Mobile Commerce World: how mobile payment can revolutionise public transit

At Mobile Commerce World in San Francisco, we heard a great talk from David L deKozan, VP of Worldwide Business Development for Cubic. Now, Cubic is one of those companies that you’ve probably never heard of… but chances are you use their services all the time. If you’ve ever used public transport, you’ve almost certainly used a Cubic product. The company handles automatic fare collection for transit, particularly smartcards - so if you’ve used a MetroCard in New York, a SmarTrip card in Washington or an Oyster card in London (for starters), you’ve used a Cubic card. And David gave us a great talk on the future of mobile in the public transit / smartcard space.

David L deKozan on mobile payment success in transit:

Virtually every transit operator in the world either already has a contactless system in place, or is in the process of trialling or building one. The problem is that the public transport market is very political, and has extremely long procurement cycles. I’ve been working in transit for 18 years, and we’ve been focusing on getting smartcards into the field that whole time - but only in the last three years have we seen things really move!

There are literally tens of thousands of contactless readers around the world, like Oyster in London or Washingtons SmarTrip. These conform to a particular tech standard (ISO 14 443) that wasn’t finalised until 2001, so this is a very recent phenomenon. The actual readers are geographically diverse - by which I mean that they’re spread out all over the country, in train and bus stations across the land. These machines are in every region. And research shows that between 45% and 55% of the population in any given region uses public transit. We call this group “Transit Riders”, and it is a huge population of people who have been trained by transit to use contactless technology!  Even better, the Tranist Riders are incredibly diverse. They include people from all age groups, all income levels, all ethnicities. Pretty much every demographic is represented, and they all now have some experience with contactless payment.

Most transit systems are card based. You swipe your card to pay the fare. Now, importantly, this card contains a data file in the black strip on the back. That file contains data on the fare it carries. It contains history, because it needs to know where you’ve come from - and when you swipe it at the next station it will update that file on your card. The reading terminal can read your stored balance, trip history and more. That’s how 99.9999% of all transit programs work. Today, these cards can be updated and loaded through a lot of channels. Oyster cards, for example, can be updated in shops by merchants with the right terminals, or on-line, or at machines at the stations themselves. But the problem with all of these is that you need to go somewhere else to do it - it’s not at the point-of-transaction, which is the turnstile or the bus-stop. What the agencies are looking at is how do you open up this system to allow contactless to work completely at the point-of-transaction, without having to top up at a merchant first?

And so we come to mobile.

Mobile phones offer a lot of flexibilty, and can fill a lot of needs that the transit community needs. It can do so much more than just a card. It’s an internet access device. It’s a portable point of sale. It’s a customer service response node, a personalised mail box, a promo delivery chanel… and this is all on top of it being used as a fare payment device! It can deliver alerts based on your commuting patterns - so it might let you know if your train has been delayed via SMS. The transit agency can even push out info (Cian: opt-in I hope) that is useful to a commuter. This isn’t just text alerts, we’re talking about delivery of targeted campaigns.

It also has economic advantages for transit - it reduces customer service costs. It can reduce the cost of distributing tickets and fares. It can be used to earn marketing revenue.

Let’s look at some pilots that have been run for contactless mobile payment. There have been a lot of NFC pilots, but very few rollouts. How can get from where we are, which is having lots of succesful pilots, to the place we all want to be? The BART NFC pilot, for example, was able to show that:
- the NFC phones were accepted at every fare gate on the BART
- the app could be uploaded via credit card
- importantly, the data file used by the NFC app was the same as that on the existing smartcards, so it will work with all BART systems that can use a smartcard
- over 80% of the users responded very positively

Contactless has also really worked in London. The mobile NFC trial used 500 participants. Again, the same application that is used for the smartcard is simply loaded onto the phone, with the same kind of data file. Over 60% of the users said they would take it up on the mobile. Oyster usage even increased for those on the trial, because while they tended to forget their card, they never forgot their phone. Consumer response to this was positive beyond what we could have expected.

So, here in the States, there’s a group called the UTFS Task Force. It’s part of the American Public Transportation Association, and it’s responsible for maintaining the standards used for fare collection. This taskforce has turned its attention to mobile and NFC. The main problem the UTFS has seen is that while transit community wants to use mobile and NFC, it is afraid that it will require a lot of infrastructure upgrading. But we have demonstrated with these trials that we can just move smartcards to mobile! We’ve demonstrated succesfully that you can move the smartcard application and files onto the mobile phone - and this will require very little upgrading.

How do we get the ball rolling? There’s a lot of things you can do that don’t require waiting for NFC enabled phones to become widespread. A properly created mobile solution should stand on its own feet, and only be enhanced by NFC. There are also temporary techs that can fill in, like stickers and memory cards. The infrastructure exists to do this, we just need to get going.