London Setting the Pace in Electronic Payments

Transit riders and Agencies in US often ask questions such as:

• Why is Transit taking so long to convert to Cashless Fare Payments?
• Are we making current Fare Systems too complex?
• What is London doing with Electronic Payments for their Transport services?  
• Can we not make it as simple as an APP?

Mobile Payment is an attractive approach, but is not as simple as it sounds. There are many factors that enter into this picture to deliver a robust and reliable Electronic Payment System (EPS).

Many studies and papers have addressed this matter more in detail. The Smart Card Alliance (SCA) of Princeton, NJ has several White Papers that document fairly extensive literature, plus Presentations at APTA Fare Workshops are also good reference sources.

It should be noted that there are many design considerations to assess, such as: Business Rules, Technology aspects, implementation issues and so on to facilitate transition from Cash to almost all electronic payments for transit system. This leads to another layer of complexity – i.e. who manages the whole business model and how is the will it be funded?  The latter is increasingly creating the need to find ways to get Funds via Supplier side with Public/Private Partnerships.

Finally, the “system” must not be too cumbersome to provide the tools for “change management” such as with fare tariffs, customer service, all the transitional phased-in details, and a well-planned migration path from today’s system to tomorrow’s vision.

In US, we recently started transitioning from only Magnetic Swipe Reader technology to so-called “EMV-CHIP and PIN” Bank Cards. But transit will need the capability to use those Bank Cards to tap at a turnstile and enter say the Philadelphia or New York City subways swiftly, without requiring a PIN to be entered.  

London worked several years to find a way to enable the use of a Chip based Bank Card at a turnstile or bus farebox, without requiring the PIN Code entry. It also had to have fast contactless transaction as required for turnstiles. Thanks to that work done by London, a solution was developed and is in operation in London. Bank Cards together with the Oyster Card form the backbone of their system (plus all back-office needs). Now use of bank Cards is extended to Buses, Tube Systems, Light Rail, Trams and several Commuter Rail fare payment.  

So why can we in US not just do it like the Londoners? 

Some high level basics are mentioned here: the essence is,

Bank Cards such as VISA, MasterCard and Amex issued in UK, have a EMV compliant CHIP and PIN functionality and it has a Dual Chip structure: such cards are delivered to the entire population of Bank Card holders in UK.  So UK has EMV compliant dual chip cards that can process fares fast at Turnstiles and on Buses: 

• For Transit Use: One can Tap & Go without the need to enter of PIN code – it meets the speed of transaction processing speed at a Turnstile or Bus Farebox.
• For Use at the Stores: The Card can be used in a Point of Sales Terminal – it requires the customer to enter their PIN code where applicable.
• But, these cards in USA do not have that Dual Chip provided in UK.

In US, Bank Cards are expected to complete the changeover to new cards with an EMV Chip Card by end of this year. This is the so-called “ EMV and Liability shift “ rollout program retains the Mag Stripe Cards of old for transition purposes. But it has only Contact Chip Card to combat many recently reported cloning cards and other fraud issues such as at Target etc.  

Michael DeVito of NY's Metropolitan Transportation Authority noted that US transit operators pursuing so-called "Open" Fare Payment systems such as New York, Philadelphia and others, have been reaching out to the US payments industry at large and the global card brands to provide information about the transit experience in the UK with dual interface bankcards. The UK experience and information collected to date indicates a strong correlation between the issuance of dual interface bankcards and a resulting increase in bankcard spend as well as lift that accrues to issuers.  US transit operators are coordinating with each other and speaking with one voice in these matters.  There are also industry-wide discussions about the issuance of dual interface cards taking place at collaborative industry-wide forums, like the Smart Card Alliance (SCA), where US transit operators have taken a leading role in promoting the issuance of UK-type dual interface cards in the US.  

Note that we often see news about applications where only a segment of a transit system introduces an APP: Say a Commuter Rail, Parking or Ferry only APP where a Mobile payment method was introduced. But it is not a fully integrated program so that One Card or a Mobile Device works for all services offered by that Agency.  

Basics about Electronic Payments for Transit

Your Bank with VISA or MasterCard business affiliation issues a Bank Card to you. The “terminals” are the devices that read the cards and authorize the transaction at the Point of Sale Unit in a store.  

In transit, the Farebox, Turnstile and Vending Machine become the ‘terminals’ as they have to process cashless fares using a contactless Bank Card issued by say VISA.

The terminal can also process proprietary “House Card” such as the Oyster Card in London. This is similar to the CharlieCard in Boston and soon to begin Key Card in Philadelphia. These cards have proven their need as essential fare media after years of trials/studies to find suitable alternative medium such as even Bank Cards. It is to address the needs of about 20 -25% Un-banked and Under-banked customers.

In London, the Oyster Card serves a similar purpose and further helps in the huge transition to the next generation of payments.  Beyond that, Oyster also plays an important role to facilitate the initial migration of customers from regional “smaller Agencies” to the neighboring Greater London system within Transport for London system to facilitate joint ticketing with a Cashless system.

Oyster and Beyond

Today, London’s Fare System extends to a multitude of Agencies beyond the old Tube and Bus System. 

When the number of passengers on the London Underground rose dramatically in the 1990s, TfL had to find ways to get people through the entrance turnstiles at metro stations faster. Besides infrastructural changes, TfL decided to invest in new technology and the smart card, known as the Oyster Card, was introduced. At the time the technology was still relatively new. Hong Kong was the only other large city using a similar system.

Ten years later, Oyster pays the vast majority of rail; bus and tram travel in London. The Oyster Card allows seamless travel between all modes of public transport in London. It eliminates the need to queue for purchasing tickets, ensures faster boarding times, a best fare promise and a speedier service.

Finally, we often are tempted to consider an APP as a “cool-tool” for riders!

But a lot of ground work is involved in activating such a tool and it must supplement a good fare payment infrastructure – not to be just a partial replacement for a multi-Modal, multi-Agency, multi-Rider category customers to enable transit service.

It takes time and continuity of patience to adapt to rapidly moving target of technology. STOP! Listen, Look both Ways, Before Crossing that railroad called “the latest tech train coming”!

Bank Cards and Mobile Payments; Ride first — Pay later

The Bank Card is linked to your Bank Account to enable settlement of the payment, typically on a monthly basis. It has been part of transit business payment culture as “Electronic Payments System” since mid-1980’s to buy a LIRR or SEPTA Monthly Pass such a Printed Flash Pass for LIRR or Magnetic Swipe Pass at SEPTA for entering a station via a turnstile.

But Bank Cards like VISA were recently introduced with CHIP & PIN capabilities in United States – but without that dual chip as in UK. So the tap and enter functionality is not ready for check at a Farebox or Turnstile in US. Hence it creates the need for a must have proprietary smart card based system – as a “House Card” – just as it started with Oyster Cards in UK.  

Today, TfL has moved forward with the Chip Based Bank Card used on Buses and at Turnstiles, and they have Apple Pay.

The old tradition payment model was to Pay First/Ride later such as with House Cards and ticketing choices such as: Weekly or Monthly Passes, or Ten Trip Tickets or Stored Value Cards. It does not mean it is discarded as could come in a different avatar called Electronic Payment. The structure is traditional but delivery mechanism can be modern ways – House Cards, Bank Cards or Apple Pay.

The Last Word

Electronic payments for Transit will expand in America – with greater shift to Mobile Payments, but not relinquishing the House Card functions for at least 5 years. Technical issues such as recognizing the difference between the chip-type used in UK versus New Cards currently being distributed in US under the EMV Liability Shift program - these technicalities will have to be addressed.

Work is in progress between Transit Agency representatives and Card Companies – facilitated by Smart Card Alliance of Princeton, NJ to address US needs. This includes the issue or dual Contact/Contactless Cards.
There are always the underlying Policy and Customer Service transition issues. It should also be noted that London started this Program with Public/Private Financing Initiatives – an approach increasingly considered in USA.

The challenges often appear to be less due to technical issues but more about Organizational/Funding matters. Remember: It always is about People, Policies and Politics; not being enamored with Technology. Keeping expectations under control is often the biggest challenge – particularly with expected politics. 

Ashok Joshi P.E. is a retired payment systems consultant.

Richard Thomas is retired from Transport for London’s Oyster card team.