Author: Ana Stanca
Demand Generation Leader, Enghouse Transportation
The growing adoption of EMV payment systems provides a major boost to open loop transit payment systems which are beginning to replace legacy closed loop payment system cards that must be replenished. Open loop systems, using EMV cards, allow consumers to use the same forms of payment they use for everyday transactions.
The American Public Transit Association (APTA) says as many as 150 major cities across the globe are considering switching from legacy fare card payment systems to contactless open loop systems.
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.
There are, however, barriers to some transit agencies making the switch.
Many transit agencies do not possess the technical expertise required to revamp their legacy payment systems both in the back office and at the point of purchase.
However, agencies are facing a growing number of transit riders who are demanding a conversion to contactless, tap-and-pay open loop payments.
A June 2021 Future of Urban Mobility survey conducted by Wakefield Research of 9,000 transit riders found that 88 percent of those surveyed expect to be able to pay with a tap on trains and buses. The survey report says there are more than 700 U.S. transit projects underway that include the introduction of contactless tap-and-go payment methods.
Experts say traditional public transit fare collection systems are slowing the industry’s post-pandemic recovery.
Here’s a recap of how legacy payment systems are delaying transit’s return to full health:
Self-service kiosks are often a chokepoint for transit agencies. Queues can build up, resulting in missed connections. Confusing interfaces, too many fare choices and language barriers often result in multiple attempts to purchase a ticket.
Prepaid tickets and proprietary transit apps
While frequent commuters often purchase transit plans and load electronic tickets onto a proprietary app on their smartphones, occasional riders and visitors often find themselves in a state of confusion.
Cash payments, whether via human or machine, are slow, inefficient, and open to fraud and theft. Additionally, they slow boarding time, which leads to longer transport times.
Open loop contactless payment systems appear to be more suitable for Generation Z, also known as Zoomers, the 16-24-year-old market segment that represents what is next in modern culture.
Zoomers are the generation that has never known life without the internet and smartphones. They live on social media and when it comes to money and finance – they are blazing new trails.
They do not use traditional banks and conduct most of their financial business on their smartphones.
Global payments platform Thunes published results of a study of 6,500 Zoomers that aimed to learn how they live their lives and what that means for retailers and other customer-facing businesses.
The Thunes study found that 62 percent of Zoomers do not have a bank account and in some emerging markets nearly 50 percent prefer mobile wallets as their choice of payment method. About 25 percent of Zoomers in western markets almost never use cash.
Enghouse Transportation, based in Ontario, has developed the ideal EMV-friendly, contactless open loop payment software solution. The Canada-based software company, already established in the Netherlands and Central and Eastern Europe, is now operating in North America.
Read about the coming wave in public transit in our whitepaper: “How Contactless Payment Systems Will Change the Future of U.S. Transit”.