By Bassam Estaitieh and Paul Doukas
With the emergence of every new payment technology, there’s a chorus declaring that it will revolutionize payment for products and services. This happened when credit cards were introduced as a method of payment for public transit, and it’s happening today with the emergence of NFC as the next exciting payment technology.
Despite the excitement, it’s important to examine what’s happened in the evolution of payment systems at public transit stations and try to draw conclusions on what the future might hold.
Payment technologies at the public transit points of sale
The point of sale for a public transit service can either be at a booth manned by a human teller, or at an automated paystation. Since the desire of most operators is to phase away the booth in favor of automated methods of payment, we will focus here on the latter. Automated paystations can be a Ticket Vending Machine (TVM), Add Value Machine (AVM), or a farebox, depending on the purpose of the machine and the transit vehicle.
For the purpose of this discussion, consider what’s happened at the TVM. First, the preferred payment method was cash-only. Eventually magnetic stripe-based credit and debit cards were forecast to completely displace cash. Internet-based payments, followed by contactless credit cards (at least in some countries), became more and more prominent. Not long ago, we saw the introduction of ticketing using applications on smartphones. Smartphone NFC payments are the newest payment on the block.
TVMs today, more often than not, enable all of these payment methods combined. Cash and cashless payments are offered at almost all TVMs. Each time a new payment method is added, the capital and operational costs of Automatic Fare Collection (AFC) systems increase for the operator. Operators are increasingly unable to phase out any existing payment method.
There have been instances where some operators wanted to phase cash away from their TVMs, but they did that by enabling their ridership to alternatively purchase tickets with cash at designated retail locations. This simply shifted the payment channel, perhaps at a higher operational cost than if the operator processed cash at its own premises.
A word about NFC
Will payment with smartphone NFC technology change all of this? Will it take over all the other cashless means of payment, and then replace cash entirely? Can the operator afford to not offer NFC payment?
This debate has been raging in NFC forums for years. NFC has been successfully and unsuccessfully trialed at various retail outlets some public transit stations. Transit for London, Europe’s biggest transit operator, tried it recently. Different trials in different industries yielded various degrees of success. NFC proponents believe that technical issues will be ironed out and a dominant value chain will emerge, making NFC a seriously viable payment option.
Some experts are now formulating a consensus: NFC payment will become a much more prevalent form of payment in the developing world and not as popular a form of payment in the developed world.
Predicting the future
So what will the payment-share landscape be in the future? If history is an indication, then cash will maintain a certain (but steady) share, and cashless methods of payment will continue to exchange market share amongst each other. The same predicament that operators face today will exist in the future: the need to support multiple payment methods.
Bassam Estaitieh is product manager, Transportation, of Crane Payment Solutions. Paul Doukas serves as director of Business Development, Transportation. Crane designs and manufactures payment solutions for gaming, retail and kiosk, transportation and vending applications worldwide.