|London public transit authority Transport for London is evaluating whether to accept bank-issued contactless payment on subways, buses and other modes of transit in and around the British capital.
The authority, which owns the popular Oyster fare-collection system, plans to go out for bids in mid-2008 for new readers that could accept payment cards that comply with the global EMV standard. This could open up what is now a closed transit-ticketing payment purse to bank-issued payment applications.
Oyster, which is Europeâ€™s largest contactless transit-card scheme according to Transport for London, is based on proprietary Mifare contactless technology. And Mifare, owned by Netherlands-based NXP Semiconductors and used by transit agencies around the world, does not support such open contactless payment applications as Visa payWave from Visa International and PayPass from MasterCard Worldwide. PayWave and PayPass are accepted at a small but growing number of retail points of sale worldwide.
â€œIf you have to move off of the Mifare card, what would you move to?â€ Brian Dobson, an integration manager for Oyster told Card Technology. â€œOne of the options is putting it on the same cards as used for buying the tickets.â€
It would mean commuters could tap their contactless cards to pay both their fares on the London Underground and also for a cup of coffee or sandwich at a shop near the station out of the same account. While large British credit card issuer Barclaycard this month launched a card that combines Visa payWave with Oyster, the Oyster transit purse is a separate application . The Barclaycard â€œOnePulseâ€ card also carries a contact EMV, or chip-and-PIN, application, for higher-value purchases. Barclaycard has an exclusive three-year deal to issue cards with Oyster onboard, for which it is paying undisclosed licensing fees to Transport for London.
By combining contactless retail and fare-collection into one application, banks could potentially collect transaction fees on the hundreds of millions of rides customers take every year on subways, buses and other modes of transit in greater London. This might make it attractive one day for many banks to issue cards supporting Oyster. The transit authority is also considering putting Oyster on contactless mobile phones that support Near Field Communication. â€œWe (one day) wouldnâ€™t have to supply cards at all,â€ speculated Transport for Londonâ€™s Dobson.
But many issues would need to be sorted out before commuters could pay for transit with their payWave or PayPass applicationsâ€“ including that fact that in London, as in nearly all cities, transit fares are prepaid, not postpaid as they would be if credit cards were involved.
Also, transactions complying with the fraud-busting EMV standard may not be fast enough for collecting fares at crowded subway turnstiles. Transport for London, like other transit agencies, wants to complete transactions at subway gates in 300 milliseconds or less. But EMVCo, the organization owned by Visa, MasterCard and Japanâ€™s JCB Co. that keeps the EMV standard, has said the fastest speed available with todayâ€™s technology is 500 milliseconds. Thatâ€™s with the set of expedited protocols used for contactless EMV payment.
And while they could save money on card-issuing costs, there would be drawbacks for Transport for London and TranSys, the private consortium that actually operates Oyster, to accept banking cards for payment. They would have to pay some type of transaction fees, like other merchants taking credit and debit cards. And for those fares paid out of credit or debit accounts, the Oyster backers wouldnâ€™t receive the benefit of the float, or unspent balance loaded by riders onto their transit purses. The interest from float is typically a revenue producer for prepaid transit-card schemes.
Also, even if the Oyster backers were to decide to accept bank-payment applications, itâ€™s unlikely all card issuance could be handed off to the banks. And then thereâ€™s the question of what to do about occasional or one-time riders, who continue to use paper tickets. This is a problem faced by all transit agencies or operators rolling out contactless-card schemes.
These drawbacks and the cost of replacing proprietary card readers with more standard readers, is why few transit agencies or fare-collection operators around the world accept banking applications.
Transit agencies in southern Taiwan have taken EMV-based contactless credit cards, known as the Taiwan MoneyCard, since late 2005. But only 100,000 cards, supporting MasterCardâ€™s PayPass application, had been issued as of last summer. In the United States, Citigroup launched a project last December allowing customers with PayPass fobs or NFC phones to pay fares on a line of the New York City Subway. The NFC part of the project lasted six months. And there is a small project in Utah and a PayPass project in Turkey allowing transit passengers to pay with contactless cards issued by banks or credit card companies. The Turkish project involves PayPass cards issued by Garanti Bank, which are accept on about 120 buses in Canakkale province, in addition to merchant locations is Istanbul and elsewhere. Like the contactless fare collection in New York City, the transit transactions in Utah and Turkey with contactless bank cards donâ€™t follow the EMV standard. Rather, they use magnetic-stripe data, as do all contactless credit and debit cards in the United States. In May, Visa and Turkey’s Denizbank announced a trial that would allow cardholders to pay fares on ferries, along with purchases at some stores, with a contactless EMV card.
Pretty much all the other banking cards that can be used by commuters to pay fares, including those in Seoul, South Korea, and Taipei, the Taiwanese capital, do so with a separate transit application on the cards.
Transport for Londonâ€™s Dobson said the drafting of the specifications for the new readers is scheduled to begin in November. Speaking at a recent Mobile NFC conference in London, he said the readers would not only support EMV, but also the legacy Oyster application, as well as ITSO, which is a standard for an interoperable transit fare-collection application in Britain. He also said the new readers would recognize payment applications on NFC phones. NFC, however, is designed to accept standard contactless applications, such as payWave and PayPass, as well as such proprietary applications as Mifare.
â€œWe have a closed system, weâ€™re looking to open it up, which will include bringing in NFC as well,â€ said Dobson at the conference.
Transport for London in August launched a small trial allowing passengers to get transit information on NFC phones by tapping the phones on contactless chips embedded in posters at one Underground station. It has launched internal trials putting Oyster itself on the phones, and likely will launch one or more public trials of mobile Oyster involving telco operators, a source said.
And the transit agency recently joined the NFC Forum, which sets commercial standards for the technology. â€œTo me, itâ€™s like being on the Internet on the move,â€ said Dobson of NFC. â€œI can personalize what type of services I want.â€
Since launching the Oyster card in 2003, Transport for London and TranSys have issued more than 13 million of the contactless cards, of which 5.5 million are used each month.
Passengers on Londonâ€™s busy subway system use Oyster for a large majority of their rides, in part because they get a substantial break on the high price of paper tickets on the Underground. Oyster is also accepted on London buses and on some tram and light rail services managed by Transport for London.
By early 2009, plans call for bringing all National Rail stations serving London into the Oyster system, which could increase transactions by as much as 50%, adding 300 stations and 1,000 readers to the scheme.