An open road to a streamlined future

Open payment systems, which permit a range of payment options for consumers, are inevitable for public transportation. Customers want to be able to breeze through the metro turnstiles by simply ‘tapping’ one of their existing payment cards, such as a bank-issued debit card. Even easier, they may relish the opportunity of passing their mobile phones over a sensor as they board the cross town bus, which pays their fare. These days are coming soon. However, before we celebrate this convenient, high-tech future, we should come to terms with today’s reality. The challenges in implementing an open payment environment should never be underestimated.

Most transportation schemes around the globe operate on some form of closed system where the fare payment media is designed specifically for a single network. One of the many advantages of this technology over the use of cash or paper tickets is that the Public Transportation Operator (PTO) can participate in far more aspects of the commuters’ ride. Commuters buy a smart card from a transit system kiosk or from a transit system employee. They board their train, underground metro, or bus and the scheme keeps track of where they’re going, automatically charging the right fare. Despite the best efforts of the industry to introduce common standards, every city tends to have its own tailored system.

Open Payments will present profound and dynamic changes. Customers will use their own electronic media, issued by a financial institution, a telecom operator, a retailer, etc. For the PTO, this results in some loss of control over the customer. With a closed system, if the card doesn’t beep when it’s tapped at the turnstile, a customer can just go to the nearest transit worker for help. With a bank-issued card, for instance, who should a customer go to for help? In addition, the thought of waving a bank card or brandishing an expensive mobile phone at 3:00a.m. in a subway station could be discouraging for some commuters.

Even in the case of contact-less bank cards, where banks will be taking control of financial transactions, the transit authority must still maintain a close partnership with the customer. When a customer has a problem with a credit card at a department store, the retailer usually calls the bank and serves as interlocutor. This practice should carry over. Finding the right blend of technology to read these new cards is also essential. Speed and durability is critical for card readers. Financial institutions are experienced in creating reading equipment for cash registers but they haven’t had much experience designing equipment that can withstand a Chicago winter and a constant beating from thousands of commuters on a daily basis. Close work between banks, PTOs and experienced contractors is critical.

From here, things get challenging. PTOs can’t simply switch over to an open payment system. They have to make a transition to the new technology while keeping established systems in place. This phase, where parallel media exists, can be highly complicated and this complexity doesn’t even begin with devising a means to deal with the diverse range of fares and fare products found in most cities. PTOs should consider implementing an enterprise-wide platform to manage all media and device types – a single central architecture that handles all customer accounts, covers payment processing and calculates charges. Because of the diversity in existing transit contracts in many cities, it is sometimes very difficult to unbundle these fare collection systems, and incumbent suppliers might balk at participating in an initiative that they feel might be against their best interests. But however it is achieved, a single architecture must be implemented.

This single central platform, agnostic of device technologies, is critical to the success of the open payment system. With a closed system, the devices involved in monitoring a commuter’s trip and fare charge are accurate, instant and automatic. An open payment system is much more complex as its central platform will have to deal with huge volumes of diverse transactions, lost cards, erroneous card taps, etc. It may also have to aggregate the number of times transactions are made to avoid processing each payment separately – which would surely prove prohibitively inefficient – while integrating trip topology to reconstruct journeys from millions of daily card taps. It must also be able to efficiently reject cards that can’t cover fares so that PTOs aren’t taken advantage of by those looking to ‘beat the system’.

One particular disruptive technology for open payments is Near Field Communication (NFC), which is a technology that enables mobile devices to serve as smart cards. Fare collection technology can talk to the mobile device’s imbedded technology, opening up a range of opportunities, including instant account balance records or instant account purse reloads. However, a mobile device at the basic level is merely emulating a smart card. The key to the technology still lies in the aptitude of the system’s central architecture.

Contact-less bank cards are already beginning to be accepted widely by merchants around the world. Within a few years, open payment systems within transit may be common in most major cities. However, the distance between point A and point B is complex and anything but straight. Technology and simple human behaviour present powerful obstacles and innovators have a lot to tackle before they can celebrate the future of mass transit.

Accenture will be exhibiting at IT-TRANS 2010 – Visit them on Stand E5

www.accenture.com/ptbuzz