R.I.P travel tickets and cards: how open-loop transit payments are transforming our travel experience, for good

Contactless digital payment solutions are revolutionizing the way people travel.

Transit leaders are actively seeking new ways to provide travelers with a better, more efficient travel experience, while cities are working towards becoming more accessible, transforming urban mobility.

But what’s actually happening behind the scenes to implement the necessary technologies to achieve these goals?

In this article, we’ll discuss how contactless payments are changing the face of transit and how the latest innovations, together with brilliantly simple payment services, are transforming the entire transit experience for riders, operators, and the cities we live in.

Global adoption of digital payment solutions

Global adoption of digital payment platforms is on the rise. Studies show that the global contactless payment market is expected to expand at a compound annual growth rate (CAGR) of 19.1% from 2022 to 2030. This has specific application to the transit sector.

What are contactless payments?

The term ‘contactless payments’ (also known as ‘tap-and-go’) refers to intelligent transactions that are increasingly replacing traditional payment systems - mostly in service industries such as healthcare, retail, hospitality, telecommunications, etc., but also now in the world of transit.

Contactless cards enable fast, easy, and secure payment through contactless chip acceptance technology. Whereas traditionally, a passenger would have to purchase a ticket from a machine or use their closed-loop travel cards for their commute, with contactless digital payment solutions, consumers can simply use their credit/ debit card, smartphone, or e-wallet to pay for rides. This helps travelers avoid frustrating issues that can occur along the way, such as queuing for tickets, running out of credit and needing to top up their card, having limited choices of transport, and even missing out on better-value fares. Instead, travel becomes a fast, simple, and frictionless experience.

Introducing open-loop systems

Open-loop technology enables mass transit payments. Designed based on international EMV? standards, it is universal: any passenger with a bank-issued contactless EMV? credit/debit card or a smart device can pay for their travel wherever open-loop payment systems are implemented. In effect, the payment card or mobile device is used as a ticket. Prepaid EMV? cards are also available.

With open-loop technologies, no tickets and no sales equipment are required; riders simply tap their cards or associated mobile devices at the terminal and go.

In short, open-loop systems enable a secure, scalable, convenient, and cost-effective way for passengers to pay for their travel, and for operators to accept payment.

Closed-loop systems

Unlike universally accessible open-loop systems, the specific standards and technology required to implement closed-loop systems mean that they are limited to specific transit operators. What’s more, travelers can only use their transportation cards to pay for their commute – any additional credit cannot be used for other purchases. And, if the card gets lost or stolen, the money stored on it is not recoverable.

To generate revenue in traditional closed-loop models, public transport ticketing systems require a physical ticket, sales terminals and staff, validation equipment, and inspection processes. OV-chipkaart in the Netherlands or Clipper card in San Francisco are good examples of closed-loop systems.

The passenger perspective

Visa's recent Future of Urban Mobility Survey revealed that 91% of passengers expect public transit to offer contactless payments, and 45% of travelers want to use contactless credit/ debit cards or mobile devices to pay for their commute. According to the study, travelers list the top benefits of contactless payments as a convenience, time saved due to faster transactions, less worry over carrying enough cash, and reduced contact with surfaces and other people. Other passenger benefits include targeted discounts, promotions and loyalty programs that are applied automatically to each relevant journey.

There is clearly a growing traveler demand for the deployment of contactless payments in transit.

Win/win for all

It’s not just passengers that stand to benefit from contactless payment solutions in transit; it’s a win-win proposition for transit operators and cities, too.

Transit operators benefit from open-loop systems in several ways: there is no need to issue, stock, and replace cards; no need to connect to devices such as tokens, tickets, or proprietary cards; fare collection is simplified; and management costs are reduced. What’s more, transit leaders can automatically apply best-fare ticketing options, collect more passenger data, and improve their reporting capabilities.

Contactless transit payments are also very advantageous for passengers & city councils – cities become more accessible as people have more options and therefore they can pay with their preferred payment method. Passengers are not required to pre-purchase a ticket anymore and ticketless travel supports city’s sustainability agenda, by reducing the use of paper, cash, and coins. Passenger can enjoy their travel without long waiting lines, and they can get benefit from targeted discounts, promotions and loyalty programs.

Now that the benefits of open-loop are clear, let's dive into the technology behind it.

What are the benefits of transit payment solutions?

Open loop technologies and transit payment solutions bring many benefits to transit operators, cities and passengers.

For transit operators, these systems are quite flexible and cost effective. No need to issue, stock, and replace cards or to connect to access devices such as tokens, tickets, or proprietary cards. It simplifies fare collection and reduces management costs. Transit leaders can offer best-fare ticketing options and collect more data and improve their reporting capabilities.

For passengers & city councils, transit payments are also very advantageous because there’s no need to pre-purchase a ticket anymore. At least not in a traditional way. Cities become more accessible as people can pay with their preferred payment method. Cities become smarter with these technologies. It’s environmentally friendly and it reduces paper, cash and coin usage. Passenger can enjoy their travel without long waiting lines, and they can get benefit from targeted discounts, promotions and loyalty programs.

Now that the benefits of open-loop are clear, let's dive into the technology behind it.

A closer look at open-loop payments

There are three main transaction models for open-loop systems that enable secure and automatic fare collection with the acceptance of all EMV? contactless payment cards and devices:

1. The Pre-Purchase Model: Payment is made before the journey, just like with standard retail models.
2. The Known Fare Model: Like a single-ride ticket, the value of the transaction is determined when the passenger taps their credit/debit card or mobile device, and payment authorization happens in real time.
3. The Accumulated Model: Here, the transaction is processed when the passenger reaches the end their entire journey. This way transit operators can offer flexible fares, based on the actual journey that was taken.

What to look for when selecting a transit payment solution

Before selecting the right provider, make sure they have the following covered:

• Flexibility: Modularity is vital for a smooth integration process. Ensure the solution you choose is tailored to your business’s needs and flexible enough to be future proof as those needs change.
• Technological capabilities: Because the payment industry is complex and requires innovation and thought leadership, be mindful of the technological capacity of the solutions on offer. You’ll want to make sure you’re partnering with a solution that can offer you the latest.
• All-in-one: Implementing transit payment solutions can involve multiple parties and managing multiple contracts and relationships can be challenging. So, look for one comprehensive solution that covers all your needs.
• Compliance: Compliance and security requirements are essential for the accountability of your business. Transit payments require the whole infrastructure, from front-end devices to the back-end systems, to be compliant with the security standards of the banking industry, so it is crucial to select the correct payment partner when implementing an open-loop payment system.
• Payments experience: Closed-loop systems are quite different from open-loop technologies. A partner who has industry knowledge of payments will bring value to your business.
• Customer service: Partnering with a solution provider who demonstrates their commitment to your success through providing 24/7 value-added support, advice, and service is essential to maintain a healthy business.

Streamline your transit payments

At Finaro, we help transit leaders effortlessly implement contactless payment solutions, providing a tailored approach, seamless integration process with existing systems and a significantly improved customer experience. Our end-to-end solution covers every need of transit leaders, cities and passengers, simplifies public transport, and improves the travel experience for passengers.

Finaro highlights

Here are just some of the advantages of the Finaro contactless transit payments system:

• Multiple certified devices
• Transit scheme certified: Visa Mass Transit and Mastercard Pay As You Go
• Calculation engine with business rules for transit fairs?
• A dedicated dashboard for transit functionality??
• ?Full integration with remote transit management & ticketing platforms
• ?Open-loop, closed-loop, and tap payment capabilities
• ?No third parties
• ?Complete focus on your business needs

Next steps

Is it time to provide a better transit experience and enable travelers to pay via contactless? Speak with our transit payments experts today.

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