Voice of the Industry

Open-loop payments in mass transit: doing it right

Tuesday 11 May 2021 07:44 CET | Editor: Simona Negru | Voice of the industry

There are many reasons for transit operators to enable open-loop tap-to-ride payments. Ken Ritchie, Senior Director at Cybersource, looks at best-practice approaches to help maximise the success of cashless initiatives.

Sustainability is a key driver for reducing reliance on paper tickets in mass transit. Their magnetic stripe means they can't be recycled, they cause litter, and they decompose slowly. Issuing paper tickets and making change on buses can lengthen the dwell time at every stop, playing havoc with timetables and increasing pollution. And when bus drivers get back to the depot, they have the chore of cashing up before going home. 

Handling cash, producing tickets and maintaining ticket machines all cost transit operators money – at a time when many of us are keener than ever on cashless and contactless ways to pay for goods and services.

It's why the proprietary (or closed-loop) cards available in many cities as an alternative to paper tickets are already popular. But there's still a cost associated with producing the cards and maintaining the machines and other mechanisms for putting money on those cards. And riders must remember to carry the cards and keep them topped up – which many will do using their EMV bank cards.

So the next logical step is to offer riders the additional option to pay for journeys directly using their EMV bank cards (or digital wallets, smartphones or wearables). Known as 'open-loop tap-to-ride', this approach lets people pay to travel with a familiar contactless tap. They don't need to know fare structures, where to buy tickets, or how to obtain (and top up) closed-loop cards. All of which makes it easy for anyone – resident, visitor or tourist – to use public transport, a goal that many cities share.

A distinct contactless transaction type

I expect most of us are used to buying anything from a quick coffee to the weekly grocery shop with a contactless tap. Those transactions generally go through pretty quickly, in a second or two, but that wouldn't be fast enough at the station turnstile or when boarding the bus. That's why the card schemes have established specific Mobility and Transport messaging standards to identify mass transit as a distinct contactless transaction type. This allows cards to be managed and authorised within a 500 ms window (using business logic within the gate or turnstile), ensuring the seamless access experience that passengers expect and operators aim to deliver.

Correctly identifying these transactions also protects transit operators and reduces risk by invoking:

  • the first ride liability limit (in regions where available), which protects the transit operator up to a certain limit if the transaction is ultimately declined (for lack of funds, for example);

  • the debt recovery engine (following a decline), which re-presents the transaction to try to recover the funds.

Provided that contactless mass transit transactions are correctly identified, there should be no issuer declines. Correct identification also prevents PSD2 Strong Customer Authentication (SCA) from being applied (where enforced). So those transactions won't be:
  • declined for SCA;

  • included in a cardholder's contactless transaction count.

Certification for confidence

Designing and implementing open-loop tap-to-ride solutions is a complex and specialist business, so transit operators should ideally work with solution providers certified under the Visa Ready for Transit programme. Certification means you can be confident they have the right skills, expertise, and partner relationships to help you roll out robust tap-to-ride capabilities in good time, without disrupting current operations. 

Cybersource is certified as a compliant payment gateway under the same programme. We collaborate with certified solution providers and connect their solutions to acquirers. We also help acquirers understand the opportunities in mass transit. And because we process Mobility and Transport transactions on acquirers' behalf, they can enter this market without modifying their systems. 

As a multichannel payment gateway, Cybersource can support ecommerce sales for all types of ticketing, not just open-loop tap-to-ride, but also closed-loop top-ups, smart ticketing apps, and QR code-based payments, among others. Transit operators typically add new ways to pay alongside existing options, so a central hub for transaction processing helps keep things simple.

We have a strong footprint in Urban Mobility and Mass Transit: we process more than half a billion transactions annually for 360+ enterprise clients and 5,000 small and medium clients. Beyond transit operators, our clients include traffic authorities with bridge tolls, and transit mobile apps such as taxis, parking, and ticketing.

CNP fraud screening

Like any other merchant, a transit operator needs to manage fraud screening of card-not-present (CNP) transactions, such as closed-loop card top-ups and account-based ticketing. Cybersource is one of the leading providers of fraud screening solutions in Urban Mobility and Mass Transit, where we offer a proven fraud prevention solution through Cybersource Decision Manager and our experienced managed risk analysts.

Visit our website to learn more about our payments services and ways you can innovate further in a competitive ecosystem.

About Ken Ritchie

Ken, Senior Director, Cybersource Global Vertical Solutions, looks after the Urban Mobility vertical. He's been with Cybersource for four years and was previously with Mastercard for almost five years. He believes in developing solutions that let people do more of what they want to do than what they have to do. He focuses on delivering Travel and Urban Mobility solutions that drive sustainability, lower costs, and delight customers and cardholders.

About Cybersource

Cybersource helped kick start the ecommerce revolution in 1994 and haven’t looked back since. Through global reach, modern capabilities, and commerce insights, we create flexible, creative commerce solutions for everyday life – experiences that delight customers and spur growth globally. All through the ease and simplicity of one digital platform to manage all payment types, fraud strategies, and more. Knowing we are part of Visa and their security obsessed standards, you can trust that business is well taken care of – wherever it may go.

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Keywords: Cybersource, cashless, PSD2, SCA, ecommerce
Categories: Payments & Commerce | Online Payments
Countries: World
This article is part of category

Payments & Commerce