Payment Strategies and Considerations for Transit David L. dekozan Vice President, Strategic Initiatives Cubic Transportation Systems, Inc.
Key Themes How did we get here? AFC 101 in 10 minutes or less Evolution or Revolution? Established vs. green field systems Getting from Here to There Public Contracting and Transition Management Lessons from The Trenches Card based Account based Open Payments
How did we get here? Automatic Fare Collection Objectives Streamline and accelerate fare payment process Automate and minimize cash handling Integrate payment and access control functions Simplify terminal interaction Enable creative fare tariffs while minimizing confusion Facilitate fare media and fare product distribution Promote connected journeys Create linkages across operators Collect and report on ridership Collect and report on revenues Optimize maintenance operations Graceful system degradation
Applying technology to these objectives The need for speed Critical for subway and inner city bus Less critical for commuter rail and inter regional bus Communications implications Magnetics Contactless smart cards Bar code tickets 3 rd party RFID Mobile phones Bar code NFC HCE
Card Based Processing Benefits Challenges Distributed transac.onal logic Greater terminal demands = more $ Store and Forward High Speed Instant feedback No transac.onal risk Proof of payment Can leverage NFC technology Short list of suppliers Fare rule changes require system wide table update Limited card op.ons Harder to partner with other ver.cals Customer must acquire and load media Must establish TSM linkages and suppor.ng apps The majority of established systems- does not require real time comms
Account Based Processing Benefits Easier to update fare rules Challenges Slower More terminal op.ons and lower $ Real.me communica.ons = more $ Easier to partner with other ver.cals A Variety of RF token op.ons Limited customer feedback at terminal Greater transac.onal risk Enables Open Payments Reduced need to acquire and load media Flexibility in how to address challenges Now feasible with the latest in comms tech- changes the overall processing architecture
Contactless Open Payments Benefits Challenges Contactless Bank card can be used as a pre- paid token Contactless Bank card can be accepted with no pre- paid account (PAYG) NFC Mobile wallets can be accepted No need for registra.on or pre- purchase may lit sales Simplicity for infrequent users Ease of flow for special events Dependent upon issuer strategies Dependent upon issuer strategies Wallet applica.on OH takes too much.me Requires terminal cer.fica.on and maintenance Increased PCI compliance demands Decreased flexibility Poten.al increases in transac.onal risk
Key Questions 1. What do you currently have? 2. What is the distribution of fixed vs. mobile fare terminals? 3. What is the make up of your ridership? 4. How sensitive are you to transactional speed? 5. How complicated is your fare policy? 6. What are your regional card issuers doing?
What do you currently have? Many agencies have established contactless fare systems Several are multi-agency An architectural change should be as transparent as possible to the user All stakeholders need to be on board There will be trade off decisions to make Ease of transition versus Competitive process Near term support costs Component supply chain
What is your current mix of fare terminals? Comms are simply better and more reliable with fixed assets If your operations have a large number of mobile terminals it will affect your operational decision making
Chicago Ventra- A Case Study "CTA performance report-january 24, 2014". Tap times Count Percent Cumulative 0.5 seconds and under 0.6 seconds 1.0 seconds 15,066,854 66.70% 6,742,369 29.85% 96.55% 1.1 seconds 2.5 seconds 768,517 3.40% 3.40% Over 2.5 seconds 10,223 0.05% 0.05% Transaction times- Rail
Chicago Ventra- A Case Study "CTA performance report-january 24, 2014". Tap times Count Percent Cumulative 0.5 seconds and under 15,563,261 61.37% 65.15% 0.6 seconds 1.0 seconds 958,672 3.78% 1.1 seconds 2.5 seconds 8,826,324 34.80% 34.80% Over 2.5 seconds 13,174 0.05% 0.05% Transaction Times- Bus
What is the make up of your ridership What is the marginal propensity for a rider to have a contactless bank card? What is the marginal propensity for a rider to have a smart phone? What portion of your ridership is daily vs. transient? What is the trip distribution between prepaid products and day of travel tickets? How sensitive are your operations to boarding times?
How sensitive are you to transactional speed? What portion of your operations are Heavy Rail? What portion of your bus routes are inner city? Are your riders already trained? What is your tolerance for transactional risk? What technologies does your current infrastructure support?
How complicated is your fare policy Complex fare rules are best aided by strong user feedback If decision making is not local exception cases surrounding network latency must be factored
Ventra Accounts as of Jan 24 More than 1.3M accounts opened since September Ventra 721,666 RTA 234,954 Student/UPASS 285,352 Other 99,380 Much of your ridership will require dedicated media regardless of architecture
EMV On the Way Transit Operator EMV Migration Oct 2015 Liability shift PCI Validation relief April 2013 Acquirer readiness US Acquirers are expected to accept EMV transactions beginning April 2013 Transit payment System upgrade Begin accepting EMV cards at transit locations Major card brands in US have offered to provide liability shift beginning Oct 2015 for the merchants who have migrated to EMV. Major card brands are offering incentives like PCI Audit relief, Data breach protection to early EMV adapters (* refer to merchant agreement)
EMV migration impacts Transit TICKET VENDING MACHINES TVMs need to be upgraded to support both EMV and Mag stripe cards. EMV enablement requires a PIN Pad device installed at TVM. Deploying Contact & Contactless readers make it more user friendly. Upgrade required Most of the Transit ecology would be impacted by EMV migration FARE GATES Fare gates require contactless readers that can process both EMV and Non EMV Contactless cards besides transit closed loop cards. Upgrade required BACK OFFICE Payment processing system needs to be upgraded to transmit EMV data elements to banks. WEB, PHONE, MAIL EMV does not impact existing web, phone and mail channels. KIOSK Kiosks would need to accept EMV Cards (contact and contactless) besides traditional purchase methods. Not impacted by EMV Upgrade required Upgrade required
EMV Online Transaction Security Risk Management Decision Criteria Card Stock Security EMV Configuration Issuance Security Online Transaction Security Offline Transaction Security Data Preparation Key Management EMV Data *Source EMV Migration forum
EMV Off-line Transaction Security Offline CAM (Card Authentication) Offline CVM (Cardholder Verification) Offline Authorization SDA/DDA/CDA Card Authentication *Source EMV Migration forum
What are your regional card issuers doing? Contactless MSD vs. EMV Contactless MSD on hold? Will EMV be contactless? Key EMV considerations for Transit Automated Transaction Counter Synch Deferred Authorization Risk Local Authentication? Local Authorization? ID and PAN Tracking Card Not Present fraud If the brands/issuers don t accommodate then what?
What about Mobile? Mobile responds to several facets of AFC Customer service Real Time Passenger Information Card/Account management Trip planning and related tariffs Fare product sales Payment optimization Media distribution
Mobile and Customer Service Card based users are accustomed to real time feed back Transaction amount Remaining balance With mobile such information can be pushed to users when the terminal is unable to convey Users can also manage their account profile, funding sources, benefit plans, and alert settings An integrated trip planner can provide tariff information to include the fare for a particular journey Creative new rewards programs can be crafted
Mobile and Fare Product Sales Mobile can enable in the hand e-commerce transactions for the purchasing of Stored Value Period Passes Ride books Single Journey Tickets Cards can be topped up in hand or updated to the cloud or handset Flexibility in funding sources is supported Credit ACH Cloud Wallet Pre-tax benefits
Mobile as form of Media Mobile can act as fare media by Presenting legible script with dynamic elements Presenting a 2D bar code Presenting an NFC card or token An NFC card can be presented through card emulation MIFARE4Mobile Other prevalent standards An NFC token can be presented through Card emulation Host Card Emulation (HCE) Other emerging strategies A contactless bankcard can be presented from a mobile wallet interface
Advantages and Dis-Advantages Approach Advantage Dis-Advantage Legible Script/Icons Low Cost Limited Data 2D Bar Code No hardware required Low Cost, no required AFC integration Ability to authenticate and cancel tickets Increased fraud potential Requires new hardware and/or parallel back office and limited data integration Ergonomic and transactional speed challenges NFC Transit Card High speed and compatible with existing infrastructure Familiar use case just tap Requires commercial agreements with SE owners Requires TSM integration and appropriate app infrastructure NFC Token Lower provisioning costs Need account based back office Familiar use case May need TSM engagement NFC Bankcard Convenient for impulse users Use Case Overhead
Summary Observations There is no one right answer While the migration from card based to account based has begun it will take time It may not make sense for everyone Public procurement by its nature is time consuming There are interim steps that can be taken most significantly using mobile There are still a lot of questions about contactless payments and the best way to leverage them The keys to success will be balancing new benefits against transition strategies and operator specific needs/objectives
David L. dekozan Vice President, Strategic Initiatives Cubic Transportation Systems, Inc. David.dekozan@cubic.com Smart Card Alliance 191 Clarksville Rd. Princeton Junction, NJ 08550 (800) 556-6828 www.smartcardalliance.org