As issuing banks in the United States consider how to migrate from magnetic stripe card to EMV, it’s important to consider the lessons learned from similar projects. “EMV” comes from Europay, MasterCard and Visa, the companies that initiated development of a global standard for credit and debit cards based on chip card technology in 1994.
Public transit ticketing has come a long way over the last 30 years, moving from printed paper-based tickets and magnetic stripe to smart cards in Europe, to NFC-enabled mobile phones in the Far East. However, these are usually in the form of proprietary schemes developed by a single supplier, within a closed network, which require considerable capital investment and have substantial operating costs.
As technology has developed in other sectors, most noticeably through mobile communications and the switch to contactless cards in the banking industry, opportunities are opening up for operators to make public transport ticketing more convenient for users and cheaper to run. They also offer new ways of collecting revenue, breaking away from traditional ticketing methods and their inherent constraints.
Public transit operators are already appreciating the benefits of smart card ticketing, including faster gate entry or boarding, particularly at peak times. Ticket selling is also more cost-effective with a wider range of sales outlets, including the Internet, while the security advantages over magnetic stripe and paper tickets have helped to cut known fraud and highlight other fraud. More information is also available about passenger movements, allowing operators to refine their services and offer loyalty products.
However, customer expectations are changing rapidly. Online retail has changed consumer buying habits and there is an expectation that all transactions can be undertaken in a fast, customer-friendly way. Standing in a queue at a ticket machine does not fit this model. Therefore, leading U.S. transit operators such as MTA, CTA and WMATA are beginning to look at a new generation of open payment systems.
From Owners to Merchants
By moving to open payments, operators would become “merchants” participating in a bank-led scheme rather than owners of a dedicated ticketing infrastructure. This could reduce costs through the use of off-the-shelf equipment from a range of suppliers, rather than bespoke equipment made to proprietary specifications.
In all the cases discussed so far, with the exception of cash, the means to distribute the travel token has had to be considered as part of the process in deciding the media type used. This broader consideration of issuing tickets, printing or personalizing them with products, and accepting them at the point of entry is far removed from the transit operator’s primary objective of running buses, trains, subways and trams.
Payment cards offer the transit authority the opportunity of relinquishing the distraction of card issuance and focusing its time on running transit systems and accepting cards.
But what is the best way of achieving this? In the United States, the contactless magnetic stripe card is ubiquitous and introduces significant challenges in acceptance for transit merchants where there are tight transaction time constraints, and, without the right level of transaction authorization, fraud could be rife.
Introduction of EMV schemes can dramatically change the concept of ticket purchase, offering more sophisticated facilities that take advantage of being able to verify the cards’ authenticity at the gate before entry.
There are a variety of differences between magnetic stripe contactless cards and contactless EMV and what it means for a transit operator.
Magnetic Stripe Data Cards
Contactless payment cards, widely issued in the United States, fundamentally work in the same way as standard magnetic stripe cards except that instead of swiping the card through a reader, the card can be tapped against a reader that activates the electronic circuit within the card enabling data transfer. As for traditional magnetic stripe cards, the security of the contactless cards is minimal and the only way for a merchant to guarantee funds is to authorize the transaction with the issuer online.