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The Chicago Transit Authority would like to create a fare-collection system in which it can accept any kind of contactless payment card.
Though such an achievement would be a "few years" away, the authority plans to start soliciting bids from card companies early next year to provide contactless readers for fare collections, says Dennis Marshall, general manager of business development.
"If the correct partner is identified, we could begin rolling out the beginning phases in late 2009," Marshall says.
He declined to set a more specific timetable.
The authority wants to make it easier to buy rides by enabling commuters to use the same card to pay for bus and train access that they use at other merchants, Marshall says. "CTA is joining the rest of the merchant universe," Marshall says.
By doing so, the authority would make paying fares easier both for regular commuters and for infrequent commuters such as out-of-town visitors and city residents who usually drive because they would not need to buy a separate fare card, Marshall says.
The Chicago Transit Authority already offers proprietary contactless cards customers can link to a credit card for automatic reloading. It also allows consumers to use credit and debit cards to purchase fare cards at certain kiosks located around the city.
The transit authority also has been working to add other options to its card. In October, it announced plans to create a card that would work on its buses and trains and for accessing cars operated by the local I-Go car-sharing service.
Accepting contactless credit cards would help the authority by enabling commuters to pay fares more quickly than with cash or magnetic stripe fare cards, according to Luis Cantu, the authority's general manager of revenue equipment technology and maintenance.
Commuters can pay a fare with cash in about 25 seconds. They can pay with a mag-stripe card in about two seconds, and they can pay with a contactless card in about 300 milliseconds, Cantu says.
In addition, contactless readers have fewer moving parts, so they require fewer repairs, he says.
The authority would need to issue fewer cards, which also would reduce operating costs, Cantu says.
For its partner in the open-loop contactless card initiative, the authority will look for a company with experience in public transportation and that understands the mission to provide affordable transit services, Marshall says.
The authority also plans to look for ways to motivate consumers to use public transit, so it will see what kinds of ideas the potential partners could offer, he says.
Enabling consumers to use contactless credit cards to pay for rides puts Chicago in the company of such cities as London, New York and Salt Lake City, Marshall says.
As part of tests, those cities have allowed some commuters to pay transit fares with the same contactless credit cards they use at merchants.
"It's not just CTA. This is an industry-wide march toward a more open payments-acceptance strategy," Marshall says.
Most transit systems around the world have prepaid card systems in place, but they want to move away from operating their own payment systems, says Farhan Ahmad, director of emerging payments and strategic initiatives at Discover Financial Services, which is based in Riverwoods, Ill.
"All the authorities are coming to focus on, 'how do we do what we do best, moving people, not moving payments,'" Ahmad says.
Transit agencies all over the world share a similar goal, according to Adam Gluck, vice president of global transit solutions at MasterCard Worldwide. "The transit agencies are saying to us, 'I would like my fair gate or cash box to be just like a cash register,'" Gluck says.
MasterCard has been involved in contactless trials in New York; London; Liverpool, England; and Kaoshiung, Taiwan, among other places, Gluck says.
Though the city of Nashville installed mag-stripe credit card readers on its buses in May 2007, most transit agencies prefer contactless payment because of the faster transaction speed and the reduced terminal maintenance required, he says.
For a transit agency, paying merchant-discount fees, which include interchange and transaction-processing costs, can result in a lower cost than other payment methods because the agency does not need to create and support fare cards, tokens or other ways to pay, Gluck says.
The agency also would not incur as much cost associated with collecting cash, such as sending out armored trucks to move cash around, Gluck says. Typically, 8% to 10% of the revenues collected in cash go toward covering the cost to collect the money, he says.
Transit agencies also benefit because they do not lose cash to theft, and the funds come electronically to the agency, saving time and costs, Ahmad says.
Receiving funds electronically also means that buses do not need to empty fare boxes as often, so they can stay out on the road longer and bring in more revenue, Ahmad says.
Even with the addition of contactless acceptance, systems likely will need to keep some closed-loop prepaid and cash services for visitors who do not have compatible cards, and for those who do not want to use their credit card for transit, Ahmad says.
Though contactless-payment cards offer many benefits to transit agencies, questions still remain about how to provide services fairly to consumers who do not qualify for credit cards or who do not want to use them, Gluck says.
Transit agencies need to make sure that everyone pays the same fare to access the system, so they cannot have a system where an unbanked person would need to pay an additional fee to buy a prepaid card, for example, just to pay transit fares, he says.
"Transit agencies exist to provide a public good, not to make money," Gluck says.
