Momentum: Issue #84

November 8, 2021

Why Contactless Payments Are the Future of Transit 

By Andy Taylor, Senior Director, Global Strategy, Cubic Transportation Systems

While contactless payments have already been popularized in Europe for many years, the U.S. has been slower to adopt the new technology. Thankfully, American banks and card issuers are embracing this trend, and we should see most of our payment cards support contactless payments sooner than later. Along with banks, transit agencies have been adopting flexible systems that provide the rider with choices to use traditional contactless transit cards, contactless bank cards, and mobile devices. The contactless card trend is migrating across continents and across wallet types at record speed. 

Why contactless payments?  

There are many reasons why contactless payments have become successful. For the consumer, contactless provides a far more convenient, flexible, and secure alternative to other means of payment. Fumbling around for cash while in a rush is eliminated entirely. Additionally, modern account-based systems can allow travellers to manage all aspects of their transit on a web browser or mobile app. This includes balance transfers, resolving any transaction dispute, and scheduling purchases to meet their individualized needs. Contactless payments provide more value and cost savings for transit agencies in that costs related to cash management are minimized.  

How have contactless payments evolved? 

Contactless smart cards began with data on a silicone microprocessor that transmitted wirelessly via a tiny antenna. The first contactless cards made for use in public transit were in the Asian markets with Korea’s UPass in 1996 and Hong Kong’s Octopus card in 1997. 

Contactless transit cards proliferated as more and more agencies began adopting their use over the decades since their introduction. Now travel habits, agency needs, and technologies have changed, allowing agencies to adopt even more contactless choices and flexibility. In most cases, transit cards are a proxy payment mechanism that provides access to public transit — though some agencies, especially in the Asian markets, have expanded the use of cards to include purchasing food and other items as well. 

At the same time, bank card technology has improved, as well the use of them in transit. Recently, the adoption of contactless ticketing systems (cEMV) has allowed the introduction of bank cards as a replacement for transit cards. Europay, Mastercard, and Visa (EMV) developed the ISO/IEC 7816 standards to ensure the security of card and personal data, incorporating a physical microprocessor on the card that interfaces directly with a point of sale (POS). Most often, this requires shoving the card into a reader at a POS device and leaving it there for a few seconds. EMV was a significant improvement from the antiquated “swipe” cards of the past. Imagine cEMV as the same EMV, only using a far more convenient contactless chip to perform the security checks and data transmission as EMV while leveraging the same wireless ISO/IEC 14443 standards as the transit cards described earlier. 

Neither of these have modifiable data records on the cards as has traditionally been the case for public transit cards — so to maintain the highest security they must interact with a back-office system to perform transactions. You can recognize a contactless bank card because it will contain the expanding arch symbol somewhere on the card. 

Mobile apps and contactless payments 

Mobile apps have become a standard self-service channel for many transit systems around the world. This can be attributed to many reasons, but broadly, they provide more information and in one of the most convenient forms available for people on the go. Contactless technologies can accompany or improve existing mobile apps or can exist without an app at all. Card virtualization, or replacement of a plastic card with a digital one on your device, has proven to be a game-changer. Virtualization of cards on mobile devices provides some notable security enhancements. A common misconception is that near-field communication (NFC) is insecure, however, the only information that a hacker can pull is an encrypted token with a key that contains nothing useful. 

Contactless payments in transit 

Now with the right bank card and mobile app, contactless payments can help make using public transportation easier and more accessible for all. Riders now have the convenience of contactless fare payment options and account management on phones, eliminating multiple touchpoints throughout the transit riding experience. This is especially useful in the age of social distancing and provides riders with safer, more efficient travel.