EMV can improve transit payments, but there's much work to be done
The transit industry today is working to improve the user experience and reduce barriers between transportation systems by transitioning to contactless open fare payment systems.
Open payments for transit fare collection allow passengers to use contactless bank cards to ride the system without having to convert cash or card payment into a transit fare first.
This is much more convenient and user-friendly because riders only need to carry and use one form of payment to ride all modes of public transportation. The New York Metropolitan Transportation Authority (MTA) is an example of a transit system that is moving in this direction, recently announcing its plans to replace the MetroCard with a next-generation open fare payment system.
Simultaneously, the U.S. payments ecosystem is continuing its move to EMV chip payments. Unlike many merchants that can certify and install point-of-sale (POS) terminals and accept chip payments right away, there are many unique features of the transit retail environment that require a technological approach to make EMV open payments feasible for transit. Some of the unique features that the payments ecosystem should consider include:
Contact EMV chip cards are not feasible for transit payments. Given current processing speed capabilities and rider safety concerns, the transit rider must have an EMV-based contactless payment device to tap to be able to enter a ride.
Point-of-entry terminals are not always online. Given their use in a subway environment and/or on board a bus, payment terminals may lose connectivity to the merchant host periodically (i.e., be offline).
Point-of-entry terminals must have the capability to process 100% of the time to ensure a consistent customer experience.
No cardholder verification is possible at the point-of-entry terminal. There is no terminal ability to capture a PIN or signature at the transit point of entry. The only EMV cardholder verification method (CVM) available for a card is “No CVM.”
No real-time authorization response is possible at the point-of-entry terminal prior to go/no customer prompt. There is no ability to perform consistent real-time online authorization of the transaction, as currently defined in networks’ operating rules, within the subsecond time frame needed to provide safe, consistent, passenger flow through the transit point of entry.
Transaction amount at the point-of-entry terminal may be unknown due to variable fare. The fare applicable to the transit rider may not be known at the time of the tap and could have a dollar value that varies with location, time of day, or other factors, or have no dollar value, such as if associated with a pass purchased in advance or a free transfer.
Ability for transit merchant to “hot list” a payment account quickly is critical in preventing recurring fraud. This ability is critical in preventing use of a fraudulent card or unauthorized use of lost or stolen payment card once it is known there was or could be fraud perpetrated with a tap.
Transactions are predominantly low value (e.g., single-fare ride). With open payments, the transit rider initiates payment for a single ride and gains entry using a single tap of his/her card. Acceptance of contactless bank cards at transit points of entry is expected to increase the number of single-ride purchases in the transit agency system and on cardholders’ cards.
Transit is a public service. As a public service, transit agencies cannot require riders to possess a bank-issued form of fare payment that would limit access to transit.
To meet these unique requirements, the U.S. Payments Forum Transit Contactless Open Payments Working Committee identified the following as guidance for EMV contactless open payments implementation: Customers should be able to initiate a contactless EMV transaction; the system should provide card authentication using dynamic data (ODA/DDA), supplemented by merchant deny list management, to address counterfeit fraud risk; it should have cardholder verification using No CVM, network negative file updates and deny list management, to address lost/stolen fraud risk; and financial authorization using deferred (or delayed) authorization to address the risk of funding not being available.
With a solution that addresses the unique security, transaction speed and integration requirements of the transit environment, EMV contactless open payments for transit can become a reality and change our public transportation experiences for the better.