With many transit systems in the process of updating their aging automatic fare collection systems and these same entities investigating or moving towards contactless technology, a new white paper from the Smart Card Alliance investigates the potential for fare collection cards to be utilized for additional payment functions outside the transit arena.

The white paper suggests new environments that can benefit both the card industry, public transit users, and transit systems. Entitled “Transit and Retail Payment: Opportunities for Collaboration and Convergence,” the paper delves not so much into the benefits of utilizing contactless technology-although that is certainly mentioned-but into the benefits available to a one-card-fits-all system.

Commented Smart Card Alliance executive director Randy Vanderhoof: “the transit paper was written to inform the market about the widespread use of public transit smart cards and how the transit industry is building an infrastructure to support contactless payments that may trigger an expansion of the adoption into retail markets that service the transit industry and have similar needs for fast, convenient, secure low value payments transactions.”

Focused on the North American market, the white paper highlights transit agencies in Boston, New York, Baltimore, Washington, D.C., Atlanta, Chicago, Los Angeles, Seattle, San Francisco and others that are investing millions to replace outdated fare collection systems first installed in the 1970s and 1980s.

“The infrastructure is going in all across the country, and three years from now millions of public transit riders will be carrying contactless smart cards,” said Greg Garback, Executive Officer, Department of Finance, Washington Metropolitan Area Transit Authority.

With contactless cards the payment technology of choice for many mass transit organizations, the white paper lists convergence scenarios for merging transit payments with other retail opportunities.

Perhaps the most famous of existing transit cards is the Octopus Card, Hong Kong’s electronic purse for public transportation. Five years ago, non-transit applications started to make use of the card, first at photo booths and pay phones located in the mass transit railway stations and later at more than 160 merchants, including 7-eleven and Circle K convenience stores, McDonald’s and Starbucks. Now, about 25 percent of octopus card transactions are unrelated to mass transit. More than 9 million cards are in use with daily transactions of US$6.5 million.

The paper also examines the Washington Metropolitan Area Transit Authority’s SmarTrip card, San Francisco’s Translink card, California’s Ventura County Transit smart card, the London Oyster Card and the federal demonstration program in Orlando known as ORANGES.

While Oyster is still strictly transit-oriented, future plans call for it to be expanded into a London-wide payment system to include parking and other services.

ORANGES is a joint effort of the Orlando area bus system, the express way authority and the city’s parking bureau. The long-term vision is for the project to move toward a multi-functional electronic payment system that would include payment for non-transportation functions such as phone service, groceries, gasoline, and other retail purchases.

The transit and retail payment convergence scenarios outlined in the white paper include:

• contactless transit payment cards with a magnetic stripe for retail payment;
•  contactless transit-issued payment cards with one or more e-purses;
•  bank issued payment cards with contactless credit or debit card payment coupled with contactless transit payment e-purses;
•  bank- or retailer-issued payment card with a retail e-purse contactless payment e-purse.

But there is one major caveat to all of this contactless transit/retail convergence: “the two markets have distinct differences,” the paper points out. For example, transit and retail have different payment processes and use different payment technologies. “all of these issues must be considered carefully if transit operators and financial institutions are to partner successfully,” the paper warns.

But the white paper is an excellent start towards what may be the next big breakthrough in contactless payment acceptance.

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 paper can be downloaded from Smart Card Alliance web site: www.smartcardalliance.org.

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