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Author: Ana Stanca
Demand Generation Leader, Enghouse Transportation
Open-Loop Ticketing systems have been slower in getting established in the US compared to Europe, but new bankcard technologies, changing consumer expectations and digitalization have been quickly changing matters on the ground. Add Covid-19 into the mix, and agencies have needed to quickly find contactless and flexible payment systems.
Here are 7 key reasons why now is the time to adopt Open-Loop ticketing solutions.
1. MOBILE PAYMENTS ARE THE FUTURE.
Just 15 years after the release of the first iPhone in 2007, more than 85% of adults in the U.S. and Canada owns at least one smartphone. In fact, 74% of Americans report that they feel uneasy leaving their phones at home, with 15% of current mobile wallet users now reporting that they leave their physical wallets at home.
Consumers use their phones today for every aspect of travel, including tasks like ride-hailing, navigation, translation, and touchless access. They increasingly expect to be able to pay with their phones.
2. CONTACTLESS PAYMENTS MEET THE HYGIENE DEMANDS OF A COVID-ALTERED WORLD.
Because of concerns about virus transmission, contactless payment became standard during the Covid-19 pandemic and the trend is here to stay.
Mobile payments across all products and services are expected to grow 30% per year over the next decade, and 88% of people say they expect a contactless payment option when they access transit.
3. OPEN-LOOP TICKETING CAN BE A COMPONENT OF A MODULAR FARE SYSTEM.
Several vendors can now provide integration services for a fully open architecture system and help to stage the various components’ release to get the building blocks up and running quickly. TriMet, the regional transit agency in Portland, Oregon, for example, used a modular, open-architecture approach with great success for its new Hop Fastpass.
4. CONTACTLESS SYSTEMS MAKE BOARDING EASIER AND SIGNIFICANTLY REDUCE DWELL TIMES.
Dwell times account for as much as a quarter of the average bus trip’s total travel time and are a significant source of frustration for riders. Today’s contactless EMV and mobile systems allow riders to check in with a tap that takes a fraction of a second, reducing boarding times and keeping the bus moving.
5. FEE INNOVATIONS MAY REDUCE THE COST OF ACCEPTING OPEN-LOOP PAYMENTS.
A potential obstacle to open-loop payments is the interchange fee charged by providers, which can be a high percentage of small purchases. However, payment providers are aware of this obstacle and may be beginning to change their policies. Visa recently lowered fees on transactions.
Another way for agencies to manage interchange fees is to delay charging the customer until the end of the day, week, or other defined period using a system called aggregated PAYG, or “pay as you go.”
6. OPEN-LOOP SHOULD SUBSTANTIALLY LOWER THE COST OF FARE COLLECTION.
Open-Loop Payment systems allow transit agencies to get out of the business of issuing fare media and maintaining the card sales infrastructure. This significantly lowers operational costs for the transit agency.
7. INFREQUENT CUSTOMERS AND OUT-OF-TOWN VISITORS PREFER OPEN-LOOP SYSTEMS.
Open-Loop Systems make it easier for casual customers to access transit in a flexible and spontaneous way. They don’t need to carry special cards or the correct change. Data collected by Transport for London confirms that its customers have been using more varied payment methods since 2020 and that PAYG is preferred for ad hoc trips rather than seasonal tickets.
Want to find out more?
To learn more about the transition to modern, Open-Loop Payments Systems and the benefits they can deliver, please download our Whitepaper: A Transit Agency Roadmap for Mobile Payment Solutions.
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