The customer rationale for contactless payment has been very well documented.
From a transit agency perspective, however, the positioning of contactless payment has varied somewhat. For example, Transport for London has sought to aggressively drive contactless take-up at the expense of the Oyster transit smart card. In 2019-20, two-thirds of non-cash payments were made using contactless channels, with the balance made using Oyster. By way of contrast, Sydney also introduced a contactless payment channel alongside the Opal smart card but has positioned this as an additional payment channel to improve customer choice and convenience, alongside physical and digital versions of the Opal smart card. Some 31% of Opal adult trips are made using contactless, and 55% of these use a digital wallet.
While the introduction of new contactless payment channels has clearly unlocked customer convenience benefits, it also requires customers to ensure that they avoid ‘card clash’. This can occur when customers are carrying multiple physical cards in their purse or wallet (i.e. contactless debit or credit and bespoke transit cards). There are multiple issues associated with potential card clash:
- Payment can be taken from a card other than the one intended by the customer
- Customers could be charged two ‘default’ fares (i.e. one to the card used to validate system entry and one to validate system exit)
- A fare might not be charged to a card, leaving the customer exposed to being considered a fare evader
- A fare gate might not open
There are additional considerations for customers using contactless cards.
Firstly, a customer may be able to retrieve only a limited trip history (e.g. if they are using an unregistered contactless card). In Sydney, for example, a customer using contactless payments must register their card to obtain up to 18 months of trip activity. A customer with an unregistered card can only obtain details of the last 10 trips. In London it is possible to retrieve seven days of trip data for an unregistered card and a year of data for a registered card.
Secondly, closed (i.e. ‘touch in, touch out’) first-generation card-based systems provided customers with visibility on the fare paid on the card reader in real time when touching out of the system. The move to second-generation ABT systems has taken transaction processing — and the capacity to confirm the fare paid when touching out of the system — away from the reader, with processing of all contactless transactions now occurring more typically at end-of-day. However, there are examples emerging where transit agencies are developing system requirements that require real time transaction processing in an ABT environment.
It is debatable how important it is to be able to access payment history at or close to real time. Transit agencies around the world have sought to reassure customers with ‘best price’ guarantees for the full range of available fare products. In addition, trip history and associated payments can always be subsequently reviewed and queried with the transit agency if required.
At the time of the initial roll-out of contactless payment channels, there was a general expectation in some quarters that credit cards would continue to be the dominant card used for payment. However, a strong generational shift to debit has become increasingly apparent. As suggested by Visa’s chief financial officer, “Debit is clearly the gateway to cash digitization.” In Australia, the market share of debit cards increased from 15% of transactions in 2007 to 44% in 2019. In the 2021 March quarter, Visa saw 24% worldwide growth in debit volumes versus flat performance for credit, while Mastercard saw 27% growth in debit and a 1% decline in credit.
From a COFC perspective, the key issue here is the difference in merchant service fees between credit and debit card transactions. These fees are reflected in specific agreements between transit agencies and the financial institutions.