Co-Branded Multi-Application Contactless Cards for Transit and Financial Payment

Publication Date: March 2008

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• Click here for information about the Smart Card Alliance Transportation Council

The mass transit and financial payment card communities have a common goal: improving the customer experience with cost-effective products and services that offer increased convenience. To help reach this goal, both communities are embracing the use of contactless smart card technology to create new value propositions and reduce operating costs. By using technology based upon common physical standards, the two communities are creating opportunities for collaboration and partnership.

The Smart Card Alliance white paper titled “Transit and Contactless Financial Payments: New Opportunities for Collaboration and Convergence” presented one approach to mass transit and financial payment convergence. The approach is based on direct acceptance of American Express, Discover, MasterCard and Visa contactless payment products at the point of transit payment/boarding, with the paper discussing some of the issues and challenges involved in implementing this approach.

This white paper complements that work, describing an approach that leverages co-branded card marketing programs and the multi-application capabilities provided by smart card technology. The white paper is intended for mass transit agencies that are considering implementing a new contactless fare payment program or enhancing an existing program through collaboration with the financial community. It is also intended for financial payment card issuers, processors, and service providers who are considering working with mass transit agencies.

Currently, five types of contactless payment systems are used or contemplated for use by mass transit agencies. They are:

• Traditional fare payment systems that incorporate a stored value model. These systems (often referred to as transit applications) use contactless smart cards to carry a data file that is read and updated by readers on buses, fare gates, and platform ticket validators. The data file includes all of the information about the electronic token or pass purchased by the customer that is required for the reader to calculate transaction-specific charges. In most instances, real-time connection to the back office system has not been provided for normal fare payment operations, but instead periodic updates occur throughout the day. To date, implementations throughout the world have used this model, including U.S. transit systems in Washington, D.C.; Baltimore; San Francisco; Oakland; Los Angeles; Chicago; San Diego; Seattle; Minneapolis; Houston; Boston; Philadelphia; Atlanta; and the New York–New Jersey area.

• Traditional payment card industry systems that use existing financial networks to process transactions and load value onto traditional fare payment cards. These systems typically use standard magnetic stripe credit and debit cards, although contactless technology is now being introduced by a variety of retailers (such as quick service restaurants) that generally process small transaction values. Transit agency devices such as ticket vending machines and point-of-sale (POS) systems are simply merchant terminals that process fare payment transactions just as they would any other retail transaction. It is common for most medium and large transit agencies in the United States to accept credit and debit card payment for some or all fare products sold.

• Enhanced payment card industry systems that incorporate an intermediate back office step. This step calculates the correct fare before the transaction is processed through traditional financial networks. These systems sometimes aggregate transactions to reduce transaction fees. An example of this model is the New York City Transit pilot program, which accepts contactless credit and debit transactions for paying subway fares. The Utah Transit Authority has conducted a pilot program, which accepted contactless credit and debit transactions for paying bus fares, and is now launching a full system bus/rail deployment using this approach.

• Basic combined systems that use contactless media. With this system, the contactless payment media carry two types of data files. One is the transit application data file used in traditional fare payment systems. The other is the credit/debit cardholder information needed to process transactions using traditional financial payment card industry systems. The two payment systems are not integrated in any way at the card level. The transit application is used to pay for transit fares; the credit/debit card application is used for other retail purchases. Examples of this model are the London Oyster/Barclaycard and the Taipei EASYCARD.

• Enhanced combined systems that give customers a choice of fare payment methods. Methods include the contactless fare card used in traditional fare payment systems, the multi-application card used in basic combined systems, and the standard credit or debit card used in traditional financial payment card industry systems.

This white paper focuses on the basic combined system and provides an overview of an approach for transit/financial payment convergence that leverages co-branded card business models and the multi-application capabilities provided by smart card technology. The white paper is intended to provide a framework for reviewing the opportunities for a co-branded multi-application transit/financial payment card and an understanding of the key considerations for implementing such a program. The white paper explores the following:

• Current transit payment system architecture and trends and financial industry card marketing programs and contactless initiatives.

• Definition of a basic combined system that leverages existing transit and financial payment technologies and infrastructure.

• Case studies of three overseas programs, the Oyster/Barclaycard, Taipei smart card program and TaiwanMoney card, that have implemented co-branded multi-application contactless transit/financial cards.

• Key commercial, operational support and technical considerations that financial issuers and transit agencies should discuss when contemplating the implementation of a co-branded multi-application transit/financial payment card.

About the Smart Card Alliance Transportation Council

The Transportation Council is one of several Smart Card Alliance Technology and Industry Councils, focused groups within the overall structure of the Alliance. These councils have been created to foster increased industry collaboration within a specified industry or market segment and produce tangible results, speeding smart card adoption and industry growth.

The Transportation Council is focused on promoting the adoption of interoperable contactless smart card payment systems for transit and other transportation services. Formed in association with the American Public Transportation Association (APTA), the Council is engaged in projects that support applications of smart card use. The overall goal of the Transportation Council is to help accelerate the deployment of standards-based smart card payment programs within the transportation industry.

The Transportation Council includes participants from across the smart card and transportation industry and is managed by a steering committee that includes a broad spectrum of industry leaders.

Transportation Council participation is open to any Smart Card Alliance member who wishes to contribute to the Council projects. Additional information about the Transportation Council can be found at http://www.smartcardalliance.org/pages/activities-councils-transportation.