Payment Systems in Public Transport

Transcription

1 Payment Systems in Public Transport Interoperable payment solution for public transport fare collection Keith Smith Payment Systems Consulting

2 Agenda 4 Introduction 4 Electronic Fare Collection 4 Types of Electronic Payment Products 4 Payment Systems in Public Transport 4 Integrated Fare Management and Intelligent Transport Systems 4 Misconceptions 4 An Electronic Fare Collection Vision

3 Introduction 4 Public transport plays a significant role in the social and economic development of South Africa. 4 It has a direct influence on the quality of life of the majority of South African citizens. 4 The number of commuters reliant on public transport is expanding, and significant investment has been earmarked by Government to improve and modernize public transport services. 4 The public transport sector has embarked on a program to transform its services into an integrated mass rapid transit network. 4 Current strategic initiatives accepted by transport authorities at all levels of Government are aimed at transforming from commuter based modal transport to customer [user] based public transport

4 Introduction 4 To stimulate the use of public transport public transport service providers will need to provide incentives for the general public to make use of public transport. 4 Although these incentives can take many forms, the ability to utilize one fare payment instrument for all modes of public transport will be of great benefit and attraction to commuters. 4 Even greater benefit will be derived if this payment instrument can be utilized ubiquitously to make payments in the commercial retail environment of the country. 4 Retailers and banks have an opportunity to partner with Public Transport Authorities and Operators to provide commuters with a payment card that can be used to pay for public transport as well as for goods and services, tolls, parking fees, or food in restaurants or grocery stores. 4 The benefits to be gained by public transit operators, regulatory authorities and banks, are enormous.

5 Electronic Fare Collection 4 The use of cash in public transport fare collection is a problem for commuters and public transport operators. 4 The administration and management of the collection of cash fares, together with the concomitant security issues makes the business of fare collection onerous. 4 Public Transport Authorities and Operators are looking at ways to improve fare collection to meet a number of objectives, amongst many others: 4 eliminate the use of cash 4 reduce operating costs 4 improve fare collection efficiency 4 introduce innovative and appropriate fare structures. 4 In addition Transport authorities and Operators are investigating ways to meet Government s strategic objectives for public transport services in South Africa.

6 Electronic Fare Collection 4 Electronic ticketing systems include a wide range of automated fare collection system technologies and fare media that make fare payment more convenient for the commuter and financial management of fare revenues more secure and efficient for the transport operator. 4 Contact as well as contactless smart card technology based ticketing systems are a preferred alternative to cash and paper based tickets. 4 These systems are however based on proprietary technologies which result in vendor lock in and closed loop non interoperable systems.

7 Electronic Fare Collection 4 Although electronic ticketing systems are successful at a technical and operational level, they have a number of drawbacks. Some of which are: 4They are expensive to maintain as standalone systems. 4They require the same skills to operate as a payment system risk and fraud control, card management, clearing and settlement, etc. 4They can only be utilized for services provided by the issuer. 4Generally transport solutions do not stand up to the regulatory scrutiny endured by open payment systems. 4The cost of establishing a clearing and settlement service and infrastructure for the redemption and settlement of obligations between service providers is immense. 4The cost and magnitude of establishing a ticket distribution system is immense.

8 Electronic Fare Collection 4 To achieve multi modal integrated ticketing, there needs to be agreement on a host of issues between many stakeholders: 4 Various business and technical issues are barriers to collaboration among transit operators, including the selection and use of compatible systems and standards, 4 use of a common payment methodology, 4 selection of compatible operating systems and security approaches, 4 potential fraud exposure and liability, 4 development of programs to drive customer acceptance,.. 4.just to mention a few.

9 Electronic Fare Collection 4 Resolution of these issues is critical to developing a contactless ticketing system that can be used across multi modes of transport. 4 This would be extremely difficult to achieve and would require lengthy and onerous negotiations between transport authorities, operators and technology providers. 4 This ticketing system will not be utilised for general purpose payments or outside the public transport service providers domain.

10 Electronic Fare Collection 4 What we need is 4a solution for general purpose payments which includes all modes of transport.

11 Types of Electronic Payment Products 4 There are two types of deposit based e payment 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 but a fully auditable system 4Payment transaction results in a claim on a float based deposit held by the card Issuing Bank

12 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

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

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

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

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

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

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

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

20 Payment Systems in Public Transport 4 The concept of Payment Systems in Public Transport is based on the accepted so called four party payment model where the responsibilities of the issuing bank and acquiring bank are clearly separated in the card payment transaction process and the Public Transport Operator is seen as a service provider accepting payments which are channeled to an acquiring bank, for transport services provided. 4 Payment transactions are cleared and settled via banking infrastructure and the National Payment System, doing away with the need for a transport ticketing clearing house. 4 The payment card can also be used in the retail environment to effect low value payments. This holds great value added socio economic benefits for South African citizens

21 Payment Systems in Public Transport 4 Public Transport Authorities and Operators can move away from multiple, non integrated fare collection systems, to systems that require only a single payment card which will allow commuters to utilize multiple modes of transport, regardless of whether the services are managed by a single operator or by multiple operators. 4 The implementation of a fare collection system based on a payment instrument issued by the banking industry has huge benefits and many of the challenges faced by the public transport industry can largely be mitigated.

22 Payment Systems in Public Transport 4 Salient benefits which can be achieved are: 4 There is no need to establish an electronic ticketing clearing house for the settlement of obligations between operators. 4 Operators receive payment from the commuter when the service is provided. 4 Clearing and settlement of the payment transaction takes place between the issuer of the card (issuing bank) and the operator s bank via the normal clearing and settlement systems utilized by the banking industry. 4 As the transaction is prefunded payment is guaranteed. 4 The banking industry s Points of Presence and retail footprint will extend the card distribution and value loading points infrastructure and network. 4 An electronic payment system will result in major capital and operational cost savings for transport regulators and operators. 4 Full multi modal travel or integrated fare collection is an inherent feature of a payment system issued by the banking industry.

23 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

24 Payment Systems in Public Transport 4By combining the infrastructure, experience and specialist skills of each of the partners 4 We have the technologies, products and tools to open up a new opportunity in public transportation with advantages to all parties: 4Transport Authorities and Operators major capital and operational cost savings 4Banks access new cardholders & locations 4Cardholders/Travelers quick, easy, convenient to use. The socio economic benefits for the citizens of South Africa are immeasurable

25 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 capital and operational costs: 4banks issue general purpose low value payment cards which can be used on public transport; 4rather than having Authorities and Operators issue their own specific proprietary cards for transport only and bear all the cost.

26 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 service provider 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

27 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. 4A bank issued payment card provides a platform for value added services to increase card take up and card usage; 4e.g. data storage, co branding with banks and retailers. 4Open standards, easier/more competitive sourcing and global interoperability based on: 4EMV 4ISO (Type A/B) contactless technology 4Banking industry global standard for contactless payments

28 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 contactless technologies to reduce card and terminal costs 4Maintain technology leadership and develop a globally consistent low value payments solution based on an EMV compatible program (Pre authorized debit) 4Support the various government initiatives towards achieving Public Transport Strategic Objectives and the extension of electronic financial services to the unbanked and low income earners of the country.

29 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

30 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

31 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

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

33 Integrated Fare Management and Intelligent Transport Systems

34 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

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

36 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

37 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

38 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

39 Misconceptions 4PayPass transaction speed 4Under 400ms and coming down 4Data management 4Ability to write data to the discretionary field on the card 4Unbanked commuters 4PayPass/PayWave does not have to be linked to a bank account Prepaid Stored Value 4Postpaid payment instruments 4Risk of non payment is taken by the bank, not the Transport Authority or Operator.

40 Misconceptions 4Compliance certification by Associations and Banks 4Terminal certification is a matter of a few weeks 4Black lists 4If you want a hot card list then you can have it. The only restriction is capacity on the terminal. 4Fare structures 4The majority of fare structures can be supported with development required for apportionment of a fare between Operators. 4Fare collection on a pay now basis 4Not postpaid

41 Types of Electronic Payment Products 4 Pay Now 4Debit card 4 Pay Later 4Credit card 4 Pay Before 4Prepaid Stored Value All of these electronic payment products can be enabled with a contactless interface In each case payment is guaranteed and delivered same day to the Authority/Operator

42 Prepaid card dispenser attached to ATM

43 Misconceptions 4Fees 4Appropriate fee structures will be determined in conjunction with an evaluation of the commercial opportunities presented by low value transactions in the public transport and retail sectors. 4A potential model involves the use of Pre Authorised Debit where card holders are charged an on line loading fee and the individual off line transaction fees are reduced to a minimum. 4Consideration could be given to a model whereby fees are based on the gross value of transactions initiated rather than on the individual values of transactions accepted.

44 Misconceptions 4The Kaohsiung City Government Smart Transport Card Project (South Taiwan) Taiwan's First Contactless Payment Card to be Used on Kaoshiung MRT KAOHSIUNG, Nov 30, 2007 TaiwanMoney Card, Taiwan's first contactless payment card for use while shopping and paying for transportation in southern Taiwan's seven counties and cities will also be valid for use on Kaohsiung Mass Rapid Transit, which is scheduled to begin operations Dec. 1, an official of Kaohsiung City said Thursday. The card was jointly launched by the Kaohsiung City government, Cathay United Bank, and E. Sun Commercial Bank, in cooperation with MasterCard Taiwan, for use in Kaohsiung City, Kaohsiung County, Tainan City, Tainan County, Chiayi City, Chiayi County, and Pingtung County, the official said. Differing from Taipei City's EasyCard, which can only be used to pay for transportation, the TaiwanMoney Card can also be used for shopping, the official said. TaiwanMoney Card holders can currently use the card to take buses on a total of 385 lines in the above counties and cities, on ferries in Kaohsiung City, as well as to shop at contracting stores including certain convenience stores, grocery stores, coffee shops, diners, and gas stations, the official said.

45 An Electronic Fare Collection Vision 4All stakeholders should cooperate to achieve common goals such as cash displacement and an integrated public transport network of services 4Where possible avoid deploying infrastructure which is not inter operable 4The concept and strategic ideal of achieving so called integrated ticketing or multi modal travel can only be achieved if all technologies and systems implemented by all participating transport operators are interoperable. 4It will be very difficult if not impossible to achieve this with proprietary closed loop systems. 4To achieve this objective as envisaged by Government it is imperative that all stakeholders in public transport collaborate on deploying systems and technologies that are based on open standards. 4A payment instrument based on contactless technology issued by the banking industry has the highest probability of successful implementation of an integrated multi modal fare collection system.

46 An opportunity to collaborate Bank Space Transport Space Card Issuing Bank ATM Shared Space 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

47 Keith Smith Payment Systems Consulting