Mass transit systems have been proven as an effective way of introducing new technologies and driving adoption in many regions, but in many ways they are still vastly behind schedule.

Transit is still seen as a proving ground for digital payments, even when the implementation itself falls short of being a fully digital system. For example, many mobile ticketing apps don't rely on upgraded tech at the turnstile or on trains, but on presenting a digital ticket to a conductor to verify by human sight. It's a baby step, but one that takes transit tech further than many other mobile payment systems.

In fact, the genesis of contactless payments can be traced back to the Octopus card in Hong Kong that launched in 1997. The Octopus card spread well beyond its confines in transit, facilitating payments in stores and at unattended locations such as vending machines and parking meters. Since then, the model has been replicated in metropolitan areas throughout the world.

The latest innovation comes from London, where Transport for London (TfL) is launching an app facilitating top-ups, balance checking and alerts for low funds thresholds for its own Oyster card.

Scanning an Oyster fare card
A passenger scans his Oyster card before boarding a Thames Clipper catamaran at North Greenwich pier in London. Bloomberg News

Future features will include a simple way to apply for refunds and review journey histories for all forms of contactless payment, with the latter due next spring.

This presents a significant upgrade to the current system that allows funds to be added to transit cards online, but requires a 24-hour wait and tapping the card at a specific station to bring the card's balance up to date. The new app will cut that processing time down to 30 minutes and remove the need to visit a nominated stop.

Why transit matters to payments

Built in 2003, the Oyster card system reflects what was cutting edge back then but also the technological limitations of the time. At the front end, TfL developed a resounding win with a faster and more convenient system for getting through the gates, but the reloading capabilities were matching expectations based on funds settlement at that time.

Today, with more demanding expectations for real-time transfer and settlement, even transitioning from 24 hours to 30 minutes may not satisfy most riders. However, this may be of little consequence since travelers on London’s trains and buses effectively have no other choice; they are beholden to the innovation that they are given.

Mobile is certainly a late addition to the Oyster ecosystem; consumers across the globe have had years to adapt to the availability of Apple Pay and its predecessors. But in transit, there is a much higher bar for the acceptance of any new payment method, since even a adding a few seconds per rider at the turnstile or ticketing kiosk can add up to massive delays during rush hours.

The speed and convenience of contactless cards at mass transit turnstiles has been a proof point for the technology where customer throughput at peak times is a mission critical need.

Transit in the U.S.

According to card manufacturers, the mass issuance of chip cards has pushed prices down for card stock due to economies of scale and manufacturing innovation. With the life expectancy of EMV cards expected to be two years longer than magnetic stripe cards, and with a desire to keep the presses running, it’s a buyer’s market for issuers wanting to explore new technologies.

“A dual interface card in 2017 is about as expensive or less expensive that the first wave of contact cards in the U.S.,” said Troy Bernard, head of product and marketing at CPI Card Group. “For what I paid as an issuer for contact in 2014 or 2015, I could get the same thing today with dual interface.”

Thus far, there has been no major push to contactless cards by issuers in the U.S., with at least one notable exception. When Costco shifted its portfolio from Amex to Citi in 2016, the reissued cards were contactless, telegraphing that Costco is potentially a testing ground for contactless cards in a retail scenario for Visa and Citi.

Mass transit's mind share

Nationwide, mass transit systems are transitioning from archaic cash-based systems to electronic cash-free networks, with numerous initiatives currently underway in metropolitan areas such as Boston and New York.

TfL’s move to the contactless Oyster card has been heralded as a huge success, but the upgrade announcement highlights that changes were not system wide and that any payment/ticketing network is a constant work in progress.

Nonetheless, mass transit remains an appealing Trojan Horse for driving card spend, or even just for acclimating a captive consumer base to the perks of contactless payments.

“They always talk about the killer app, that’s actually the killer use case,” says Jack Jania, senior vice president of strategic alliances at Gemalto Inc. “You use that same card for your transit, you use it twice a day, five times a week. It has a tendency to stay top of wallet.”

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