Open-Loop Payments In Mass Transit

William Arsn

The importance of sustainability is one of the driving forces behind the reduction of paper tickets in mass transit. Their magnetic stripe prevents them from being recycled, they cause litter, and they decompose slowly. When paper tickets and change are given to passengers, the time spent at each stop can be lengthened, negatively impacting schedules and increasing pollution.

Managing cash, printing tickets, and maintaining automated ticket machines all cost transit operators money – at a time when we’re more inclined than ever to pay for goods and services with cashless and contactless methods. This is why proprietary (or closed-loop) cards, which are available in many cities as an alternative to paper tickets, are already popular. However, there is still a cost associated with making the cards as well as maintaining the machines and other devices for putting money on those cards. Riders must also remember to carry the cards and keep them filled up, which many will do with their EMV bank cards.

The Solution

The next logical step is to provide riders with the option of paying for trips directly with their EMV bank cards (or digital wallets, smartphones or wearables). This technology, known as open-loop payments’ or ‘open-loop tap-to-ride,’ allows users to pay for transportation with a familiar contactless tap. They are not required to understand fare structures, where to purchase tickets, or how to obtain (and top up) closed-loop cards. All of this makes it simple for everyone — resident, visitor, or tourist – to use public transportation, which is an aim shared by many cities.

A Distinct Contactless Transaction Type

Most of us are accustomed to using a contactless tap to purchase anything from a quick coffee to the weekly supermarket store. Those transactions are usually completed in a second or two, but that isn’t fast enough at the station turnstile or when boarding the bus. As a result, the card schemes have developed special Mobility and Transport messaging standards to distinguish mass transportation as a different contactless transaction type. This enables cards to be managed and authorized in a 500 ms timeframe (using business logic within the gate or turnstile), guaranteeing the seamless access experience that passengers expect and operators strive to provide.

Correctly recognizing these transactions also protects and decreases risk for transit operators by invoking:

  • the first ride liability limit (in regions where it is available), which covers the transit operator up to a certain limit if the transaction is ultimately declined (for example, due to a lack of funds);
  • Following a decline, the debt recovery engine re-presents the transaction in an attempt to recover the monies.

There should be no issuer declines as long as contactless mass transit transactions are appropriately recognised. Correct identification also avoids the use of PSD2 Strong Customer Authentication (SCA) (where enforced). As a result, those transactions will not be:

  • denied for SCA;
  • or included on a cardholder’s contactless transaction count.

Certification For Confidence

Designing and implementing open-loop tap-to-ride solutions is a complicated and specialized industry, thus transit operators should ideally collaborate with solution providers that have been accredited under the Visa Ready for Transit program. Certification ensures that they have the necessary skills, expertise, and partner contacts to assist you in implementing strong tap-to-ride capabilities quickly and without interrupting present operations.

O-City, as a multichannel payment gateway, can handle eCommerce sales for all sorts of ticketing, including closed-loop top-ups, smart ticketing apps, and QR code-based purchases, among others. Because transit operators frequently add new payment methods alongside current ones, a centralized transaction processing hub helps to keep things simple.

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