A major report was published last month on the UK Transport Card Forum website by Working Group 22: Contactless Payments in Transport. I had the pleasure to chair this group over eighteen months and there were some excellent contributions by several experts. Here’s an outline of what the report says…
Contactless Payment Cards (CPCs) continue to be issued by UK banks, led by Barclaycard. Most issuers have programmes in place to provide these to their credit and debit customers, and by the start of 2012 there were more than 23 million in circulation. Transport Operators and Authorities, particularly TfL, are now planning or considering whether and how to accept these cards as a means of payment for transport journeys.
Meanwhile, the number of ITSO schemes in the market continues to grow. The DfT has invested substantially in encouraging Transport Operators and Authorities to deploy ITSO schemes, and we are seeing projects proliferate. So any consideration of whether and how to accept CPCs should recognise the considerable ITSO infrastructure which has now been deployed.
Overarching these considerations is the advent of NFC mobile phones. At the start of 2012 there were about a dozen handset models offering NFC capability in the UK, on top of the various methods of upgrading existing phones by means of stickers or SD micro cards. The number of NFC enabled phones is increasing rapidly during 2012, and many payment and ticketing providers have the ambition of including their products on these.
So, faced with these options, what is an Operator or Authority to do? What factors should they take into consideration? What lessons have already learned by others? How can choices made now be optimised or future proofed?
Transport Operators and Authorities considering whether to accept CPCs in their services have two other options which we considered – ITSO Stored Travel Rights (STR) and sQuid. Obviously, the starting point of each Operator or Authority is different, depending on the mix of local Operators, the existing card population, and the status of smart ticketing equipment and back office systems.
In the report we looked in detail at the constraints facing such bodies, and how these might vary for the three options mentioned. There is no single right or wrong answer; rather we found that there are “horses for courses” and each Operator or Authority needs to consider its own circumstances; it may be that two or all three of the options can be accommodated and that this is considered to be desirable.
In the UK CPCs can be used without a PIN for transactions up to £20, although special arrangements may be required for use in Transport. The major differences for use in Transport with ITSO based cards are that these cards are issued by third parties (banks), are subject to global standards (“EMV”), and are supported by the pervasive networks of the payment schemes.
The majority of contactless terminals so far installed are in coffee-shops and fast-food outlets; however several larger-format multiples, including Spar, Boots, Co-op Retail and Tesco, are piloting the technology. In the UK, usage remains relatively low as a proportion of credit and debit card transactions, but doubled when McDonalds went live throughout its chain, and is now rising more steeply. One of the advantages of offering “open-loop” payment in public transport (more significant to some operators than others) could be that casual and infrequent users such as visitors no longer have to obtain a local card.
We looked at the latest state of play on the use of NFC mobile phones for Transport payment. WG22 finds that this is still at a very early stage of development. The potential volumes of transactions to be had from Transport represent a tempting prize from the large players involved in the NFC ecosystem. Several bodies, both UK and international, are setting standards and guidelines for NFC in Transport, including the UK Card Association, the UK Mobile Network Operator group, GSMA, and the NFC Forum. In addition, TfL has carried out substantial work on how NFC phones can be used in its Transport network, and the first scheme to go live in the UK was announced in May by Stagecoach and Everything Everywhere in Cambridge.
WG22 sees that the landscape for the use of smart cards in Transport in the UK is patchy and varied in the extent and nature of deployment. Both ITSO, with government support, and CPCs, backed by global players and infrastructure, could provide unifying forces for smart payment in UK Transport. They are not necessarily mutually exclusive, and we are fortunate to have TfL, which has taken a global lead on the subject of CPCs and NFC in Transport.
The full report is available to TCF members from the Transport Card Forum website.
Fenbrook Consulting advises businesses about the commercial opportunities and technical requirements of Smart Ticketing, Contactless Payments and Near Field Communications