Account-based systems pave the way for open payments

Using bank cards, non-proprietary devices and the acceptance of mobile wallets are key to the future of fare collection

By Floyd Diaz

As more and better wireless technologies for public transit are developed and agencies’ competencies and commitment to integrating mobile data evolve, account-based systems for fare collection – both smart card and mobile ticketing – are gaining in popularity, and with good reason.
Account-based systems offer several clear advantages to agencies, which want to create more efficient and secure payment systems, and to increasingly mobile-savvy passengers, who are demanding more flexible fare and payment options.  With open payments, riders can also use their credit or debit card to pay for their trip adding an extra level of convenience.
At the same time, the business opportunities of open payments systems, such as the digital wallet solutions recently introduced by Apple, Samsung and a number of others, are creating the perfect environment for open payments to become the de facto standard for accepting payment in public transit and everywhere else.
Since July of 2014, Apple, Google, PayPal, Amazon, Samsung and others have all launched open payment solutions of their own. Revenue from mobile payments solutions in the U.S. and EU is growing at a staggering 42 percent per year – on track to total more than $90 billion in 2016.
According to a recent VentureBeat article, secure open payments via mobile now account for 7 percent of all e-commerce sales, a sevenfold increase since 2010, and will rise to more than 50 percent in the next three years – meaning revenue from open mobile payments systems will, by 2018, account for more than half of the world’s digital revenue.
Many of the benefits of an account-based system, and the ability to capture and use data from wireless techs, have direct application to the future of open payments, including:
• Flexible fare options including customer retention loyalty programs and capped fares. Keeping existing passengers is just as important as attracting new ones. By creating partnerships with local business owners who offer discounts and other special considerations to public transit passengers, agencies help to foster a more positive experience for passengers, while also strengthening ties to local business owners. In a similar vein, capped fares are popular with passengers because they allow for flexible use of transit services for a fixed fee. This allows the passenger to travel throughout a day, or week, without the requirement to buy extra tickets, or worry about spending more than they need to, always knowing that they are going to get the best possible fare. The simplicity of these types of transactions and the opportunity to learn from the business intelligence (BI) data they produce is of great value in developing ideal open payments solutions.

• Commercial rules are consolidated in the back office. By consolidating fare rules in the back office environment and fulfilling transactions from account-based systems automatically, the burden on vehicle operators and others who collect fares from passengers (e.g. ticket window staff) are reduced. More importantly, the need to warehouse data for long periods of time is mitigated and front office staff are allowed a window into real-time fare collection data – a critical step for implementing advanced BI solutions down the road and providing riders their rewards and benefits immediately. Open payment systems in transit will build from this BI to create new fare offerings based on a passenger’s travel data as it relates to different modes, routes, schedules and contextual circumstances.

• The devices required are non-proprietary and ubiquitous. By moving away from a walled-garden approach to collecting, integrating and sharing data across the enterprise, the agency benefits in several ways: First, by increasing interoperability across different intelligent transit systems (both in-house and third party); Second, by reducing the expense of provisioning fare collection (non-proprietary devices are uniformly less expensive to implement and easier to maintain than proprietary solutions), and finally by leveraging the smartphones and other mobile devices that most passengers now have, to allow them to discover, query, select and pay for fares in a manner with which they are very familiar.
This last point, connecting via mobile technologies and experiences that the passenger understands and feels comfortable using, is essential to understand because the frequency, volume and value of open payment methods are skyrocketing.
Surely, this extraordinary shift in how consumers want to pay for things will manifest itself in the public transit industry as well.
Account-based systems for fare collection are a crucial step in allowing public transit agencies to scale their operations in order to accept open payments. This is a critical time for agencies to evolve their fare collection solutions in advance of a time, coming very soon, when support for passenger’s mobility and digital wallets move from “nice to have” fare collection solutions to the preferred form of digital payments worldwide.

Floyd Diaz is director of Automatic Fare Collection at Trapeze Group, where he is responsible for developing long term strategic initiatives that will facilitate Trapeze’s market growth in the Automatic Fare Collection (AFC) domain.
Visit www.trapezegroup.com.