Visa sees transit start to recover—with a boost from contactless payments

Mass transit usage cratered during the coronavirus pandemic, but there’s signs of recovery based on how people are paying for their fares.

Contactless transactions for transit fares increased 187% from an April low to the end of June, reports Visa, which notes that this is still below the pre-pandemic volume. There has also been a pickup in transit technology projects that involved contactless payments.

This week Caltrans and Monterey Salinas Transit announced a contactless transit payment project that will go live in September, while globally Visa said contactless transit projects are now live in Brussels, Bucharest, Bratislava, Hong Kong and Santo Domingo, Dominican Republic.

“The reduction in usage has had a massive impact on revenue, but the transit systems also have to step up and retain the usage transformations,” said Ana Reiley, global head of delivery for urban mobility at Visa.

Mass transit has suffered from the same fears as in-store retail and dining, namely that crowds of people in enclosed environments raise the potential for infection. Beyond mask mandates, transit systems are increasing cleaning and deploying ultraviolet lighting, believed to kill the coronavirus on surfaces.

Bloomberg News

Transit systems also include many of the same contact risks that retailers face. Most transit systems have physical ticketing kiosks, often at bus stops or inside stations, and require physical gated entry. The quick uptake in transit payment technology in 2019 in the U.S., and earlier adoption of account-based ticketing and open-loop contactless payments in cities such as London, provide a way to remove a lot of the physical ticketing infrastructure from transit networks.

Contactless and open-loop transit ticketing, or account-based ticketing, replace stored-value cards with tickets that can be purchased via an app, and entry through a contactless terminal. Open-loop systems also allow mobile wallets such as Apple Pay to be used to buy transit tickets and enter turnstiles, with Apple in particular developing a biometric system to speed entry.

“Contactless allows you to use transit without having to touch anything,” said Reiley, adding Visa has more than 500 transit systems globally that have implemented contactless transit payments or are in the midst of projects, including large migrations to open-loop contactless fares in New York and Sydney. In some cases, such as New York, these projects are being accelerated as part of coronavirus recovery plans.

Visa this week also entered a partnership with Cubic Transportation Systems, which provides mobile transit technology and incentive marketing. Visa and Cubic will co-develop open payment technology based on Visa’s framework. The card network also reports its Visa Ready certification and mass transit transaction model partnership have expanded to 150, up from 100 in October 2019.

The projects aim to bring people back into the transit systems. Ridership has started to creep back up in recent months, though it is still low. Boston's MBTA, for example, saw a dip of about 75% from February to April, followed by an increase of about 25% to mid-June. New York's MTA saw a similarly steep drop followed by a gradual recovery in June.

“A lot of consumers right now are not willing to take public transit because they feel exposed to the virus, or they want to use public transit less often. The reason is they don’t want to touch machines in a closed environment,” said Reiley.

Despite the slowdown, there’s been an expansion and interest in demand for contactless or touchless technology, as well as account-based ticketing, said James Gooch, marketing director for Masabi, a London-based transit technology company.

Masabi this week partnered with Uber and NEORide, a council of 15 transit systems in and around Ohio, to deploy the ride-sharing app’s transit ticketing feature. Uber has deployed similar technology in Denver as part of its strategy to tie its core business together with transit for use cases such as airport arrivals. Masabi has made similar “transit as a service” deployments that did not involve Uber in St. Louis and Dayton, Ohio, since the pandemic began.

Pooling systems and deploying transit ticketing and payment technology via mobile allows the cost of upgrades to be shared among systems, Gooch said. “There’s one system, so it’s a stronger shift. It’s a better way to deliver that technology.”