Mastercard's plan for transit goes beyond fare payments

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Transit systems provide a clear use case for mobile payments, allowing commuters to avoid lining up at ticketing machines when they're already in a rush to get to their destination. But many of the perks of mobile wallets, such as targeted offers, don't apply to them.

"If a subway system is delayed because of high volume, there's no point in going to a parent who has to pick up a child at school and sending a notification saying, 'If you use the train an hour later you can get a free cup of coffee.' That travel and payments data has to be used for something different to manage travel volumes," said Ian Slater, senior vice president of enterprise partnerships at Mastercard.

Mastercard is in the midst of dozens of transit technology projects in partnerships with cities that range in geography, technology culture, need and level of automation. The card network's goal is to grow its own transaction volume by combining payments with other use cases, even if those use cases prove elusive.

The largest recent initiatives include New York, where the MTA's eTix mobile app, a partnership with Masabi, is used on Long Island Railroad and Metro North trains. In the first three months of deployment, the app was used by more than 280,000 riders and now accounts for 8% of ticket sales for both LIRR and Metro North. In Bogota, Colombia, Mastercard introduced an open debit card to pay fares on more than 10,000 buses, with more than 20 million trips purchased in the first year. Mastercard has also partnered with Singapore's Transport Authority to power contactless ticketing across all transit modes, the first city in Asia to adopt the technology.

"Making it easier to buy tickets on mobile apps will increase collections, particularly on older commuter rails," where conductors still collect paper tickets, said Andy Schmidt, an executive advisor at CEB. "The existing processes on commuter rails can be extraordinarily manual."

The most progress has come in London, where contactless and mobile transactions account for 40% of payments on underground, bus, ferry and rail lines, or about 12 million trips per week. In London, contactless technology has reduced the cost of fare collection by 5%, and London's transit system has begun licensing its payments technology to other transit systems.

"The largest immediate benefit is you can get on and off by tapping on a reader; there's no need to do anything else, no swiping or dipping," Slater said. "That saves time and capacity by itself."

Many of these early transit deployments are mature enough for the card network to consider how the body of work and the resulting data can be used to drive changes in how transportation systems operate. Even without targeting specific people, there's enough meta data for Mastercard to match purchase patterns with demographic categories that use certain modes of transport at certain times near certain neighborhoods, businesses or landmarks.

"You can see where the chokepoints are in a system" said Schmidt, who said tracking where people pay, and how they enter and exit systems can also help transit authorities monetize underused space. "A lot of people using 'Gate 5' could suggest putting a newsstand or coffee stand there."

That can help transportation systems graduate beyond traditional scheduling timetables, in which trains run more frequently at peak hours, with incrementally less frequent service during midday, early evening, late evening, weekends and holidays. Instead, an open-loop mobile fare payment app can track shift changes at hospitals or universities in a certain part of town, resulting in a transit schedule that is based on day-to-day, Slater said. Incentives can further address scheduling issues by offering coupons for using the system at a later or earlier time, Slater added.

"We're exploring how to take the data we know about people, where they are, what they buy and when, and nudge them to use transit a bit earlier or later if they can…because we know they may have time or opportunity to shop nearby," Slater said. "But you have to do that in a way that has value for people and communicate that in a way that they want to receive the message."

One possible option is to use the non-personal data that mobile payments apps such as Masterpass and Apple Pay provide. Both of these options have been introduced to New York area transit system and could be paired with other mobile payment transactions at retailers outside of the system to track pedestrian traffic in and around transit systems for planning or marketing purposes.

"The more granular you can get and tie data to geographic locations, the better," Slater said. "You can get to the point where you can move people or gain dynamic information based on transactions in real time. No cities are there yet, but it's something that is being discussed."

Cities still lack the technology used in third-party ride sharing apps such as Uber, which are expanding their services to resemble mass transit. This divide is often seen as a catalyst for rivalry, but should not be, Slater said, noting the data and coverage provided can aid both systems. And, consumers don't care about the difference, he said.

"One of the challenges for a city is how to integrate these providers into the public transit system. These third parties are also seen as antagonistic to transit, but they don't necessarily want to be," Slater said. "And riders just want to get from point A to B. It doesn't matter to them."

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