In our 2021 survey of transit agencies, 92 percent said they were planning fare payment innovations to bring riders back on board post-pandemic and more than a half are planning to introduce Open Payments using contactless bank cards and mobile phones.
The ability simply to tap a contactless bank card or mobile wallet to travel is transforming the way passengers pay for public transport. In this article, we'll explain how contactless EMV (cEMV), often referred to as ‘Open Payments’ or ‘Open Loop Payments’, is revolutionizing fare collection and answer the most frequently asked questions about Open Payments implementations for transit.
Here’s a quick intro to Open Payments for those not familiar with it
Contactless EMV is the technology and standard that enables Open Payments. EMV literally stands for Europay, Mastercard and Visa, the three companies that developed the specifications for the standard. The ‘c’ prefix stands for ‘contactless’ and means a card or mobile wallet can be scanned securely.
It’s this technology that enables seamless ‘tap and ride’ journeys across public transit systems – allowing riders to pay for fares by ‘tapping in’ on-boarding and if appropriate ‘tapping out’ when they alight.
Using cEMV media offers many advantages for passengers, agencies and operators because they are both a secure token and authenticatable payment method in one. They are also already in passengers' pockets and can be used across any transport system configured to accept contactless payments without needing to create an account before travel. This means passengers can seamlessly ‘tap and ride’ and agencies do not need to issue plastic cards, reducing their fixed costs. This way to pay can also be enabled on passengers’ smartphones and smart devices through services such as Apple Pay and Google Pay.
Talk to one of our Open Payment experts to find out how to implement contactless payments for your riders. We'd be happy to offer you a personalized demo.
10 questions to ask your supplier before implementing an Open Payments system
When exploring the options for Open Payments systems, there are a few key questions to ask to ensure the system – and the supplier selling it – will both meet your needs.
From features to security, design to deployment, usability to support, it is vitally important to tick all the boxes.
Based on our experience with more than 150 transit agencies around the world, we believe the following questions cover the most salient topics that you should explore to ensure the solution you select is the right one for you.
1. Which Open Payments model am I buying into?
There are three principal ways to deliver contactless ticketing. For most agencies, we believe Model 2- “Aggregated Pay-As-You-Go” is the best option - even if your immediate needs suggest a simpler solution is adequate in the short term. Model 2 allows for fare capping and is crucial to ensuring adoption of Open Payments.
Model 2- Aggregated Pay-As-You-Go (MTT)
This model facilitates more complex pricing and multimodal journeys. It can combine multiple journeys and modes of transport into a daily charge based on where and how often the rider taps in (and optionally taps out). It can also enable free or reduced price transfers and additional fare-capping as passengers ‘earn’ return, daily, weekly or monthly passes, enabling passengers to tap around the transport network for several days until they reach the monthly pass value, at which point the system stops charging the passenger until the start of the next month. Riders can also register their cards for concessionary discounts, such as senior or disabled, and have their reduced fares calculated automatically.
Because the taps during a day are collected and analyzed prior to setting the total fare for the day, they can aggregate them into a single transaction, avoiding separate card fees for each tap, and saving the agency money.
This system runs off an Account-Based back office which means passengers do not need to buy a ticket before travel, they simply use their secure token (in this case a contactless EMV card) and are charged periodically (within a fare framework determined by the transit agency).
A good ABT system can provide fare capping and similar advantages to other token types beyond Open Payments, so that children and underbanked cash-only riders can also enjoy the same benefits, without paying more for a series of single tickets.
The other two price models are Model 1 -“The Known Fare Model” and Model 3 - “The Pre-Purchase Fare Model”. Model 1 is simpler to roll out operating a simple tap-and-charge model charging the same fee for every tap made, but there is very little flexibility to configure more complex fare frameworks at a later date. Model 3 works well for specialist operators running a small number of routes (e.g. airport transfer shuttles) with no requirement for fare capping or in use cases where you want to link pre-purchased passes to cEMV cards.
2. Which payment processor and acquirer should I use to collect payments?
It is essential to select a payment processor and acquirer who both have experience in processing Open Payments in transit mode and experience working together. This will make the cEMV Level 3 certification process much easier to achieve.
An Open Payments fare collection system relies on third-party processors (PSP) and acquirers (Merchant Bank Account Provider) to manage contactless payments. Open Payments in transit mode differs from retail mode and both the payment processor and acquirer must be certified in that geographic territory to process the more complex transit mode cEMV transactions that have zero value authentications, variable capture and debt collection which are sometimes very new functions never used by traditional merchants. We have experienced some payment providers that are able to process transit payments in one country, but unable to in others.
So it’s essential to select a payment processor and acquirer who both have experience in processing cEMV payments in transit mode and experience of working together. This will make the cEMV Level 3 certification process much easier to achieve.
3. Do I need to install new onboard fare collection infrastructure to support Open Payments?
It’s possible that your onboard ticket validators are already compatible with Open Payments, but even if this is the case, they may require an additional level of certification before they can be used to accept contactless fare payments.
Validators will need to be cEMV Level 1 and 2 certified including the transit mode extensions and suitable card tokenization before they can be used to accept contactless fare payments. If your current validators don’t have those capabilities, you will need to procure new validators, or in some cases, get updated kernel-firmware for the readers. Try to source these from a supplier who already has a strong track record in cEMV transit payments, with several thousand units in operation.
If your current validation units are Level 1 and Level 2 certified with transit capabilities and tokenization, you will then need to secure cEMV Level 3 certification or ‘End to End’ certification for them. This level of certification also involves your processor and acquirer and the card scheme (payment network) so it’s important to have these arrangements in place prior to seeking Level 3 certification. It is important to note that the cEMV Level 3 certification is required for each card scheme, and is different for each card scheme, thus it is important to work with a payment processor and acquirer who have experience with open payments.
4. Is your recommended fare collection infrastructure compliant with PCI standards?
You will need to demonstrate your validators, back office, business and maintenance processes comply with the Payments Card Industry Data Security Standards (PCI DSS) including Chain of Custody control for payment devices to ensure that payment devices haven’t been tampered with to add card skimming or cloning devices or exchanged for devices that will steal card numbers.
If your organization has followed this regulation, then your validators should be OK to be updated to process Open Payments once the cEMV Level 3 certification has been obtained.
If Chain of Custody control records cannot be proven, the devices will need to be sent back to the suppliers to be inspected and recertified prior to securing Level 3 certification and key injection.
5. Does your contactless payment system work offline?
Open Payments transit specifications specifically allow for offline authentication and processing, and offline deny-list checking, so the latest generation contactless onboard validators will store the details of any transactions made offline and upload these once connectivity is re-established.
In areas with patchy network coverage (such as remote rural areas, the urban canyon, underground or around bridges and bus depots) this very slightly increases the risk that an out-of-balance card freshly added to the central deny-list won’t have been downloaded to your vehicle yet and might get an additional journey, but provided your acquirer and processor have robust debt recovery strategies in place to automatically retry the transaction every few days for when the card balance is again paid up, the risk of incurring long-term bad debts is reduced.
6. How do I introduce Open Payments alongside existing ticketing and payment systems?
If you have rolled out a shared fare payment platform like Justride, then chances are your fare media will be supported and your back office and validation devices are already able to be updated to full Model 2 “Aggregated Pay-As-You-Go” Open Payments, including Account-Based Ticketing and fare capping if desired (As long as you have followed the chain of custody rules and kept up with PCI requirements). Otherwise, installing multiformat validators which support all your current fare media is key to delivering open payments.
If the validators are too old or if you are considering several different new ticketing technologies, maybe fitting a new multi-format validator to the side of the legacy farebox, with a back office that provides those different options is the way to maintain optionality. Legacy farebox can be left in place on the vehicle to process cash and legacy closed fare cards. If the new ticket options prove popular enough, then as cash use declines onboard, eventually the legacy fareboxes can be retired, just leaving the new multimode validator, as implemented by Dayton RTA, Ohio.
We recommend installing multiformat readers to provide multiple channels which would allow an agency to trial a simple fixed-price ticketing (Model 1) solution to test the concept, before unlocking the real benefits - for both operators and passengers - by upgrading to a Model 2 solution.
The new Open Payments infrastructure added could then be used in a wider rollout of a more comprehensive contactless aggregated Model 2 at a later stage if a more complex back office were procured, and the readers procured already supported an appropriate tokenization method.
Talk to one of our fare payments experts about how to combine Open Payments with Account-Based Ticketing and get a personalized demo.
7. What are the customer service implications?
The biggest potential customer service challenges will likely center on riders being refused boarding because their cards are on ‘deny lists’ – but these are administered by your processor and acquiring partners who should be able to produce the data to explain the reason for their card not being accepted.
Usually, in a well-designed Open Payments system, each time a card on the ‘deny list’ is tapped again it triggers a “debt collection” attempt to re-try the failed payment just in case the cardholder has paid their bill or topped up their card just prior to tapping.
There is also some potential for mischarging if a rider taps different cards on different vehicles or taps in and out with different cards (sometimes referred to as ‘card clash’, which occurs because multiple contactless cards are held towards the reader at the same time). Clear messaging is required to remind riders to use the same card at each end and for all linked journeys, and to avoid placing a whole wallet full of different cards on the reader at the same time.
Sometimes users will query entries on their payment card statements, which makes it useful to put descriptive entries in the transaction data submitted, and have a customer self-service web and mobile portal where they can register their payment card, view travel payment history and print out receipts for claiming expenses, without needing to call customer service agents.
Where Open Payments have been introduced, customers are overwhelmingly positive towards them and uptake is generally swift – especially among younger demographics who are increasingly embracing a ‘cashless’ lifestyle. According to Research conducted by Visa in 2019, 94 per cent of 18-34-year-olds already prefer to use non-cash methods of payment.
The 2019 Visa study indicated that 49 percent of UK commuters see the introduction of contactless payments as the single most significant improvement to their overall public transit experience. More recent Visa research conducted in 2021 indicated that 88 percent of riders expect their local transit system to offer a contactless option to pay for their journeys.
8. How do you monitor uptake?
Open Payments systems provide rich data on utilization and journey patterns. Payments data remains encrypted, but the anonymised journey data is available to transit agencies and operators, providing more detailed insights into Open Payments usage patterns – pretty much in real-time.
Having access to this data in aggregate will quickly indicate acceptance and uptake of contactless payments and could potentially highlight any barriers to adoption or areas where awareness is lower.
Transit agencies should make sure their use of the Open Payments travel data is consistent with the terms and conditions of carriage, and that they respect users’ privacy when using aggregated travel data, rather than specifically targeting users individually, which could cause a consumer backlash.
9. How will your system accommodate riders who don’t have a bank card, bank account or mobile phone?
Every rider no matter their banking or technology status can have a ‘Tap and Ride’ experience making taking transit easier than buying a cup of coffee. It’s not limited to those with contactless bank cards or mobile phones. If you select the right Account-Based Ticketing platform it can accommodate all ticketing channels alongside contactless bank card payments using Stored Value accounts.
Let’s be clear: switching on contactless ticketing using bank cards and turning off all other ticketing media is simply not a possible, equitable or inclusive option. Open Payments are just another layer to a ticketing mix that must continue to include options for unbanked riders. These could include convenience store bill payment networks offering thermal barcode tickets on receipt paper for low-value pre-purchased tickets, cash digitization or cash top-ups for Stored Value Accounts associated with local ID cards, mobile apps, or Account-Based Ticketing smartcards for the unbanked.
With the right promotion, passenger adoption of contactless payments will increase, taking the strain off the current ticketing infrastructure and allowing you to run down legacy systems over time, reducing and maybe even eliminating cash on board, providing improvements to journey times and reducing capital and business processes around cash for the agency.
10. Where is your future roadmap headed?
The pace of change in payments technology continues to accelerate, and riders’ expectations of how they pay for journeys are changing almost as quickly. Ensure the Open Payments system you choose has a robust future-proof roadmap so the solution you buy today will continue to meet passenger needs in the future.
How does your agency see the bigger picture unfolding? Will your customers expect you to offer wider connectivity and interoperability between neighboring transit systems or specialist operators such as airport shuttles? Would you be comfortable insisting that your customers carry your closed loop smart card in their wallets when they can use their bank card to pay to travel on your competitors’ buses, or pay for transit wherever they travel using global apps they already downloaded like Uber, Moovit and more?
Getting ‘locked into’ a bespoke fare collection system that doesn’t have the flexibility to support new innovations in payments technology in the future could prove costly.
Delivering Open Payments with Fare Payments-as-a-Service (FPaaS)
While it is possible to deliver Open Payments with a bespoke system using proprietary software and hardware, for many transit agencies, a future-proof ‘open loop’ approach may be more cost-effective to implement and offer greater flexibility.
Payment technology is moving forward at a rapid pace and new advances could be costly and complex to implement for agencies that are locked into a solution with a bespoke supplier.
This perhaps explains why 42 per cent of transit authorities are planning to adopt a Fare Payments as a Service (FPaaS) delivery model for fare collection in the future compared to only 17% sticking with bespoke systems. FPaaS makes it easier to introduce a raft of fare payment innovations – including an Open Payments solution, and know that the next new technologies will be added to their platform over time, without needing to guess what they will be or future-proof their procurement today.
Using a Fare Payments-as-a-Service delivery model can also unlock many more ticketing innovations and benefits for both transit operators and riders. FPaaS solutions are swifter and more cost-effective to implement and update and offer a flexible, inclusive future-proof roadmap for the delivery of a whole suite of Mobility as a Service (MaaS) innovations that are coming down the track.
Masabi’s Justride is the leading fare payments platform for public transport, helping agencies move away from expensive bespoke fare collection systems by enabling the delivery of Fare Payments-as-a-Service.
Justride is a single platform configured in different ways for all partners. Transit agencies benefit from the latest ticketing innovations delivered quickly and cost-effectively, with regular feature updates everyone on the platform benefits from.
In 2021 Masabi launched Open Payments for the city of Bilbao which you can learn more about here.
Talk to one of our Open Payment experts to find out how to implement contactless payments for your riders. We'd be happy to offer you a personalized demo.
For more information download our Open Payments Look Book.