- Contactless payments can encompass bank cards or mobile apps that let you tap on a reader and go.
- Contactless payments are particularly effective for use in transit systems because they are faster and more efficient.
- Cities like London and Sydney are already using contactless transit payments and New York City plans to follow suit in 2019.
Many people see public transportation as a necessary evil. It’s crowded, inconsistent, and, of course, it seems that you always get stuck behind someone who doesn’t have the correct fare or whose card needs a refill. But what if there was a way to make at least part of the experience easier?
The answer could be in contactless payments — where all you need to do is tap a payment card or a mobile phone to a reader. They've caught on quickly in Canada, Australia, Colombia, and across Europe. And now they’re finally gaining traction in the US.
Luckily, one of the places you’re likely to see them first is in transit stations, where they can make catching a train or bus faster and more efficient.
As people flock to urban areas, straining transportation systems, cities are switching to contactless to reduce congestion and make the transit experience smoother and more attractive. Globally, there are already more than 100 contactless transit systems, including London, Vancouver, and Sydney.
Easier for passengers — and transit administrators
Contactless payments are part of a broader urban trend of making technology more people-centric and easier to use. Today’s consumers are used to fast, online payments for goods and services. Paper tickets and tokens don’t match that experience.
A contactless system eliminates the hassle of waiting in line at a turnstile or a ticket booth. Instead, passengers simply tap a contactless-enabled card or mobile phone. Going contactless is a boon to transit authorities as well as passengers. It eliminates the costs of printing tickets and maintaining fare equipment. It also makes customer management easier and reduces the cost of fare collection by 30% or more.
"Contactless payments are transforming transportation for passengers and transit systems," says Linda Kirkpatrick, executive vice president for merchants and acceptance at Mastercard. "They're more efficient and cost-effective. In developing countries, they allow many people to participate in the non-cash financial system for the first time."
Mastercard has led the way in contactless payments overall, and is now working with cities and transit systems worldwide to improve the transportation experience. Here’s how the tech company is turning mass transit into a frictionless hub that saves travelers time and money.
Zipping through the Tube in London
In London, 8.5 million people make 30 million journeys every day, stretching capacity and straining the resources of the city’s Transport for London (TfL) transit system.
But TfL is becoming more efficient since partnering with Mastercard to adopt contactless payments. Half of all Tube and rail journeys are now made using tap-and-go. As more people start to pay with the bank cards and phones they already carry, the cost of fare collection has dropped from 14% to 9%.
Setting up the system for the enormous, sprawling network required extensive planning and card-technology expertise.
“The technical and commercial challenges of implementing something of this kind are absolutely formidable, so for us, having a partner like Mastercard was critical,” says Shashi Verma, TfL’s CTO and director of customer experience.
A study done for Mastercard by L.E.K. Consulting found that consumers love the convenience of contactless payments, which have generated a worldwide reputational boost for London’s transit system.
Modernizing Mexico City
Until last year, Mexico City’s transit system, like much of the rest of its economy, ran entirely on cash. Every day, 6 million people lined up to exchange pesos for bus or subway tickets, causing bottlenecks.
But the problem goes much deeper than that. Fifty-five percent of the population lacks a bank account, preventing them from participating in the digital economy and expanding their financial options.
“They are left behind, without the things we take for granted: proof of identity, a way to save money for emergencies, access to loans or insurance,” says Mastercard CEO Ajay Banga.
That's starting to change as the city works with Mastercard to make its transit system contactless. In the past 12 months, more than a million reloadable contactless debit cards have been issued, in many cases providing unbanked people with their first formal financial tool. Mastercard is also working with local partners to make the cards usable in shops and restaurants.
The cards, which are more convenient and safer than carrying cash, are an important first step that could lead residents to banking, saving, and building a better future. They may help to create the modernized economy the Mexican government is committed to achieving.
New York is the next stop for contactless
London’s system has worked so well that many cities are using it as a model, including New York.
The city’s Metropolitan Transit Authority, which introduced mobile ticketing on the Long Island Rail Road and Metro-North commuter lines a couple of years ago, is working with Mastercard and its partner Cubic Transportation Systems to roll out a contactless payment system based on London's for the city’s entire subway and bus systems, starting in 2019.
Riders will be able to tap a card or phone — or even a smartwatch or smart fitness device — at the turnstile or bus reader. Those who also use the Metro-North and Long Island Railroads will be able to merge their tickets into a single integrated form of payment. Essentially, the entire New York metropolitan transit system will flow more smoothly, speeding commuters and visitors to their destinations throughout the city. MTA spokesman Jon Weinstein told "AM New York" that move is part of the plan to give "a world-class city" a "world-class [transit] system."
Looking ahead
Once bus, subway, and rail systems have contactless systems in place, the next step is to integrate them, as New York has started to do. Then passengers will be able to switch seamlessly from one mode of transit to another and manage their transportation costs the way they experience their journeys from A to B — as a connected whole.
Transit contactless systems may also someday merge with in-app payments for ridesharing services like Uber and Lyft, bringing consumers an even more connected experience.
"In an age where customer satisfaction is paramount, contactless payments are the key to progress," Kirkpatrick says. "If you have a system that's faster, more convenient, and secure, who wouldn't want to use it?"
This post is sponsored by Mastercard.
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