US transit agencies will benefit from implementing contactless open-loop fare payment systems, but widespread adoption “remains elusive” due to challenges facing the US public transit and payment industries, according to a report by Washington-based Brookings. Institutional Research Group.
How better payment systems can improve public transport The report shows how enabling passengers to pay their fares with their own contactless credit or debit card improves the customer experience, improves efficiency by speeding up boarding times, reduces cash costs and can encourage more consumers to use public transit, thereby reducing environmental impact and improving social engagement.
It also examines the current landscape of transit payments in the US, including the current pilot rollout of open-loop contactless fares in California, and notes that transit agencies in other states and counties may be reluctant to adopt open-loop contactless fares due to a “perfect storm of issues.” “, including:
- relatively high, variable or unpredictable interchange fees charged by banks and other payment processors for card transactions;
- the need to introduce systems that can also offer fare restrictions and discounts for a wide range of passenger categories;
- the need to create solutions for unbanked passengers and the potential impact of slow transaction processing times on underbanked passengers;
- the cost of upgrading fare collection equipment and backend systems and the need to review existing contracts with fare equipment suppliers.
However, the report says these problems are “not insurmountable” and that “transit agencies and financial institutions are working together to develop solutions to these challenges, but greater innovation in this area is needed to encourage widespread adoption of open payments in transit.” .
According to the report, the main steps that can be taken to increase adoption are:
- debit and credit card systems that reduce transit payment interchange costs that will offer “significant savings” to transit agencies;
- transit agencies consider a wider range of factors when deciding to switch from a closed-loop to an open-loop payment system and to implement solutions such as account-based ticketing or digital identity technology;
- Further research related to the development, implementation and application of open contactless fare payment systems, as well as identifying best practices in other “high-volume, low-dollar areas” such as parking, electric vehicle charging and toll payments.
“As long as toll transaction costs remain high, the benefits to these agencies from moving to open payments are more limited, reducing the incentives for many transit agencies to move forward with the capital investments needed for the transition,” the report said.
“So for larger transit agencies, it’s clear that with the rise of digital payments, upgrading payment systems is a matter of who and when, not if.”
California began rolling out fare-capped contactless ticketing in May 2021, expanded it further in July 2021, and added support for discounted fares in October 2022.
Next. Visit the NFCW Expo to discover new suppliers and solutions