Author: Ana Stanca
Demand Generation Leader, Enghouse Transportation
An estimated 150 major cities are considering the switch, according to APTA
As many as 150 major cities across the globe are considering switching from legacy closed loop payment systems to open loop systems, according to the American Public Transit Association (APTA).
That means moving from agency-operated payment cards to Europay, Mastercard, Visa (EMV) pay platforms that allow transit riders to pay for their transit fare the same way they use their credit or debit card or mobile wallet at coffee shops, convenience stores and supermarkets.
APTA says the switch will improve customer convenience, cut operational costs, and safeguard and optimize operator revenue assurance. In addition, it will improve passenger security, decrease theft, and limit touch points for passengers and drivers.
The move to open loop is growing rapidly. The number of open-loop EMV cards used in ticketing in the U.S. is expected to rise from 1 million in 2020 to 13 million in 2025. The numbers for Latin America are even more impressive, as open-loop EMV cards for transit use in the region are anticipated to skyrocket from 3.7 million to 23 million in the same period, according to PYMNTS.com.
In an interview with Payments.com, they stated that the pandemic has spurred demand by consumers for touchless, more hygienic payment options. To get there, transit providers are moving beyond the confines of closed-loop payment systems, tied to prepaid options that decrease over time as riders swipe cards or queue at turnstiles. More modern options include payments connected to credit and debit instruments, to EMV and NFC. Also transit agencies should identify and engage partners within the ecosystem, including integrators, payment processors and payment networks — especially operators who have already successfully launched open-loop payments.
Looking ahead, Payments.com said that as consumers move away from cash, they expect that they will also continue to demand more contactless payments — and demand, too, that transit agencies offer those contactless options. The agencies must meet those expectations.
One of the advantages of universal payments in an open loop system is the seamless transfer from one transit provider to another.
For example, Chicago Transit Authority (CTA) and Metra, the area’s commuter rail operator, are currently struggling with incorporating an integrated fare system that would marry the two fare collection systems.
Cook County Board recently told blockclubchicago.org, “I’ve often observed that the services offered by transit agencies are not as well integrated as they should be. Transit in the region should function as one system, rather than three separate ones. I call on the transit agencies to take the next step in our partnership to develop a truly integrated fare system.”
Auckland, New Zealand is also facing a payment dilemma. Like many transits across the globe, Auckland Transport eliminated cash fares on buses during the pandemic for health and safety reasons.
The transit agency recently announced they would not be bringing back cash payments.
Now critics are saying there are not enough places to purchase the Auckland Transport HOP Card. An open loop payment system that accepts EMV cards would be a viable solution.
In Boston, the Massachusetts Bay Transportation Authority (MBTA) is in the midst of its Fare Transformation project, which is incrementally bringing contactless EMV payments to the system.
“These fare media updates will provide MBTA riders with greater flexibility through the introduction of ‘tappable’ forms of payment that are compatible with future fare readers on buses and trolleys, allowing for all-door boarding and, ultimately, for faster service,” said MBTA.
MBTA plans to introduce EMV payments on selected lines later this year with seamless payments on all modes starting in 2024.
To learn more how Enghouse Transportation can assist you with your open loop payment system, read our latest whitepaper “How open-loop payment systems will change the future of U.S. transit” or contact us today.