In many instances, mass transit systems have proven to be catalysts for adoption of new payment technology, starting with the genesis of contactless cards for access to buses and trains in Hong Kong and Japan in the late 1990s. Hong Kong's Octopus Card is one of the earliest examples of how transit networks can expand beyond their initial purpose to become a more versatile payment vehicle for retail use.
Since then, many metropolitan areas have moved from traditional cash and tokens for fare to faster and more user friendly digital alternatives. However, there is still a long way to go — and legacy systems die hard.
Cash payments are an important component of mass transit — buses and trains are essential for all strata of the population, but particularly critical for low income and underbanked travelers.
However, from an operational standpoint, cash acceptance is a seriously costly business for transit authorities. In a Boston Federal Reserve study, it was found that cash handling totaled 22.9% of operating costs, while credit and debit card acceptance totaled just 3.5%.
Moreover, cash handling has many ways it can go awry, including simple human error. For instance, a 2016 review of MBTA cash handling in Boston found a number of egregious errors in the “money room.” The report detailed holes in fences, missing keys, disabled cameras, a door kept together with duct tape, and other doors throughout the building left propped open. One photo included in the report showed an open door with a taped sign that read, “This door should remain shut at all times.”
While the advantages of going digital are many, mass transit agencies are still reliant on a range of technologies and few have truly embraced digital and mobile ticketing to date.
In a 2016 study by the National Academy of Sciences, 22 U.S. transit agencies were assessed for the type of access media that they used for their networks. Seventeen were reliant on limited-use media such as disposable paper tickets, and fourteen had adopted reloadable smart cards. However, open loop payment capabilities were in their infancy — just five accepted bank cards for access, four used mobile bar codes and three accepted mobile NFC.
The precedent set by implementations such as the TfL Oyster card in London demonstrate the advantages of shifting to more efficient, open, digital platforms that have more than one use.
Buy in for new payment systems is essential for adoption, but in this case the advantages of modern open loop payments for transit are apparent.
Research by Xerox shows that travelers see the advantages of open loop payment systems for mass transit over legacy ticketing systems. According to the survey, 65% of travelers worry about not having enough money to pay with cash based systems and 43% find ticketing machines difficult to use. Conversely, open loop systems were seen as easier for funds transfer (64%) and reduce wait times and delays (59%).
Speed and efficiency in transit are critical metrics, and fresh thinking in ticketing technology can have a ripple effect beyond the point of payment.
Fare collection and access have traditionally involved a turnstile or single door, but this is inherently slow — it deliberately creates a bottleneck to prevent people from entering the transit system for free.
In research on the San Francisco Muni system, it was found that shifting from single door access to buses and trolleys to opening all doors cut the time it took for customers to embark and disembark in half. The advantages in faster, more efficient transport are obvious, as are savings in fuel costs. But what about fare dodgers? According to a similar study conducted in Oslo, Norway, removal of turnstile ticketing and implementing random checks on trains along with mobile ticketing cut fare evasion from 10% to 5%.
Despite the clear advantages of moving to more open ticketing (both physically and digitally), one element that could limit adoption is the perception of security among riders.
Research conducted by ACI Worldwide showed that travelers still perceived payment in cash — either at a physical location or onboard — to be the most secure, with debit and credit cards trailing in almost every instance. What may be even more concerning is the perception of mobile apps for transit payment, with just 38% of riders considering it to be secure or very secure.
As with all new payment paradigms, experience, education and awareness can overcome inertia and muscle memory. Selling the advantages of digital and open loop access will be critical components of adoption.
As the coronavirus pandemic has driven more people to work from home and shop online, the demands on digital, faster payment systems have been heightened — as have the opportunities for fraudsters to exploit them.
As many businesses and consumers have been forced to deal with the difficult conditions thrust upon them by the COVID-19 pandemic, so too have fraudsters needed to make adjustments just to continue their life of crime.