An opportunity to collaborate

Transcription

1 Payment Systems in Public Transport An opportunity to collaborate Keith Smith Payment Systems Consulting

2 Agenda 4 Retail Payment Systems 4 Electronic Money Products 4Account based 4 Pre Authorised Debit 4Non account based 4 Prepaid Stored Value 4 Contactless Payment 4Technology Advances in the banking sector 4 Payment Systems in Public Transport 4 Pay at Gate or Pay Before 4 Benefits for all Stakeholders 4 Case Studies 4 Pilot Projects 4Kaohsiung, Taiwan 4New York Mass Transit Authority

3 Types of Electronic Money Products 4 There are two types of E Money products : 4Account based systems 4Card holder has a client relationship with the Issuing Bank 4Payment transaction results in a claim on an account based deposit held at the card Issuing Bank 4Non account based systems 4The card holder is anonymous 4Payment transaction results in a claim on a float based deposit held at the card Issuing Bank

4 Account Based System Pre Authorised Debit XYZ Transaction Service or Goods Merchant Transaction Set spending limit Card Holder s Bank Merchant s Bank Card Holder s Account Deposit Account Clearing House Merchant s Account

5 Non Account Based System Prepaid Stored Value XYZ Transaction Service or Goods Merchant Load stored value Redemption Issuer of E Money Merchant s Bank Float Account Clearing House Merchant s Account

6 Payment Systems in Public Transport XYZ Fare Transport Taxi Redemption Funds X fer Card Holder s Bank Taxi Owner s Bank Card Holder s Account Deposit Account Clearing House Taxi Owner s Account

7 Payment Systems in Public Transport XYZ Fare Transport Bus Redemption Funds X fer Card Holder s Bank Bus Operator s Bank Card Holder s Account Deposit Account Clearing House Bus Operator s Account

8 Payment Systems in Public Transport XYZ Fare Transport Rail Redemption Funds X fer Card Holder s Bank Rail Operator s Bank Card Holder s Account Deposit Account Clearing House Rail Operator s Account

9 Payment Systems in Public Transport XYZ Fare Transport Redemption Funds X fer Card Holder s Bank Operator s Bank Card Holder s Account Deposit Account Clearing House Operator s Account

10 Payment Systems in Public Transport Fare Transport Funds X fer Redemption Card Holder s Bank Operator s Bank Card Holder s Account Deposit Account Clearing House Rail Operator s Account

11 Payment Systems in Public Transport Transaction Service or Goods Load stored value Redemption Issuer of E Money Merchant s Bank Float Account Clearing House Merchant s Account

12 Payment Systems in Public Transport Banks MyTrans MyElect MyWater MyShop MyMultiCard Clearing and Settlement Clearing House

13 Payment Systems in Public Transport 4 Separate payment system for transport 4These systems may be technically and operationally sound but may be expensive to maintain. 4They require transportation companies to acquire payment skills such as risk and fraud management, cardholder support, card issuing, settlement and clearing. 4Will not be utilised for general purpose payments. 4 What we need is 4a solution for general purpose payments which includes all modes of transport.

14 Payment Systems in Public Transport 4 Banking industry issued smart card payment application used as stored value for public transportation payment 4 Partner with the banking industry who provides the clearing system 4 Single card with credit/debit/stored value on both contact and contactless interface 4 Single stored value purse for both transportation and retail payment 4 Implementation follows global standards to ensure global interoperability 4 A Win Win proposition for all stakeholders

15 Payment Systems in Public Transport 4By combining the infrastructure, experience and specialist skills of each of the partners 4 We have the products and tools to open up a new opportunity in transportation with advantages to all parties: 4Transport operators major operational cost savings 4Banks access new cardholders & locations 4Cardholders/Travelers quick, easy, convenient to use

16 What s in it for the Transport Operators 4A newer and more secure technology at the lowest cost 4No need for expensive payment and clearing systems 4Proprietary ticket clearing house not required 4No card management and issuing and authorisation systems 4Global standards that ensures interoperability 4Vastly reduced operational costs: 4banks issue general purpose low value payment cards which can be used on public transport; 4rather than having Operators issue their own specific proprietary cards for transport only and bear all the cost. 4Transport Operators can take advantage of value added services offered by banks to increase card usage and generate new revenue 4Reward and loyalty programs; 4co brand programs

17 What s in it for the Transport Operators 4Flexibility to include other transport operators under same payment platform (multimodal integrated transport system) 4In an open payment scheme, another transport operator is just another merchant 4Better service availability for consumers/commuters via the banking industries retail services network for: 4Card top ups 4Administrative services 4Lost cards 4Customer support 4Supported by proven technology, products and payment/financial institutions

18 What s in it for the Transport Operators 4Improved payment security without additional burden of acquiring bank like payment and fraud expertise. 4Take advantage of developments in payment cards to keep up with technological advances at a lower cost. 4Open standards, easier/more competitive sourcing and global interoperability based on: 4EMV 4ISO (Type A/B) contactless technology 4The PayPass global standard for contactless payments

19 What s in it for the Banks 4Establish and maintain an open low value payment system 4Make use of economies of scale 4Enhance cardholder value proposition 4Take advantage of the move to EMV to leverage on existing acceptance channels (e.g. retail POS) and new EMV technologies such as PayPass (contactless) and to reduce card and terminal costs 4Maintain technology leadership and develop a globally consistent low value payments solution based on an EMV compatible program (Preauthorized debit)

20 What s in it for the Card holders 4Benefits of one card which can be used for all payment needs 4Wider usage of the prepaid stored value on the card at retail POS deployed by the Banks and retailers 4Convenience with one card for everything and everywhere 4Ability to link the transport functions and payments to existing accounts (don t need to manage additional accounts/balances) 4Having a single bank relationship to manage both transport and general payment functions 4The contactless convenience experienced by cardholders on transport can be extended to low value payments at retail POS

21 Integrated Fare Collection Solution An electronic payment fare collection solution is a combination of: 4Pre Authorized/Pre paid Stored Value 4Enables cards to be issued to traditionally non banked customers: children, high risk, visiting tourists, etc. 4Enables transactions to be performed offline (e.g. readers installed on board vehicles such as buses and taxis) 4Contactless Payments 4Which enables quick and easy payments 4Both proven solutions thus minimizing the technical risk of this innovative new approach to transport payments 4With some additional functionality to handle ticketing

22 Payment Cards in Public Transport Why now? 4 Advances in Payments Technology 4In the past, payment cards have had limited applicability for the public transport environment 4Neither Magstripe nor Chip & PIN lend themselves well to high throughput, ruggedised operation 4The emergence of contactless payment cards creates a new opportunity to consider payments in transport

23 Payment Cards in Public Transport Why now? 4 Advances in Payments Technology 4Contactless Payment Card 4Within transaction limits 4No PIN 4No signature

24 What is PayPass? 4 PayPass is the de facto global standard for contactless payments 4 PayPass specifies what is required of both card and reader in order for contactless payment to take place 4 Developed by MasterCard, PayPass has been licensed by both Visa and JCB 4 The primary aim of PayPass is to offer an attractive alternative where traditionally cash has dominated 4 PayPass is a key component of the MasterCard War on Cash / Low Value Payments initiatives

25 MasterCard OneSmart Solution for Transport 43 Main Options: 4Accept Standard PayPass 4Enables cardholders to pay as you go rather than buying tickets or tokens 4 Transit Enhanced PayPass 4For more complex fare collection requirements (e.g. distance based fares) 4PayPass + Transit Hybrid Solution 4Combining PayPass with an existing transit application on the same card

26 Integrated Fare Management and Intelligent Transport System

27 Integrated Fares & Intelligent Transport Systems Fare Tables Ticket Redemption Payment Transaction Exception Reports Fare Structures Route Planning Capacity Planning Driver Rosters Subsidy Management

28 e Ticket Fares & Intelligent Transport Systems Transport Operator Ticket Sales XYZ Transport Operator Fare Schedules Route Schedules Capacity Planning Roster Planning Transport Authority Transport Policy Fare Subsidies Transport Operator Ticket Validator

29 e Payment Fares & Intelligent Transport Systems Card Issuing Bank ATM XYZ Value Load Terminal Clearing House Data Warehouse Transaction Acquiring Bank Transport Operator Fare Schedules Route Schedules Capacity Planning Roster Planning Transport Authority Strategic Planning Transport Policy Fare Subsidies

30 Low Value Payments & Intelligent Transport Systems Card Issuing Bank XYZ Clearing House Data Warehouse Transaction Acquiring Bank Transport Operator Fare Schedules Route Schedules Capacity Planning Roster Planning Transport Authority Strategic Planning Transport Policy Fare Subsidies

31 Intelligent Transport Systems Data Warehouse Information signs SMS Application Systems Application Systems Internet Transport Operator Transport Authority Television/Radio Call Centre Fare Schedules Route Schedules Capacity Planning Roster Planning Commuter info Strategic Planning Transport Policy Fare Subsidies

32 PayPass in Public Transport 4 Pioneer projects in the transport environment: 4 Kaohsiung City Govt The TaiwanMoney card 4Based on OneSmart PayPass enabling offline operation without credit risk 4Extended functionality to handle transport data 4 New York Mass Transit Authority PayPass Trial 4 Tap and go payment transactions at the barrier 4More information at:

33 The Kaohsiung City Government Smart Transport Card Project (South Taiwan)

34 KCG The Challenge 4The catalyst for developing the OneSmart Transit solution was the Kaohsiung City Government (KCG) Kaohsiung Smart Transport Card Project 2nd largest city in Taiwan KCG manages transport both for Kaohsiung and for 6 surrounding cities Total population of 6.5m (inc. 1.5m in Kaohsiung) Modern transport, financial and industrial centre

35 KCG The Solution 4KCG wanted to introduce a smart card to improve the efficiency and convenience of their transport system 4However they did not want to incur the costs of: 4 Card issuance (production, distribution, customer support) 4 Scheme management (risk, clearing, settlement, etc.) 4 Legislative oversight (e.g. obtaining banking licenses) 4The solution was to partner with the banks who already perform these functions in their day to day business 4The attraction to KCG was to avoid the cost of duplicating these functions 4The attraction to the banks is a cost effective means of addressing a completely new set of cardholders and acceptance locations

36 KCG Project Key Partners 4MasterCard provides a combined payment solution (including PayPass and Pre Authorized) for issuers and acquirers. 4Mondex Taiwan operates the Pre Authorized host solution and clearing and settlement service 4Cathay United Bank and E.Sun Bank focus on issuance of the TaiwanMoney Card, as well as marketing and customer services. 4Acer is the systems integrator, device provider and project manager 4China Engineering Consultants, Inc. is in charge of programming the electronic transportation terminals.

37 Card Issuance 4Cards are issued by MasterCard Taiwan members (unlike more traditional transport only cards issued by non payment organizations) in two flavors : 4Standalone card 4For children, non local and non banked customers 4The card features a single payment brand (associated with transport payments in this market) utilizing OneSmart Pre Authorized and PayPass technology 4Payment Plus 4For existing cardholders and new account customers 4Dual branded card including MC credit and/or debit

38 Acceptance Infrastructure Bus/Ticket validator (Contactless) Top Up at POS (Contact EMV) Payment at POS (Contact/Contactless) Cash

39 PayPass in Public Transport The Taiwan Money Card 4Launched October A single payment product for both transport and retail use 4Around 140,000 cards issued 4Accepted on over 1,900 buses 4Around 2,000 retail locations (coffee shops, supermarkets, convenience stores, cinemas) 4Transaction levels continue to grow month by month June 2006

40 TaiwanMoney Acceptance Aboard the Bus 4Bus/Ticket Validator is offline and contactless only 4Driver can choose to open only front doors (so exiting passengers must pass the reader)

41 Typical Retail Shop The Brunch Coffee Shop MasterCard Cash window decal Countertop PayPass Reader Acceptance marks: MasterCard PayPass (credit) MasterCard Cash (prepay) Universal (multi scheme) contactless acceptance mark

42 TaiwanMoney Reloading Cash Top Up (at bank or shop) Library Photo Top up = $100 4Consumer hands card + cash over to cashier 4Cashier performs top up by inserting card into POS terminal Library Photo 4Online EMV transaction hence in contact mode

43 KCG Bus Validator Hardware Configuration GPS Satellite Bus Validator Unit with built in wireless network module TAIWANMONEY GPS Mouse for bus location tracking Driver Console for driver interaction with BV Power Supply 12 to 24Vdc provided by bus

44 KCG Bus Validator Operation Route Start & End Procedures 4The Bus Validator (BV) supports two modes of operation: 1Fixed Fare 2Variable Fare 4In each case, the route start/end procedures are the same: TAIWANMONEY 4 Start Route Procedure 4driver logs on to bus validator with his/her Driver ID Number and the Route Number 4Based on the route number, the BV automatically selects either fixed fare or variable fare mode 4 End Route Procedure 4back at the depot, driver logs off 4BV automatically uploads transaction file (including clearing records for pay as you go transactions) via wireless network 4BV automatically downloads any configuration updates

45 KCG Bus Validator Operation Fixed Fare Operation 4In fixed fare mode, card is presented to Bus Validator only once (at start of journey) RECEIPT PAID $3.00 $3 TAIWANMONEY 4On presentation of the card, fixed fare is deducted regardless of start point & intended end point of journey 4The BV may store an electronic receipt on the card as evidence of the cardholder s right to travel 4Alternatively payment may be taken in the form of an electronic ticket (e ticket), purchased in advance and stored on the card 4When an e ticket is used for travel, the BV updates the e ticket status to invalidated 4Once invalidated, a ticket cannot be re used

46 START=B3 KCG Bus Validator Operation Variable Fare Operation 4For variable fare operation the GPS mouse (with which all BVs are equipped) is used to determine the journey distance $2 TAIWANMONEY +$1 TAIWANMONEY 4In variable fare mode, the card is presented to BV twice 4On boarding the bus (first presentation): 4 BV records on the card the start location of the journey as reported by the GPS mouse 4 BV deducts the minimum journey fare from the card and sets card status to on bus 4On disembarking the bus (second presentation): 4 BV reads back start location from card and compares with current location to calculate total fare due 4 BV deducts additional fare to pay (over and above minimum fare already taken) and sets card status to off bus 4To ensure that passengers present card on disembarking, cards with status on bus are detected when next boarding a bus

47 KCG Bus Validator Operation Social Card Concessions 4Certain cardholders (e.g. those over 65 years of age) are entitled to limited free travel 4Concessionary status has a start and end date (recorded on the card). Free travel can only be obtained between these dates. Each time a concessionary passenger boards the bus, the Bus Validator (BV) checks the date to determine whether the card is currently valid for concessionary travel 4If the card is currently valid then the concessionary journey counter is incremented 4If the counter exceeds the number of allowed free journeys (e.g. 120) with a one month period then the card reverts to normal (paid) operation

48 The New York Subway Trial

49 New York Mass Transit Authority 4Offered to 135,000 pre selected Citibank cardholders (both credit and debit cards) 479 turnstiles equipped with contactless payment reader along Lexington Avenue Line and one E and one 7 station in Queens 430 stations across 4 boroughs (Manhattan, Brooklyn, Bronx and Queens) Aim: Demonstrate PayPass acceptance in the mass transit market

50 New York Mass Transit Authority Terminal/Reader Installation 4 Removed coin slots and token counters 4 MTA installed standard electrical and telephone lines 4 Drilled one 1/8" hole; used other existing holes from components removed 4 Connected terminal / reader to power and telecom Terminal/Reader Installation Time minutes per unit

51 New York Mass Transit Authority Operation Two choices 4Prepaid pre funded account with discounted travel 4 Pay As You Go no prefunding, no special discounts At the barrier 4Meets 300ms requirement 4No need to swipe, just tap & go 4Easy to read / understand prompts (green = go, red = stop)

52 PayPass in Public Transport The MasterCard Vision 4Cooperate to achieve common goals such as cash displacement 4Avoid deploying new infrastructure which is not inter operable with existing global payments infrastructure 4Enable payments in the public transport environment without imposing new business practices 4e.g. our solutions support e ticketing without imposing specific data structures or validation methods 4Embrace open standards & hence economies of scale; avoid noninteroperable, closed or proprietary schemes

53 Keith Smith Payment Systems Consulting

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