As major retailers and brands such as Starbucks grab international headlines for introducing innovative solutions for mobile wallets, much of the early innovation has actually been quietly happening within the public transportation space, from Chicago to Seoul and all points in between. Incorporating transportation options within a mobile payments wallet can be a key value-added differentiator, akin to boarding passes and concert tickets.
The movement may have gotten its start in an unlikely place — Sofia, Bulgaria, with the introduction of an SMS-based ticketing system for streamlining the local parking and public transportation system back in 2007 — a monumental advancement from the outdated “punching” system that predated it. What has followed is a complete revolution in payment options around mobile and NFC (Near Field Communication) and mobile commerce, that is offering a better experience for consumers and a more efficient, cost-effective means for streamlining the movement of the world’s rapidly swelling urban populations via subway, buses, taxis and other forms of public transport.
In the virtual era, Payment via NFC phones and contactless smart cards are propelling a lot of these burgeoning initiatives. While the outlook for widespread adoption of NFC is bright, estimates vary on when it will reach critical mass and be present in a majority of phones. Juniper Research placed the number at one in every five phones by 2014. Adding a microSD component to a given solution allows most non-NFC handsets (the major exception being iPhone, though products such as iCaisse bridge this gap) to be included in the fun. Marrying these emerging technologies with an instant issuance card strategy may represent the clearest path to success, while empowering consumers with instant and personalized offerings.
Several major cities have seen widespread adoption of this new model, which includes augmenting mobile payments with instant-issue smart cards. The wildly popular T-Money in Korea is ubiquitous and is incorporated into smartphone (SIM Cards), key chains, T-Money smartcards and other products. The payment solution works on not only buses and trains, but also at convenience stores and other businesses. London, also a pioneer in this space, is introducing new RFID applications for its mass transit system, which will build upon the popular Oyster card, introduced in 2003.
The transit authority in Chicago recently unveiled a plan to introduce an “open-loop” payment system for public transportation. Rather than issuing a single pass or pre-paid card, the “open-loop” system will allow users to pay with contactless bankcards (Visa PayWave and MasterCard PayPass) and eventually NFC phones. The Ventra Card, issued by Metabank, will also be available as a pre-paid and reloadable contactless card. Similar to the T-Money card in Korea, it will also be taken at other merchants and used as an ATM card. You can view a brief animated video on how the Ventra system will work beginning in 2013.
New applications of these emerging contactless and mobile payment solutions are presenting themselves each day. As the mobile wallet unfolds beyond the scope of payments to encompass mass transit, loyalty programs, membership credentials, building access, health services and more, the value proposition becomes clearer to consumers. Increased convenience and greater utility will drive broader adoption — and everyone has an opportunity to benefit.
Consumers become more loyal customers when the payment system is elegant and, ideally, packaged with loyalty programs and incentives. Financial institutions and public transit authorities can also leverage the wealth of data that comes with the (now trackable) consumer behavior. Is mobile commerce “driving” visible changes in your world — either as a consumer or industry professional? Tell us about it with a comment below.
Visa PayWave is a trademark of Visa International Service Association.
MasterCard PayPass is a trademark of MasterCard International Incorporated.