Public Transit Smart Cards and Cross-Industry Payment Opportunities

This trend may be a catalyst that creates new collaborative opportunities between transit operators, the retail payments industry and other sectors. A new white paper available from the Smart Card Alliance, Transit and Retail Payment: Opportunities for Collaboration and Convergence, discusses the business interests and technological foundations that must be aligned to capitalize on those opportunities. Transit agencies in Boston, New York/New Jersey, Baltimore, Washington, D.C., Atlanta, Chicago, Minneapolis/Saint Paul, Los Angeles, San Diego, Seattle, Houston, San Francisco and other urban areas are investing hundreds of millions of dollars in a once in a generation effort to replace aging automatic fare collection (AFC) systems. First installed in the late 1970s and early 1980s, these systems are now at the end of their useful life. Smart card technology has become the standard for new AFC systems because it meets customer requirements for quick entry and exit, ease of use and convenience, and delivers many operational advantages. The American Public Transportation Association (APTA) reports that ridership on U.S. public transportation is on the rise, increasing 22% in the last 6 years, making it the fastest growing transportation sector. They estimate that 14 million Americans move through public transportation systems daily, and they took 9.4 billion trips in 2002, just slightly down from 2001 that had the highest level of use in 40 years. Investment is up too, with federal, state, and local expenditures on public transit systems in the United States totaling $15.4 billion each year for the past four years, according to APTA. An important aspect of that investment is new fare collection systems. The benefits of smart cards for transit fare payment are clear and accepted worldwide by operators. Customers love the convenience -- the traveler simply taps the card on the gate reader, with no specific card orientation required. Operating costs are lower due to reduced token, cash and coin handling. Replacing electromechanical readers with contactless smart card readers that have no moving parts reduces maintenance. Smart cards also help transit operators manage revenue sharing, optimize their operations, differentiate their service offerings and offer innovative features such as the efficient implementation of transit benefits programs. More than 17 million smart cards have been issued for use as a payment card in the United States, with recent initiatives focusing on loyalty applications and contactless cards in trials. In addition, the industry has quietly enhanced many of its payment transaction processing and card issuance systems to lay the foundation for an evolution to standards-based smart bankcards. The Alliance paper presents the state of the industry from both the transit and retail payment viewpoints. It examines the opportunity that millions of smart card-carrying transit riders create to converge on a common card for both transit and retail payment. The paper also identifies and explores the technical and commercial considerations that must be addressed to make this a reality. Profiles of numerous implementations and research from relevant studies are also included in the white paper. Individuals from 13 organizations, both public and private, were involved in the development of this white paper including: Cubic Transportation Systems, Inc., Datacard Group, EDS, ERG Group, First Data Corporation, IBM, Infineon Technologies, MasterCard International, Smart Commerce, Inc., ViVOtech, U.S. Department of Transportation/Volpe Center and Washington Metropolitan Area Transit Authority. The report, written for executives and managers, is available to both members and non-members at no charge at (www.smartcardalliance.org)