The Future of Transit Cards
Almost every major city around the world has their own reloadable card for public transportation. We are pretty familiar with these cards because in most cases, reloadable transit cards are the cheapest way to use public transportation. As society speeds towards its ever increasing digital lifestyle, the questions many transit operators are asking themselves are: Are transit cards still necessary? Are they still the best way for our riders to pay fares? Are transit cards still the best option for us, the operator?
Let’s find out.
Different City, Different Card
It comes as no surprise that every city with a vast public transportation network has their own transit card. The card is often designed to work specifically with that city’s transit infrastructure. Because of this, there are very few examples of a card from City A working in City B (1). I can’t take a Suica card from Tokyo and use it on the TTC in Toronto. The MetroCard in New York City doesn’t work at an Oyster tap station in London. Is this a problem though? Separation can be good, especially across countries. If my Presto card (Toronto) is loaded with Canadian Dollars, what happens if I could use it in Hong Kong? This adds a level of complexity transit operators aren’t interested in addressing.
What About Japan? 🇯🇵
Japan’s IC Cards by region. Source: japanstation.com
Japan’s prepaid transportation cards are probably the best example of using a card in multiple cities. This is because every city in Japan built their fare payment system to accept the IC card. While different cities do have different names (and fun mascots) for their cards, as long as they conform to the IC card standard, they will work across the country.
Ok, that’s great for Japan, but how are we supposed to implement this world wide? No city is going to just uproot their existing infrastructure to support cards from across the world.
Let’s create a Global Standard! 🌎 👊
Sure, I guess, but you’d still need each city to buy-in. At the very very basic level what you need is:
A unique identification number world wide.
A global network able to charge the card, wherever it is used.
A way for the card to recognize the local currency and adjust its balance accordingly.
That’s it. (2)
How are you going to get everyone IN THE WORLD on board to create and adopt those standards? You don’t need to. It already exists.
Credit Cards 💳
Credit cards are the perfect fit. Their networks are operational world wide with existing infrastructure. Between Visa and MasterCard alone, you’re looking at over 200 countries that they both already operate in. Credit cards already have a global unique identifying number and automatically handle any foreign currency conversions. Some issuers even offer cards that have no fees on foreign exchange transactions. This sounds exactly like what we need for our global transit card. The best news is that some cities are already implementing this. 🎉 London has been accepting contactless payments for years. Transport for London has just released new data (via Payments Source) showing that:
55% of all payment for fares are done on a contactless credit card.
That is over 21.6 million rides per week.
1/8th of these contactless payments are coming from Apple Pay, Google Pay, Samsung Pay or another mobile wallet.
While on the topic of mobile wallet apps, New York City will begin accepting Apple Pay this spring in a new pilot project. They join cities like Chicago, Portland and Singapore (to name a few) already accepting mobile wallet payments throughout their public transportation system.
This sounds great. Every operator should just switch to accepting credit cards! Right?
Why Operators Would be Hesitant 🚫
Switching to a credit card based system doesn’t come without its drawbacks. Firstly, credit card companies charge fees. This starts at 2.5%, however big merchants can negotiate better deals. What does this mean? Increased fare prices. Transit organizations are going to have to raise prices to cover this expense. The other main drawback is infrastructure. Transit operators have invested a lot of time, money and resources into their current systems. Getting them to walk away from them to adopt a new, credit card based system, would be a hard sell. I think it’s pretty clear that credit cards would be a better option for riders, but operators are the ones making the call at the end of the day. A credit card based system does have benefits for operators:
You no longer need to have kiosks in each station or stop to purchase or reload cards.
You no longer need to hire the people to mange and perform maintenance on those systems.
You no longer need to manufacture the plastic transit cards, handle activation, returns, reloading, etc.
If those benefits outweigh the fees and sunk cost of infrastructure, and other transition costs, great.
What about Apps? 📱
Apps have the same problems as current transit cards: each city has own and some cities have multiple apps that work for the same fare. There can be a lot of confusion and there’s no one leader in the space that provides a global “app for that”. But, there may be one soon. At the beginning of February 2019, ride sharing giant, Uber launched services in Denver, Colorado. Nothing new, Uber is launching in new cities all the time, right? Uber’s app in Denver, for the first time, offers scheduling, route finding and fare payments for Denver public transportation.
Public transit information inside Lyft’s iOS app. Source: Lyft Blog.
Uber is positioning itself as your one stop shop for ALL your transportation needs. They already have relationships with city municipal governments around the world (some of them are not favourable, but they’re still in the room) and can leverage their size and position in the market to roll out similar public transportation features in every city they operate. If Uber handles the transactions in their app, cities and operators aren’t on the hook for those increased expenses.
Uber is not alone. Lyft began integrating public transportation information in their app last year in certain cities. Lyft doesn’t operate in as many cities, and has no international presence outside of Toronto, but do not think that Uber will come out of this fight as the clear winner.
This is also a big concern for public transportation operators. Do they want to make deals with companies whose primary business model is in direct competition with public transit?
Conclusion
The transit card landscape is going to go through a big transformation in the next couple of years. Credit cards and payments are increasingly going mobile. Transportation apps like Uber, Lyft and Grab have just or will be soon having an IPO or a huge funding round, giving them large war chests for expansion of their services. How much of those expansions will focus on the public transportation space? Combine these market shifts with the need for customers to always be carrying less and demanding convenience above all else, transit cards as we know them will soon start to change.
1. There are some examples of multiple cities using the same transit card, but those are mostly limited by geography. My very own Presto card in Toronto will work with some other transit operators in nearby cities, however, it definitely doesn't work in other countries.
2. You can have more features (monthly transit passes, transfer times, zone or station entrance/exit information) added at a per network level tied to the unique identification number.
