Due to technological advancements and shifting consumer needs, the urban transportation business is evolving. One of them is the adoption of ‘‘Open-loop payments’’ in public transportation, which allow passengers to enter in less than a second by tapping a contactless card or smartphone wallet on terminals at the gates. They tap again when they arrive at their destination, authenticating their end-to-end travel and effortlessly paying for the service.
Considerable challenges of open-loop payments
There are two major barriers concerning open-loop payments. To begin with, replacing existing infrastructure with new technology that can handle open-loop payments is a pricey undertaking. You’ll need readers that can take these payment types, as well as back-end systems to handle them. There is a cost associated with switching to these systems, which is worsened by the gradual adoption of these payment methods by customers. This means you’ll have to keep supporting legacy solutions while you make the switch, which means your cost savings won’t show up right away.
Second, switching to an account-based system has the potential to alter how public transportation operators set or calculate fares. For example, you might switch to a PAYG model, which will necessitate changing consumer and operator behavior – for example, no longer purchasing single tickets or period passes, necessitating the introduction of tap in/tap out or other fares-calculating mechanisms.
This poses a commercial risk, as well as additional operational issues, such as the possibility of affecting boarding times. Existing business agreements in places where you may have a competitive offering will be impacted as well. When a single authority has control and decision-making authority over an entire city or region, it has the potential to simplify operations by eliminating some of the commercial negotiations.
Advantageous opportunities of open-loop payments
Moving away from a proprietary scheme or standard is a benefit for the transportation agency since it allows them to adopt a system that is currently in use by the general public. The most popular application is contactless payment cards, which allow the PT (Public Transport) provider to use a card issued by the customer’s bank. Some of the costs of the bespoke proprietary solution are eliminated as a result of this.
In London, the capacity to minimize the requirement for Oyster Card production, distribution, and management by using contactless cards, which are handled and delivered to clients by their own banks, is one example. As you digitize the payment system, you have the ability to save a lot of money while also improving the client experience.
Another advantage of using open-loop payments is that the ticketing solution becomes account-based. This can be anonymous or personalized, but it implies a higher level of customer participation and a better customer experience. This is in addition to the benefit of having better trip data for the PT provider to adapt existing services and then supply these services more effectively.
Open loop payments appear to be the future of the urban transportation business. It is a simple and speedy process which O-City has adopted, making payments for transportation effective. As the industry continues to develop and new technology becomes more widely utilized, there is no doubt that most of the prevailing challenges of open-loop payments will eventually be solved.