Visa is digging deep into the question of whether transit fare payments can influence habits in other settings.

"Our competitor is cash, which is typically used for small value transactions," said Michael Lemberger, who is head of products at Visa in Europe. "And transit payments are a part of that."

Visa has launched Visa Ready for Transit, a global program to accelerate contactless payment projects at transit systems. The program is focused on adding contactless payments for commuting—a large project for many locations—but there's also the role that contactless transit can play in incentivising smart cities initiatives, or programs to embed technology for transportation, parking, retail payments and identity management.

Michael Lemberger, head of products at Visa in Europe.
Michael Lemberger, head of products at Visa in Europe.

Visa is expanding its Visa Ready program, which certifies third-party vendors' products, to include payment technology for mass transit operators and will host a series of events around transit technology. An initial event took place in London with future events scheduled for Dubai, New York, and Singapore.

Visa's global transit group has implemented about a dozen transit payment systems thus far with projects underway in Asia, North America and Europe.

At launch Visa Ready for Transit's announced clients are Worldline and Vix Technologies, two companies that offer technology to transit systems. The Visa program additionally expects to add fraud management, back-office tools, loyalty and marketing programs to Visa Ready for Transit, addressing use cases for open loop transit payments such as tie ins with local merchants.

"We have put a lot of people in the field that have experience in mass transit and understand the nuance behind it," Lemberger said.

Visa sees early signs that adding contactless open-loop payments to mass transit systems encourage more use of digital payments in the surrounding community, and the habit-forming that accompanies contactless payments for mass transit has become part of the argument that it's transferrable to other payments.

"There are also other factors that are pushing contactless payments…contactless is a very good tool," Lemberger said. "But there is the ability to show on a transit system that contactless can remove a lot of friction from payments."

Visa's primary pitch to transit systems is that contactless payments, once implemented, are easier and less expensive to manage. The card brand's internal "Cashless Cities" study found transit agencies spend 14.5 cents for every physical dollar collected, compared to 4.2 cents for each digital dollar. "By using contactless and open loop payments, the transit systems are using a network that is already built," Lemberger said.

Lemberger said Visa was not ready to comment on any role it may play in New York's contactless fare migration, which is scheduled to take place over the next four years. Visa has worked on earlier transit payment projects in New York.

There are complications to migrating a transit system from traditional closed loop single-use cash payments to a contactless account-based system.

"Transit is probably the hardest environment for payment card acceptance," said Tim Sloane, vice president of payments innovation and director of the emerging technologies advisory service at Mercator, who adds transit's power as a precursor for other payments technology has led his firm to track transit in its Prepaid Benchmark.

Transit acceptance devices operate in a "filthy" environment, Sloane said, adding cards need to reliably accepted in one or two tenths of a second, which is also a challenge. "Then there are all of the crazy fare structures."

If a person's commute involves trips via train, bus and boat, all three of those systems must recognize a single fare payment and then open the gates or ring a tone of fare acceptance quickly, Sloane said. "So this is not swipe and pay, this is pay and swipe, swipe again, and swipe again. The decision-making is made more difficult by the fact that the card transaction should be done via EMV, which encrypts the transaction."

To address these challenges, Visa's program includes a central team in London with regional specialists elsewhere to provide hands-on assistance. It has also created a mass transit transaction model, or a back-office framework to manage contactless payments for transit systems of varied sizes and fare structures—including fixed, time and distance-based "zone" fares, multi-modal fares and capping, concessions and delay refunds.

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