Consumer expectations for contactless payments have shifted dramatically in recent years as a result of various advances in technology along with evolving rider preferences. Modern passengers demand seamless, convenient, and highly personalized travel experiences and are no longer willing to compromise when it comes to their safety or comfort. Due to this, transport agencies have shifted their focus to adopting open-loop payments as a way of enhancing rider experiences by facilitating faster and more comfortable journeys. Contactless payment technology has revolutionized the way we interact with public transportation systems by providing an improved way for commuters to pay for their transit fares. These systems allow riders to simply tap their preferred credit, debit, or prepaid card, with the additional option of using a payment-enabled device such as a smartphone or a smart device containing their digital wallet. Visa’s latest data indicates that over 94% of passengers onboard public transit expect agencies to offer contactless payments, moving forward. Following a steep decline in ridership during COVID-19, many transit agencies are still struggling to reach pre-pandemic ridership levels. In 2024, U.S. public transportation systems experienced fluctuating ridership levels between 73% and 79% when compared to 2019 levels. Transport authorities can increase and retain ridership by leveraging open-loop payments to ensure more convenient and frictionless journeys for their passengers. Currently, more than half of Americans use contactless payments such as EMV bank cards to make purchases for various goods and services. Open-loop contactless technology is reinforced by Account-Based Ticketing (ABT) architecture, which is considered next-generation ticketing in transit, with the potential to radically advance how we get on board public transport systems. In this article, we’ll look at how open-loop, account-based ticketing can help agencies take their fare collection to the next level, along with transforming their relationship with customers by offering better transit experiences.
The Evolution Of Ticketing & Payment Systems In Public Transit
Ticketing and payment systems in public transport have gone through a major transformation in recent decades. Paper tickets which were typically sold at ticket vending machines, counters, or by staff were becoming increasingly replaced with Automatic Fare Collection (AFC) systems, including closed-loop smart cards, such as the Oyster Card System in London, as well as Hong Kong’s Octopus, Seoul’s Upass, and NaviGo in Paris. Closed-loop payments have been the standard in transit systems around the globe for many years and they do come with some benefits. This form of payment requires customers to load value either directly on a physical card or on an account that is electronically linked to that card. The value can then be used for travel across that particular transit network. Before open-loop transit payment systems became widely available to passengers, closed-loop systems were a significant improvement over tokens and paper tickets, helping enhance convenience for the rider as well as increasing the efficiency of transit operations. Closed-loop systems have helped with financial inclusivity by offering discounted cards for low-income riders, senior citizens, and students and have been particularly useful to members of society who are unbanked and might lack access to a credit or debit card. However, closed-loop systems do tend to come with some drawbacks. In a closed-loop system, the payment method (a card issued by the provider) is directly linked to the system. For instance, a travel card distributed by an operator can only be used for the particular services that this operator provides, as with the Oyster Card in London. For transit agencies, closed-loop models also come with substantially higher maintenance costs and offer fewer options for how fares are managed, which are more complex and have to be applied at different levels of the system. From the customer’s perspective, closed-loop payments entail that a card is needed and funds must be supplied either through top-up or subscription. Ticket counters and vending machines are also essential components as to how passengers load funds into their cards and accounts which can be inconvenient, as well as expensive for transit agencies as they further increase maintenance costs.
In the past, closed-loop systems have contributed to a degree of complexity for riders since they are limited to a particular merchant and would require riders to obtain physical cards to use their services or download specific apps. In some instances, that would mean using several cards or apps if transit fares are not integrated across different providers. Additionally, customers must consistently line up at ticket counters or vending machines, sometimes waiting in long queues and having to always carry cash and remember to reload their cards or buy tickets on an app. An even bigger disadvantage is the fact that any value added to a closed-loop system card is not transferable to any other systems, and it can be lost along with the card. This could be incredibly frustrating for members of society who are struggling financially and might have deposited money into their travel cards that they simply can’t afford to lose. By contrast, contactless, open-loop systems allow riders to use a standard contactless bank card or a mobile wallet without the need to purchase tickets, download an app, or reload a specific card. Open loop payments remove the ticket from a journey altogether, as the card used for payment or mobile device becomes the ticket. Open-loop technology makes it possible to facilitate payments without the need to be part of the system itself. In essence, a customer can use their existing contactless card to purchase fares even if they are not affiliated with that particular transport network. This means passengers can use a single payment method whenever they use multiple transit services. Payments for journeys can also be realized during the trip, after the journey is complete, or after all journeys have concluded for that day and the actual fares are calculated based on usage. Open-loop contactless technology is further reinforced by Account-based Ticketing (ABT) architecture, which takes fare collection to the next level by shifting the focus from physical tickets and transport cards to user accounts. The ‘back-office’ is where the rider’s data is processed and stored, in a secure account. Each customer’s account is held in a cloud and carries all the data required to determine their fares as they travel. Rules are determined by operators and are automated, enabling payments in real-time. Through this account, customers can access an app that gives them a 360-degree view of their travel history and usage even if they use multiple payment methods.
Open-loop Payment Technology Streamlines Fare Collection & Leads To Better Passenger Experiences
Contactless cards facilitate payments that are fast, easy, and secure through the use of contactless chip technology. Instead of purchasing a ticket from a machine or using a closed-loop travel card, passengers can conveniently use their bank-issued credit/debit card, a smartphone, or an e-wallet to purchase fares. This eliminates many common frustrations usually reported by riders such as queuing for tickets, running out of credit, having limited transport options, and missing out on better-value fares. According to a survey by Visa, more than half (57%) of respondents said that speed and efficiency are the top benefits of contactless open-loop payments. Open-loop technology makes it possible to initiate mass transit payments using international EMV® standards. This payment method is universal, which makes it incredibly convenient for any passenger with a bank-issued contactless EMV® credit/debit card. Users can also use any smart device to pay for their travel wherever open-loop payment systems are implemented. In this instance, their payment card or mobile device acts as a ticket, and there are also prepaid EMV® cards available on the market. Amongst the biggest advantages of open-loop technology is that no tickets or sales equipment are required. Passengers can simply tap their cards or use their mobile devices at the terminal and be on their way. Tap-to-pay technology in transit reduces queues by expediting the process of fare collection. Tapping, rather than paying in cash, deducts around 1.75 seconds from boarding times, with time-saving capabilities of up to 2.25 seconds per trip when compared to swiping a card. Dwell times are also shown to decrease, which creates benefits for passengers, operators, and cities by alleviating local traffic. By speeding up and simplifying the passenger experience, operators can enhance customer satisfaction, inspiring more frequent travel from the existing customer base and attracting new people to public transit systems. Transport For London (TFL) reported a 4% growth in ridership in the year following its rollout of a contactless payment system.
Visa’s survey on the Future of Urban Mobility reveals that over 51% of public transit riders currently use four or more payment methods a month for their trips. The study also concluded that around 94% of passengers expect public transit agencies to offer contactless payments, and 65% of riders say that they plan on using contactless payment methods for their future commutes. Open-loop systems provide a secure, highly scalable, convenient, and cost-effective way for passengers to pay for travel and for operators to accept payments. These systems also come with enhanced security features and are able to facilitate faster transactions, leading to a better overall experience and reduced reliance on cash. Passengers benefit from having a more hygienic way to interact with public transit systems as they only need to tap a card reader with their bank card or smartphone as they board a vehicle. If they are taking multiple trips, card taps are grouped and a single charge is applied at the end of the day, for all the journeys they have taken. Another major benefit of contactless EMV is transparency. There are online portals available to both merchants (transport providers) and their customers so that everyone has a clear view of transactions, any payments (including declines and refunds), and historical data. This way passengers can be sure they are always charged correctly. Operators can leverage these insights to create better, customer-centric applications and services. Passengers value having a self-service channel where they are able to view their payment and travel history along with the possibility to resolve any issues without having to call a customer service line. From the perspective of the transit agency, open-loop payment technology is both flexible and cost-effective since it requires less maintenance and there is no longer a need to issue and maintain tickets or transit cards.
Local city governments also stand to benefit from the use of open-loop payment systems in transit. Aside from the cost savings gained from their local transit networks, cities can establish a more accessible and inclusive way for locals and visitors to navigate the city. Furthermore, as municipalities adopt open-loop payments, they can also enjoy the benefits of having more sustainable public transit by removing privately issued cards or tickets. There are also long-term environmental benefits for cities as these systems increase the use of public transportation, which replaces individual car trips. For riders, open loop payments allow them to avoid ticketing offices or kiosks entirely and they don’t have to download a specific app or bother with entering their card details onto a ticketing website. Passengers also have peace of mind knowing they don’t need to calculate the exact amount of funds they need for their rides so they can just focus on their journey. Any targeted discounts, promotions, and loyalty programs for which passengers are liable are applied automatically. Another powerful way to augment a contactless open-loop system is through customizable fare-capping. This puts a ceiling on the amount a passenger can pay for a single day, a week, or a month, regardless of how many trips they take. Additionally, fare capping, which limits the maximum daily, weekly, or monthly charge for travelers is only applicable by the use of electronic fare payments. The majority of agencies see fare capping as a crucial step toward equity in transit as it ensures riders are not overcharged and keeps costs reasonable and predictable for users, promoting a greater use of public transit services. In the past, low-income riders were not able to benefit from the cost savings of weekly or monthly passes due to the high up-front cost. Open-loop technology also allows these members of society to pay for what they actually use, eliminating the initial barrier and ensuring greater access for travelers.
How Can Transport Agencies Leverage Account-based Ticketing To Enhance Customer Experiences?
Account-based Fare Collection Systems have changed how transport agencies store, monitor, report, and manage customer information. Back-office management now comes with sophisticated features that make operations efficient and seamless, consisting of components such as fare revenue accounting, passenger data management, and system performance analysis. Comprehensive mobility platforms also deploy advanced tools such as CAD/AVL which further aid with fleet management processes while also making it possible for transport authorities to monitor and improve the efficiency of their vehicles in real-time. This means that passengers can benefit from better-quality transit services that are faster, more reliable, and more convenient – all of which are typically the biggest complaints from riders. By leveraging Account-based Ticketing, agencies can make use of what’s already in the pockets of passengers, giving them the freedom to choose how they plan, manage, and pay for their journeys. This includes globally accepted payment methods, such as contactless bank cards and mobile wallets, offering a superior approach to fare collection that is more efficient and cost-effective. In the case of mobile ticketing, transit agencies can introduce and experiment with different fare strategies, offering riders more value than previously possible. For passengers using mobile ticketing, they can rest in the assurance that their fares are stored safely in their account. Even if they happen to lose their phone or need to reinstall the transit app, they can easily retrieve any available value and fares by logging into their account from another device. This method is also incredibly easy to use by riders as they will only need to scan a QR code of the ticket at the validator or show their active ticket to an inspector. What’s more, passengers can benefit from technology that’s continuously evolving as these apps are regularly updated to offer better functions and user experiences. Furthermore, the majority of transit apps are designed for future integration with MaaS ecosystems, meaning that riders can easily navigate and manage multimodal journeys, going forward. Fare Collection Systems also deploy robust security measures to ensure passenger information is protected. These include secure cloud-based platforms such as MS Azure as well as payment systems that are PCI-compliant.
Switching to ABT architecture comes with a wide range of benefits for transit agencies, some of which are immediate while others can be realized in time, as is the case with the collection of data. An AFC system collects a lot of data and is capable of generating detailed reports regarding sales, ridership, fares, service demand, and usage patterns. What this essentially tells us is that agencies now have a 360-degree view into how riders use their services, what their needs are, preferences where there is demand for particular services, or what their complaints are. Technology is among the best tools at transit agencies’ disposal when it comes to delivering highly personalized travel experiences. A generic approach is no longer sufficient and riders want services that are tailored to their individual needs and preferences. By analyzing and processing gathered data, agencies can respond adequately to what their riders actually want and need. This can help them create better travel experiences for passengers while fostering better customer relationships, in the long run. Real-time insights and analytics are also essential in assisting transit agencies in day-to-day operations by allowing them to get a better grip on fleets and transit assets, extending their lifespan, and reducing the chance of any unwanted delays or vehicle breakdowns. Historical and real-time data can be applied to effectively optimize vehicle frequency and routes over time, resulting in more efficient resource allocation, and enhanced route management. Modern ABT systems are capable of addressing another major complaint from riders, which is access to real-time information. Real-time Passenger Information (RTPI) Systems come with features such as estimated arrival times, trip duration, live vehicle tracking, and dynamic route planning. This gives riders convenient access to public transit schedules, at their fingertips and through their smartphones along with other tools to help them plan their journeys more efficiently. By investing in real-time information systems, such as web portals and mobile applications, transport agencies can guarantee that their passengers are continuously informed about any developments throughout the network along with arrival times, delays, or potential service disruptions.
It’s also important to consider that Account-based Ticketing systems support interoperability across different transport modes and services. Whether we’re talking about buses, trains, or bike-sharing schemes, all modes become open to any type of payment, so commuters can use a single account for all their transportation needs. Operators can effectively manage fares and establish targeted fare segments based on user profiles, travel patterns, and other relevant criteria. This newfound flexibility allows agencies to meet the diverse commuter needs while optimizing revenue and maintaining financial stability. An Account-based Ticketing approach also minimizes costs associated with cash handling, such as collection, counting, and security, which means that agencies can use the freed-up funds to upgrade infrastructure or for service improvements. Multimodal contactless EMV payment schemes with fare capping are already being used successfully in countries such as the UK, under multiple providers. Once integrated with intelligent trip planning and real-time information, they are one step closer to making MaaS a reality. When we talk about multi-operator fare caps, we’re referring to a fare rule that limits the amount passengers pay when using participating services. A multi-operator scheme can combine several transit agencies or operators who offer various transport and mobility modes. This essentially means that each operator’s fare model remains unchanged, with a daily fare cap that comes into play whenever the cap criteria are met by riders. Calculations are once again made in the back office, and apportionment reports are generated, to share fare revenue appropriately between operators. The notion of ABT systems, combined with contactless, open-loop payments have the potential to shift the passenger’s perception of regional transport. Riders no longer need to consider ticket prices or which operator’s services they are using. Their journeys become seamless, with as minimal friction as possible, leading to a significant improvement in the overall travel experience. Passengers can use a combination of transport modes that best allows them to get from point A to B and trust they will always be charged the best value ticket.
Final Thoughts
Providing a seamless and comfortable transit experience remains a crucial element in enhancing customer satisfaction and loyalty among transit passengers. Transport authorities can leverage solutions such as Open-loop payments and Account-based Ticketing to streamline fare collection as well as bring more convenience and comfort to riders. It’s important to remember that while technology can be a facilitator to better customer relations, the number one priority for agencies should be to provide quality transit services that are reliable, affordable, and accessible to users. Emerging transit technology can bring newfound flexibility to agencies by allowing them to increase operational efficiency, improve services, and move away from outdated legacy models that are no longer effective or sustainable. It’s also up to transport authorities to establish a feasible strategy for how they plan to implement these solutions so they can achieve the desired results as well as a higher return on investment. This means choosing the right technology, scaling based on results, and initiating the right partnership with other key players in the industry such as tech vendors and private companies. Educating staff and passengers is another critical aspect of ensuring digital literacy among all groups of users, not just tech-savvy ones. Being diligent and wise regarding how these new solutions are being integrated into local transport networks could go a long way in making sure they are not only used to their best potential but they are also inclusive and effective in achieving the best possible outcomes for everyone.
AUTHOR
Konstantin is an experienced product and business development professional with vast experience in building revenue systems, having been involved with such initiatives on three continents. His experience spreads from e-commerce and healthcare (for USA, SEA - Malaysia, and Singapore) to mobility as a service (USA and Europe).
