In contrast, the Utah Transit Authority recently announced the launch of its open loop contactless e-fare collection system, which will accept existing credit and debit cards from all major card providers. This open loop approach makes interoperability easier in the long run but provides little incentive to payments and financial services companies to invest in system deployment in the short term.
4.Creating a payment system without additional fees for riders.
Despite the added convenience that dual-purpose smart cards offer, the issue of added fees may hinder consumer adoption. According to an industry trade publication, Los Angeles consumers who previously did not have relationships with banks are expected to use the cards frequently outside of transit, but would face fees of 25 cents for each retail purchase and nearly $5 a month for maintenance. Whether subway and bus riders are willing to trade those fees for speed and convenience remains to be seen.
5. Designing an electronic payments system that caters to the diverse needs of system users.
A fifth major challenge to transit agencies across the country is how to deal with complex demographic issues that are often unique to their population and design a payments system able to meet the various needs of different user groups, including one-time users. For example, in developing its new transit system, Utah had to take into account not only daily commuters, but also the waves of tourists who arrive every autumn for ski season. In addition, in many cities, train demographics can vary greatly from bus demographics, and the composition of bus and subway riders can vary greatly from line to line.
6. Ensuring customers will adopt the new payment system.
The final, and in many ways most difficult, challenge to advancing e-payment transit practices is winning over consumers. Experience shows that the best incentive is actually a disincentive. For example, in London, the transit agency helped drive usage by charging significantly more for transit riders who paid cash instead of using the Oyster smartcard, which is a stored-payments card for London’s mass transit system.
Similar approaches might be tried in the United States, although U.S. riders are more likely to balk at such a fare differential and/or at card usage fees, simply because of the sensitivity to card fees in today’s environment.
While these six challenges continue to impede or slow progress in remaking the U.S. transit payment system, there is a larger force at work that will no doubt win over time: inevitability.
We have the technology and know-how to develop a nationwide transit payment system that is faster, smarter and infinitely more convenient.
We also have an economic imperative. Transit authorities would like to exit the fare management business and focus on their expertise — moving people safely and effectively — and allow the private sector to do what it does best: operate and manage a payment system that works seamlessly with transit services.
To make this happen, government transit authorities and business leaders will need to be innovative and willing to work collaboratively. Consumers will need to be patient, but to also push for — and be accepting of — change. Like the trains and the buses that comprise our transit systems across the country, there are bound to be delays, but there is no doubt we will reach our destination.
Farhan Ahmad is the general manager, prepaid and director of emerging payments for Discover Network, Discover Financial Services’ payments network.