A VIX GUIDE TO ACCOUNT-BASED
TICKETING AND OPEN PAYMENTS
A VIX GUIDE TO ACCOUNT-BASED TICKETING AND OPEN PAYMENTS
The global payments landscape is radically and swiftly changing.
Advancements in technology and mobile communications are
simplifying payments to a tap of a bankcard or smart device at
the cashier. The customer payment experience is now quicker
and easier, and creates opportunities for new engagement
models with consumers. As adoption of new banking and mobile
technology grows at the consumer level, more and more businesses
in every sector are beginning to see the benefits of opening their
payments channels.
Retail, FMCG and fast food businesses that have naturally low value,
high-volume payments have been amongst the quickest to roll out
these new systems. However, these speed and cost efficiencies could
have the biggest positive impact in the one sector where payments
systems have historically been a disproportionate drain on resources
and a source of frustration for customers – passenger transport.
Historically, transport authorities have not been early adopters of
new technology and have tended to be slow to evolve their systems.
However, in recent years, forward-thinking transport authorities and
operators from Salt Lake City to London have piloted and launched
new transit payment and ticketing systems that allow passengers to
use contactless credit or debit cards, student cards or other ID cards,
or even their mobile phone to pay for their journeys.
These new automated fare collection (AFC) solutions are commonly
called “open-loop” or account-based systems. They can provide a
greater degree of flexibility than previous transit “closed-loop” or
cash based payments and ticketing schemes.
This paper examines the benefits of introducing open payments
systems for passengers and operators. It also reviews some of the
challenges and provides examples of where various schemes are
already working well around the world.
2
A VIX GUIDE TO ACCOUNT-BASED TICKETING AND OPEN PAYMENTS
3
WHAT’S THE DIFFERENCE BETWEEN
AN OPEN AND CLOSED-LOOP
PAYMENT SYSTEM?
CLOSED-LOOP PAYMENTS
SYSTEM
These more traditional AFC schemes
often use a proprietary payments
system that allows for commuters
to pay a fare and validates their
access to travel using smart cards
or tokens that are only valid within
that scheme.
A second feature of these schemes
is that data is predominately stored
on the cards. This increases the
complexity of functions required on
both validators and fare media.
These types of solutions have
become the de-facto standard
for transit payments systems
because they have a number of
advantages over older paper-based
and magnetic ticketing systems.
Smart cards are more flexible,
secure, easy to use and have
reduced operating costs compared
with paper tickets.
But closed-loop systems lack
flexibility. Commuters are forced to
use a smart card that is specific and
only valid on that transit system. For
the commuter this means that their
funds are locked up and dormant
until needed to pay for a ticket, as
well as requiring them to top-up and
remember their smartcard for travel.
OPEN-LOOP TICKETING SYSTEM
With the advent of more flexible,
standards-based payments schemes
and solutions such as contactless
EMV and mobile payments in retail,
there is now a greater opportunity to
use these readily available payments
technologies in transit schemes.
PHOTO:
GETTING AROUND
IS EASIER USING
CONTACTLESS EMV
For the operator, these schemes
generally require a significant
up-front infrastructure investment
and can have relatively expensive
ongoing operational costs owing to
the need to maintain proprietary
reload infrastructures, as well as
issuing and managing dedicated
cards or tokens for the schemes.
Open-loop ticketing systems allow
the user to pay for their travel using
their existing credit, debit or pre-paid
cards, mobile devices or any other
enabled payment media. There is
no need for commuters to carry a
transit specific card.
CASESTUDY:
eO UTA
SYSTEM,
SALT LAKE
CITY
eO UTA SYSTEM
One of the earliest adopters of account-based ticketing in passenger
transport was Utah Transit Authority in Salt Lake City Utah, which
worked with Vix Technology to deploy the Vix eO UTA system in 2009.
Processing more than 42 million passenger rides per year, the accountbased system can accept bank-issued contactless credit and debit
cards, institutional contactless cards (such as university student cards
and ski passes), as well as NFC mobile wallets such as ApplePay.
A number of different operation
models have been investigated as
organisations look at how openloop payments schemes could be
integrated into transit systems.
The model becoming most prevalent
is one where information around the
journeys and fares is stored in a back
office account, and fare calculations
occur in a back office system. This
back office account-based fare
calculation model is becoming
common in open payments ticketing
implementations. This allows for
fares to be calculated in the back
office after the trip has taken place.
It also enables fare capping or other
incentive schemes to be applied,
creating more flexibility in the transit
payments scheme.
A VIX GUIDE TO ACCOUNT-BASED TICKETING AND OPEN PAYMENTS
4
WHAT IS AN
ACCOUNT-BASED
PAYMENTS
SYSTEM?
GLOBAL
PAYMENTS
TRENDS
The shift to EMV contactless card and
chip and PIN payments technology
globally is continuing to accelerate,
overcoming two major hurdles to
open payments in transit:
1. Creating a clear global standard
for developers to design ensures
worldwide interoperability.
2. Building trust in contactless
payments – which helps with
acceptance of their use in transit.
The USA is the last of the G20 nations
to commit to EMV, joining more
than 80 other countries including
Australia, Brazil, Canada and much
of Europe and Asia. It’s estimated
more than 45 percent of the world’s
payment cards now use the EMV
standard (around 1.62 billion cards)
and that 76 percent of payment
terminals are also EMV enabled
(around 24 million terminals).
Account-based payments systems are
becoming a popular alternative to card
centric closed-loop systems owing
to the acceptance of open payments
standards within the transit model.
Along with this, the post-billing model
(where the fare processing is moved
off devices onto host systems) is now
being extended to support a variety
of other payments products, not just
EMV cards, as we have previously
seen. Other appropriately secured
tokens can also be linked to a back
office or cloud-based account.
With this model, a variety of different
payments models can be introduced
including:
1. Direct billing to a cardholder’s bank
account via a pre-paid or regular
billing model (similar to mobile
phone billing);
2. Linked accounts where families may
have a single account for all their
family members paid for through a
single payments interface;
3. Extending the linked account model
to institutions, such as a company
that may provide travel cards to
employees as part of their salary
package, and the institution is billed
monthly by the transit operator.
One of the benefits of an accountbased system for transit operators
or authorities is the ability to create
a variety of attractive products
and partnership opportunities.
Account-based ticketing and
payments schemes can link a
variety of appropriately secured
“travel rights” or tokens to a
single account. This can enable
the introduction of innovative new
models of linked transport modes
such as park-n-ride, where your
car licence plate might be linked
to your account and recognised
through an ANPR (Automatic
Number Plate Recognition) system,
thus allowing for integrated
parking and travel discounts.
PHOTO:
APPLE PAY, GOOGLE PAY
AND SAMSUNG PAY HAVE
ALL LAUNCHED NFC/EMV
PAYMENT PLATFORMS IN
THE LAST 12 MONTHS.
The world’s biggest smartphone
companies have invested heavily
in their own NFC/EMV payment
platforms, with the launch of Apple
Pay, Google Pay, and Samsung Pay in
the US in the last 12 months.
The push from these tech giants
could mean the long awaited mobile
payments revolution will occur
sooner rather than later.
Twitter:
#NFC #mobile
& #EMV #card
#payments the
latest in accountbased #transit
#ticketing @
Vix_Technology
Guide: http://www.
vixtechnology.com
Click to tweet
A VIX GUIDE TO ACCOUNT-BASED TICKETING AND OPEN PAYMENTS
5
WHY SHOULD TRANSIT OPERATORS
EMBRACE OPEN PAYMENTS AND
ACCOUNT-BASED TICKETING?
There are a number of specific
customer and operator benefits
in adopting open payments
and account-based ticketing for
passenger transport listed below.
Over and above these specific
benefits, there is the growing
consumer demand to be able to pay
for travel as they are increasingly
paying for other daily expenses –
using their contactless payment
card or mobile device. Being able to
adapt and meet growing passenger
expectations is a singularly powerful
force for change for most transit
operators. However, for some,
there is a bigger, proactive desire
to be able to use this change to
provide value-added services by
integrating with other service or
retail companies.
THE KEY BENEFITS
OF OPEN PAYMENTS
FOR CUSTOMERS
1. OPEN PAYMENTS
Open payments schemes offer
the convenience of using a single
bankcard or mobile device as both
a ticket and payment method.
This means the customer doesn’t
need to worry about carrying cash,
having the right smart card or ticket,
or that their account is topped up.
PHOTO:
OPEN PAYMENTS MEAN
LESS QUEUEING WHICH
LETS PASSENGERS
MOVE QUICKLY AND
EFFICIENTLY THROUGH
A STATION.
Passengers who are new to the
network have no cards to purchase
or complex ticketing machines to
navigate - they can simply tap the
card or device that’s already in their
purse or pocket.
2. INTEROPERABILITY
BETWEEN VARIOUS TRANSPORT
NETWORKS AND RETAILERS
The benefit of a global standard
like EMV is that the more widely it is
accepted, the more consumers can
rely on their EMV cards and devices
as their main payment method. The
ability to use one card or device for
multiple transportation services
takes the hassle out of having to
carry multiple cards, or understand
various fare offers prior to starting
your journey.
3. STREAMLINED BILLING
A well-designed scheme with
account-based post-billing can
support complex and equitable fare
calculations, such as charging riders
only for the trips they make, or
capping the maximum fee charged
on any single day, week or month.
This means the customer doesn’t
need to worry about buying the
correct ticket and can rely on the
system to charge them the lowest
possible fare.
4. LESS QUEUEING
With no ticket to buy or balance
to top up with a cashier or reload
machine, transit passengers can
board a vehicle far more quickly and
move much more efficiently through
a station. Less queues and delays
means happier passengers.
5. MORE WAYS TO PAY
By extending the infrastructure
and approach that the use of open
payments has promoted around
account-based services, it is possible
to use these same frameworks to
include other identifiers such as
student cards, business ID cards or
mobile tokens in the fare collection
system. Little change is needed
to open up the fare collection
infrastructure in order to offer a
wider choice of payments options.
A VIX GUIDE TO ACCOUNT-BASED TICKETING AND OPEN PAYMENTS
THE KEY BENEFITS OF
OPEN AND ACCOUNTBASED PAYMENTS FOR
TRANSIT OPERATORS
from cash payments. In addition,
fewer queues at ticket vending
machines and kiosks also improves
flows in busy stations and terminals,
leading to improved punctuality
and efficiency. This is the case,
especially in bus networks, by
reducing the time that a driver
spends at bus stops manually
processing cash fares. Introducing
more efficient payment methods
has the effect of reducing delays on
transit routes and thus provides the
potential to reduce the number of
buses required on particular routes.
1. LOWER OPERATIONAL COSTS
The costs of AFC can be significantly
reduced by decreasing, or even
eliminating the processes required
for both cash handling and those
associated with the process of
ticketing and handling an operator’s
own fare media. While there have
been no detailed investigations,
anecdotal feedback suggests that the
reductions in fare collection costs,
as a percentage of the total ticket
processing and handling costs, could
fall from around 15-20 percent, to
less than 10 percent.
2. LOWER CAPITAL COSTS
The move to open payments forces
the need to simplify fare collection
and ticket devices. This drives
standardisation of devices, which in
turn allows for hardware purchasing
to feel more commodity based
and opens up a greater ability to
multi-source devices. Add to that the
reduction in ticket vending machines
and kiosks required, because fewer
passengers will need to purchase
tickets before riding, and you start
to lower the cost and volume of the
hardware required.
3. LESS CONGESTION AND
IMPROVED PERFORMANCE
The advantages of contactless cards
in improving throughput at stations
and buses is well understood in terms
of the ability to reduce the time taken
to pass through gates or barriers
– these same dwell time savings
apply largely to open payments and
account-based payments tokens.
This means faster boarding and
better station flows, reducing
passenger and service congestion
– particularly where the switch is
6
4. TIGHTER SECURITY
Open payments systems limit
the possibilities for physical and
cyber-security breaches because
any scheme processing contactless
payments cards and devices needs
to meet the global EMV and PCI
standards, which have the highest
levels of electronic security and
encryption.
5. IMPROVED ACCESSIBILITY
AND CONVENIENCE
Reducing the barriers for new
passengers and improving the
customer experience for regular
commuters through simple
and convenient ticketing and
payments can be a key driver for
growing passenger numbers in
an increasingly competitive
transport market.
CASESTUDY:
ACCOUNTBASED
TICKETING,
MELBOURNE
ACCOUNT-BASED TICKETING
Twitter:
#Transit operators
accepting
#ApplePay,
#GoogleWallet &
#SamsungPay with
open #payments @Vix_Technology
Guide: http://www.
vixtechnology.com
Click to tweet
The future of account-based ticketing and payments could
see major cities providing a framework that allows multiple
organisations to link their own cards or apps into a single, seamless
scheme. For example, major venues and transit operators could
integrate to create a combined access, travel and in-venue
payment experience.
Vix Technology partnered with Australian Rugby League team,
Melbourne Storm, in 2014, to create an in-stadium payments
system linked to the Club’s fan loyalty programme. The
membership cards are not only enabled to work at AAMI Park, the
home ground stadium, but are also enabled for other major city
venues, institutions like Universities, and retailers to link up to the
same scheme and utilise the same access and payments system.
A VIX GUIDE TO ACCOUNT-BASED TICKETING AND OPEN PAYMENTS
7
WHAT ARE THE CHALLENGES
INVOLVED IN TRANSITIONING
TO ACCOUNT-BASED TICKETING
AND OPEN PAYMENTS ?
ADOPTION
The shift to open payments, like
every other major technological
change, has its own unique set of
challenges and complications.
One of the first issues to be
considered is whether
customers in a specific region or
market have sufficient adoption
rates of contactless EMV payments
cards and NFC devices to benefit
from an open payments system.
Successful schemes often refer
to the need to have at least 30
percent penetration of contactless
cards prior to rolling out an open
payments ticketing scheme.
While penetration might be a
driving factor in a pure EMV
payments model, there are clear
benefits for early adopters of open
payments by way of an accountbased architecture, such as those
experienced by Salt Lake City’s
Farepay system launched in 2009.
UTA utilized existing personal
credentials such as student identity
cards as a valid travel token with
great success.
PHOTO:
OPEN PAYMENTS SYSTEMS
ARE ALREADY HELPING
SALT LAKE CITY.
Twitter:
#Tech
standardisation
& customer
education are key
open #payments
challenges
in #transit @
Vix_Technology
Guide: http://www.
vixtechnology.com
Click to tweet
EDUCATION
Another major challenge to adopting
open payments is gaining the trust
of customers that the system will
deduct the correct fare from their
account every time. While this
issue is still present in closed-loop
systems, the issue is compounded
in open payments systems as the
validator does not know when
the rider will exit the system and
therefore can’t display the fare upon
entry. This leaves the rider to trust
the transport operators to charge
them the correct fare later.
Successful implementations of
these new forms of ticketing
solution have relied heavily on
a crisp, well-managed message.
Transit authorities with smooth
and easily adopted roll-outs have
worked hard to build trust with clear
customer communications around
fare structures and price capping
as well as implementing automatic
refund safety nets. The schemes
have also created transparency
through providing online (mobile and
web based) resources for customer
account management and enquiries,
and supported customer service
with self-service, as well as access to
trained customer service staff.
READER DESIGN AND
CERTIFICATION BECOMES
MORE COMPLICATED
Readers will be required to support
numerous types of card and other
fare media, so the software for
each one – be it card detection,
payment card applications such
as Visa, MasterCard, AMEX,
Discover or a proprietary application
– needs to be developed and
supported. In addition, it is costly
to achieve the necessary
certification of these applications
against card standards, which then
becomes an on going cost during
the life of the fare collection scheme
as it evolves. This is a catalyst,
which leads hardware suppliers
to minimise the variants of their
devices and any changes required
during its lifecycle. This, in effect,
should standardise devices across
transit fare collection schemes.
A VIX GUIDE TO ACCOUNT-BASED TICKETING AND OPEN PAYMENTS
ADDITIONAL SECURITY
COMPLIANCE REQUIREMENTS
Given these schemes are handling
scheme payments data as well as
customer personal data, there is a
critical requirement that the system
and its components comply with PCIDSS (Payment Card Industry Data
Security Standard) and local data
protection standards.
These security requirements affect
the entire solution including the
design and the on-going operations of
everything from the on-board devices
to the back office processing systems.
These increased security and data
protection requirements create
a need for a much higher level of
operational security, something
8
typically beyond the skills or
experience of a typical transport
operator (especially those smaller
operators who do not run a full IT
department).
TRANSITION
A further consideration for transport
operators is how to transition to
open payments. History has shown
that large-scale system refreshes
and replacements can suffer some
initial problems such as delays,
increased costs or a failure to meet
expectations.
A suggestion of a well-managed
transition to an open payments
and account-based solution could
include consideration at the initial
design stage to allow for the open
scheme to co-exist alongside the
existing closed ticketing scheme.
This can be done by introducing a
simple reader upgrade, if necessary,
to support new payments media.
This has the advantage of allowing
for an extended transition period
or continued support of specialist
products on closed-loop cards for
local needs.
CONCLUSION
One thing is clear, the entire transit
industry and ecosystem is part
of a seismic shift to enable more
cost efficient and easier ways for
passengers to pay and operators to
process fare collection. This transition
evolves and adapts with a varied pace
around the world but it’s undeniably
changing the landscape for all.
ABOUT VIX TECHNOLOGY
Vix Technology is a leader in smart booking, ticketing, payments,
real-time information and data management solutions for largescale transport networks working with more than 200 customers
worldwide. Vix leverages over 25 years’ industry experience in
designing, operating and maintaining proven next-generation
solutions. We manage around five billion transactions a year and
create new ways to connect with customers. Harnessing the latest
technologies, Vix enables transit and non-transit customers to
boost engagement, save resources and enable powerful datadriven loyalty and reward schemes through simple solutions that
achieve measurable growth and increase customer satisfaction.
VIXTECHNOLOGY.COM
For more information about open next generation
AFC solutions please contact Vix Technology:
info@vixtechnology.com
VIX TECHNOLOGY
@VIX_TECHNOLOGY