cards are used - in ABT the “plastic” itself (or other carrier of contactless media), is used only as an identifier or, in other words, the “key” to a transport account, securely stored on the server. Cardholders can stop being afraid that the card (and therefore the funds on it) will be irretrievably lost or damaged. Such an ID can be easily blocked and restored in the ticketing office or remotely without any actual losses for the owner. As a bonus, this technology allows to attach multiple media to one account providing possibility of corporate or family accounts or even replace the contactless card with QR (that is significantly cheaper) or biometrics data (like convenient facial recognition technology) for identification.

From a different angle, closed loop cards proved to become a major positive step in flattening the curve of Covid19 global pandemic. One of main purposes of transport cards is to make the ticketing process more convenient and smoother: reduce time in transit, improve convenience and accessibility and in 2020 reduce the physical contact with surfaces or cash that can carry dangerous Covid19 droplets.

It is widely assumed that the passenger will top up a card balance in advance (for several journeys at once) to decrease the number of cash transactions and necessary visits to ticket offices, hence reduce cash payments in the buses. But in reality it is not so accurate.

At first, instead of a one cash transaction, we make at least two ticketing transactions: top-up and validation. In some cases, we must make a third one - card purchase for initial travel. Top-up transactions convert real money into tickets (transport balance) and by validation transaction on the reader we make ticketing transactions.

Human behavior has a major impact on the process. As it turns out, not all passengers are willing to top up their cards in advance to reduce the number of visits to ticketing offices for future travels for two major reasons. As mentioned, the passenger always has fears of losing the card, but there is an even more fundamental reason. People prefer not to lock money on transport cards but leave the liquidity for more urgent needs. The uncertainty in the future also plays its role, as these tickets might not be needed due to dismissal, job change, illness, relocation etc. Recent COVID-19 isolation measures can enforce this trend even more. Other passengers are using mass transit from time to time and have no reason to make advance payment on the transport card at all, it is more convenient for them to visit the ticket office just before travel.

The future is still massively influenced by behaviours. In a global context that forced masses into isolation and cash- conscious decisions, we can hardly expect the increase of closed loop ticketing efficiency. Further steps can be either to transform the transport card into a new payment ecosystem by involving other services into it - this is choice of Hong Kong (Octopus), or parallel launch of an open loop payment system, as in Limburg, Bengaluru, Aktobe.

Under open loop we understand the possibility to pay with existing payment tools – bank cards or eWallets.

It’s so obvious that one may even say: “Why wasn't it done yet?” And “Why do you ask me to take this new transit card if I have a debit and credit card in my pocket?”

And this becomes a new chapter in ticketing transformation.