5 payment innovations taking place in transit

It's long been understood that transit systems are fertile ground for payment innovations. Despite the years-long setbacks in updating some systems, the promise has always been that if people use a new payment format in their daily commutes, they will continue to use it at nearby merchants.

And when these transit fare systems invite open-loop cards they also have the potential to create a feeding frenzy among issuers that want to offer the go-to payment card for riders.

This topic will also be covered at SourceMedia's annual PayThink conference in Los Angeles during the Friday, September 20, session Transit Update: The Rails of Contactless Payments.

This story was compiled from reporting by PaymentsSource writers including John Adams, Kate Fitzgerald, David Heun, Michael Moeser and Daniel Wolfe.

Making noise

HSBC dancers
Dance Dance Institution
Changing the transit system isn't enough — it's up to the bank to let riders know to use their cards.

Even though HSBC has a complete contactless card portfolio (it's one of the few U.S. banks that can say that), most customers are unaware that their cards are contactless, the bank says. The $177 billion-asset unit of the global giant HSBC Holdings finished converting to contactless when the U.S. EMV conversion officially started nearly four years ago.

One way to get the word out: Create a spectacle.

In August, HSBC hosted the flash mob in front of its flagship branch on Fifth Avenue, just steps away from Bryant Park and close to the Grand Central Station subway stop with contactless acceptance.

Some three dozen dancers wearing red-and-white HSBC T-shirts put on a two-minute show in an area that roughly 25,000 people walk by every hour, according to the bank.

Hyper local

Bank of America window sign
Signage is displayed at a Bank of America Corp. branch in Alameda, California, U.S., on Monday April 9, 2018. Photographer: Michael Short/Bloomberg
Bank of America doesn't share HSBC's complete commitment to contactless cards, but it is still determined to compete for transit fare payments.

In New York, Boston and San Francisco, BofA chose to force a mass NFC upgrade by mailing new contactless credit and debit cards to all of its consumer card holders in those regions. The surgical contactless strike covers about 4 million Visa cards — a sharp contrast to the industry standard of replacing cards only as they expire.

BofA picked the cities for its bombardment based on their density of contactless-enabled merchants, plus the recent moves of mass-transit systems to adopt contactless payments.

Apple Pay on the way

Apple pay sticker
A sign for the launch of the Apple pay system, from Apple.Inc is seen displayed at the entrance to a McDonald's Corp. restaurant in London, U.K., on Tuesday, July 14, 2015. Apple Inc. is making the U.K. the first market outside the U.S. for its digital-wallet system as the company fights for a place in the electronic-payments industry. Photographer: Chris Ratcliffe/Bloomberg
Apple has made habit-forming transit payments a major part of its push to expand Apple Pay, including pending or active deployments in New York, Portland, Ore., and other major cities.

It's also struck a deal to enable Cubic's transit cards in Apple Wallet, which will support trains, subways and buses accessible through Cubic's transit app.

There's also potential for further collaboration, since Cubic supplies transit transaction technology to dozens of global cities, and has partnered with London to market transit payments to other markets. London's transit system also supports Apple Pay.

Welcome to Miami

Miami skyline
Miami is tapping into contactless payments as a way to fight a decline in Metrorail ridership.

The Miami Dade County Department of Transportation and Public Works has been experiencing a steady decline in monthly ridership across all three of its main mass transit services: Metrobus, Metrorail and Metromover. This past March, Metrorail served only 1.55 million monthly riders, down from 1.7 million riders in March 2018 and 1.93 million riders in March 2017.

By enabling contactless payments for transit, the transit system will eliminate one common hassle all potential riders experience when taking mass transit — queuing at turnstiles while riders pay their fares . This should make the Metrorail service a more attractive ride option.

Transit-style grocery store?

Amazon Go glassgate turnstiles
An Amazon.com Inc. employee scans in to shop at the Amazon Go store in Seattle, Washington, U.S., on Wednesday, Jan. 17, 2018. After more than a year of testing with an employee-only focus group, Amazon Go opens to the public Monday in downtown Seattle, putting to the test the online retailer's technology that lets shoppers grab what they want and leave without paying a cashier. Photographer: Mike Kane/Bloomberg
Amazon Go is best known for allowing consumers to leave the store without paying, but less attention is focused on how shoppers enter the store.

Amazon Go uses transit-like turnstiles to register each shopper as they enter. Customers present a QR code on their phones, which prompts the gates to open and let them in. Shoppers can even share a swipe — two or more people can enter under the same account, and the store will track both of their purchases and charge them to a single user.

Amazon is testing alternative versions of this process, including "Orville," a hand-scanning system it plans to deploy at Whole Foods in 2020.