As more transit operators around the globe go digital, we are gradually seeing the decline of old and outdated systems that use cash, paper tickets, closed-loop, and card-based transactions. It’s estimated that the digital ticketing market will grow to $1.7 billion by 2025 and it’s reported that 80% of cities in the US prepare for the adoption of contactless payment methods in public transportation. Transit agencies are turning to open-loop payments as a way to create a contactless payment ecosystem that makes things easier for passengers and reduces human interactions – a crucial element to getting riders back to transit post-pandemic.
Let’s take a look at some key points of why contactless payments in transit are becoming critical, along with various benefits and what to expect in the future.
Why are contactless payments crucial for public transit?
According to Visa, the use of open-loop payments doubled in the U.S. during the pandemic, with more than 300 million contactless cards being in circulation now. Payment networks have provided much-needed aid to transit operators with the transition to “open-loop” contactless payment systems that allow riders to simply tap their phone or contactless-enabled card or device when making a journey. Tap-to-pay carries the potential of becoming a universal process that simplifies the public transit experience around the world. It will no longer matter if you speak the local language or not, or if you understand the local currency. Tap-to-pay essentially provides the same user experience wherever you go, creating a fast and convenient way for riders to get around transit networks.
Passengers have made their opinion clear on the fact that they prefer contactless payments when it comes to public transport. In Visa’s Future of Urban Mobility study, 91 percent of riders surveyed reported that they expect to pay with a tap onboard trains and buses. The report also concludes there are more than 700 U.S. transit projects underway that involve the use of contactless tap-and-go payment methods.
Convenience and enhanced user experience
By making it possible for customers to pay for a journey using what is already in their pockets, transit agencies can provide critical ease of use when it comes to fare payments along with providing more customized and preferred travel experiences for customers. Open-loop contactless transit solutions make it possible for travelers to use their existing contactless credit card, debit card, or mobile wallet to tap and pay for a ride, in an instant. There is no need for prepaid journeys, cash handling, or paper tickets, and you don’t have to use any proprietary transit-specific apps or ticket machines.
This type of digital ticketing provides a platform where seamless mobility in transit can be achieved. Commuters can easily switch from one mode of transit to another such as transferring from a city bus to the subway or the railroad and so on. Everything is integrated and combined into a single platform. Ticket charges and changes in operators are all integrated digitally, allowing for a simple, hassle-free user experience. Additionally, this also makes it possible to transcend language and currency barriers when it comes to fares so that public transport is more accessible to residents, visitors, and tourists.
Boosts operational efficiency and reduces costs
For the most part, agencies benefit from payment technologies included in bank-issued contactless cards as well as mobile wallets that facilitate tap-to-pay as a fast and convenient way of moving passengers through gates with greater and improved efficiency. Going contactless also removes a significant portion of the cost normally associated with managing ticketing infrastructure since passengers with NFC-enabled devices are more inclined to choose a digital fare. Transit operators will be able to save money and resources from the issuing and replacement of closed-loop fares along with machine maintenance.
A fast and convenient payment alternative lessens the pressure and dependency on cash, boosting overall operational productivity. The technology behind tap-to-ride solutions typically allows a passenger’s daily trips to be combined into one single transaction, which in turn eliminates the multiple authorization fees for operators. Passenger fare caps and discounts are automatically calculated and applied.
Through the adoption of open-loop contactless payments, transit operators can provide passengers with a fast, easy, and secure way to pay for their journeys. Unlike proprietary closed-loop systems, open tap-to-ride systems allow travelers to simply pay for their fare with the swipe of a contactless credit or debit card, smartphone, or another wearable device upon coming in contact with a contactless transit reader when entering a bus, turnstile, or a gate.
Fast and secure transactions
Public transit systems engage in millions of transactions every single day so any payment system used must be reliable, accessible, and secure. Contactless payments, more specifically in the form of e-ticketing, offer a range of benefits to transit operators that include enhancing efficiency in operations and helping staff achieve fast and secure validations. Transportation companies can effectively reduce their operational expenses from current ticketing systems, and reduce maintenance, and overall costs, gaining better control over cash flows.
Transit operators can take advantage of high-security technology that is already employed in EMV payment cards. Additionally, reducing or eliminating paper tickets, cash handling and idle time spent at stops benefits the environment as there will be less fuel being used, reducing levels of harmful CO2 emissions in a city.
Contactless payments are safer and can increase ridership
Along with providing residents with a more seamless experience, contactless payment systems also enable visitors of a city to use public transit without prior knowledge of how complex ticketing systems work and operate, something that could otherwise be very confusing for a tourist. Contactless further contributes to passenger safety and public health by limiting the need for the exchange of cash between people.
Passengers can essentially use their preferred payment method to make a journey without the need to understand details of local fare structures or tickets, and without having to stop at a kiosk, purchase a paper ticket, download a specific app, or preload a proprietary stored-value car.
A contactless payment solution eliminates queues that would otherwise form via conventional sales at ticket counters, along with topping up travel cards at vending machines. Systems without cash offer unprecedented efficiency, allowing passengers to move quickly through transit networks which in return improves schedule adherence and reduces the chance of large crowds forming.
A contactless payment ecosystem is more sustainablе
Contactless payment systems are also environmentally friendly as they reduce the need for paper or plastic tickets. This offers a variety of benefits to the operator, passengers, and the environment as this form of traveling essentially promotes sustainable use of resources and eliminates single-use tickets along with plastic travel cards. There is a reduction in operational costs, fewer harmful emissions being dispersed into the atmosphere, less waste being produced, and decreased reliance on the hardware used for issuing tickets.
How open-loop payments are changing the transport industry
With that said, contactless payment systems are leading the way in the future of urban mobility as the industry gradually shifts towards a more digital and flexible approach that better suits the evolving needs of passengers. Visa’s efforts stand as exceptional proof of such advancements as they have been involved in over 550 urban mobility projects across the world ever since launching their tap-to-pay technology in transit back in 2011. Their most recent achievement comes as a new milestone of reported one billion tap-to-ride transactions recorded across different transit systems, globally, in just over 10 months.
Visa’s second Future of Urban Mobility Survey reports that 42% of surveyed passengers plan on using public transport regularly in the next year, regardless of whether they will work from home or not and it has been further established that over 62% of the participants are already using public transit up to three days per week. In response to the survey’s question about how riders would pay for transit, 45% of the survey’s participants responded that they were planning to use a contactless option with their credit or debit card, or a mobile device.
Digital payments are the way forward for public transit
Looking ahead, the future of public transit is thought to be a digital touchless ecosystem that is accessible, safe, and equitable, providing a seamless transit experience for passengers. The New York Metropolitan Transport Authority’s (MTA) recent migration to an entirely contactless system is a great example of such a transition becoming a reality and with great success, while TFL in London completed its migration a few years ago.
Visa’s success in achieving one billion contactless transactions on global transit systems is just the beginning of the transit industry’s digital transition. We’ve seen adoption rates steadily rise across the globe as more governments and agencies wake up to the tremendous potential these systems offer.
Modernizing public transportation systems through contactless payment technology will be a crucial step to providing consumers with much-needed advancement in payment choices which will be in return critical for encouraging transit usage over having more cars and taxis on the already heavily congested and overcrowded roadways.
Contactless payments are essentially an evolving technology, and their potential uses are still being discovered. Biometric payment cards are a good example of this as they are credit and debit cards that contain fingerprint scanners, further increasing the security of mobile apps. Additionally, as financial management becomes increasingly digital, the application of digital payment technology will only increase in favor of adoption amongst citizens, businesses, and governments, worldwide.
