Does Closed Loop Have a Future as PTOs Look to Open Ticketing Systems?

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By Sam Gazeley | 1Q 2021 | IN-6089

The transport ticketing market is seeing a gradual upheaval of long-standing technologies and proprietary systems in favor of an open model, placing the end user’s convenience and choice as a priority. However, rollout of closed-loop systems are still very much underway in cities across the globe. So is it the end of the line for the closed-loop card, or is it full-steam ahead in another closed format?

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Looking to TfL to Light the Way

NEWS


The transport ticketing market is seeing a gradual upheaval of long-standing technologies and proprietary systems in favor of an open model, placing the end user’s convenience and choice as a priority. However, rollout of closed-loop systems are still very much underway in cities across the globe. So, is it the end of the line for the closed-loop card, or is it full-steam ahead in another closed format?

Transformative technologies—such as acceptance of contactless payment cards at transit gates and shifting fare calculation and account management to the back office through account-based ticketing—are seeing a swift uptake in many developed Western urban transport networks. The global COVID-19 pandemic has brought with it varying degrees of social-distancing requirements and lockdowns, making mass transit with its high-density format and close proximity to others a no-go for governments looking to reduce transmission rates at the cost of economic growth. Vastly reduced services and a plummet in ridership has provided Public Transport Operators (PTOs) across the globe a well-needed opportunity to scrutinize the efficiency, cost, and road map of their ticketing systems. As such, PTOs worldwide have turned to Transport for London (TfL) as an indicator of where the future of mass transit lies.

Why Not Opt for EMV?

IMPACT


Since 2014, travelers on London’s transport networks have been able to use their Contactless Ticketing System (cEMV) to move about the city, digitizing the physical fare media and streamlining the ticket purchasing process while ensuring that the end user receives the lowest possible fare for their route. However, the Oyster card payment system is still going strong with both usage and issuance at a high level, indicating that the frequent traveler is not yet ready to surrender their trusted proprietary card. Nonetheless, there are several benefits that cEMV offers over the popular Oyster card.

  • cEMV uses cards with an increasingly high level of security (potentially synergizing with emerging next-generation payment card technologies, such as biometric cards).
  • cEMV enables use of an internationally recognized standard.
  • cEMV enables secure and transparent payments that are easily identifiable on the end user’s bank statement or app.
  • cEMV offers different ticketing-fare media, including card, mobile, and wearables.
  • cEMV lowers PTO expenditures by not having to issue and manage high numbers of smart cards and paper or magstripe tickets.
  • cEMV uses cards already in circulation for other applications—such as retail—reducing the need to issue additional plastic media that contributes to first-use PVC entering the ecosystem in a market looking to transition to ecologically sustainable practices and to demonstrate corporate social responsibility.
  • cEMV provides an efficient tap-and-ride experience for end users at busy transportation hubs.

With such myriad advantages for cEMV, the future for closed loop will require a demonstration of its own advantages to remain competitive. Indeed, cEMV is not for everyone; some travelers will not own a contactless payment card, even if it were offered through opportunity or by choice; some may not carry a smartphone for mobile EMV payments; and some may not wish to use their payment card or phone for ticketing purposes. As we move toward the year 2025—the end of the current TfL contract with Cubic—we should look back at the original goals for cEMV use in U.K. transit:

  • To establish a nationwide coverage of contactless across all transit modes
  • To create a compelling customer experience that is easy for customers to understand and that offers “best” fare options through fare aggregation
  • To establish rapid customer adoption levels that track the adoption rates seen at TfL
  • To establish a strong business case for the use of contactless payment in transit.

While these goals have been largely met, such goals may not necessarily apply to other cities that are looking to adopt a similar setup. Of course, the requirement is always there for a PTO to cater to all users as part of their public service. The focus, therefore, has been placed on increasing the options available to the traveler rather than on replacing one solution with another.

What Can Closed Loop Offer?

RECOMMENDATIONS


For those who do not carry a contactless payment card or who do not wish to use it in a transport system, closed loop can still play a role in an EMV-centric ecosystem. By issuing prepaid fare cards with EMV branding and outsourcing the issuance of the closed-loop EMV card to banks, PTOs can also negate the cost of having to issue the card themselves.

There lies a choice then in how accounts are managed and how fares are settled. One implementation is to have a program manager own the back office, though this means relinquishing control from the Transport Authority (TA) to the program manager and may cause conflict with multiple stakeholders owning parts of the system. Alternatively, the PTOs themselves can expand their own back office infrastructure to support and manage transactions on the traveler’s account, permitting an expansion of fare models such as monthly passes. In this manner, the loop becomes fully closed, pivoting the EMV card away from payment toward transit and enabling the TA to enforce its own rule set.

As many TAs across the globe looking to upgrade or modernize their ticketing systems, some will resort to modifying a closed-loop ecosystem and rolling out EMV in a more closely managed format. In either case, the future for both open- and closed-loop transit is secured in the variety of ticketing ecosystems on offer.

 

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