Mastercard has spent years attempting to overhaul transit payments to allow riders to pay with a contactless credit or debit card. This time around, it expects Apple Pay to play a significant role.
“It’s infrastructure in the U.S. that’s been a challenge,” said Linda Kirkpatrick, executive vice president of U.S. merchants and acceptance for Mastercard. “With any payment system you need an entity that can accept a payment type, an entity that’s going to issue it and consumers that are excited about using it. Having all three come together at one time isn’t easy to do.”
Mastercard, which has worked with transit systems globally for years to automate payments, predicts that U.S. adoption is about to change. The card network expects that new transit technology will be live in more than 20 cities in the U.S. within the next few years.
Los Angeles, Boston and Denver are already live with newer systems, and New York is opening contactless payments and mobile ticketing on subways and buses by the end of 2019. Apple Pay is also expected to go live with transit systems in Portland, Ore., Chicago and New York later this year.
Apple Pay is an important addition because it brings in more active users. Apple Pay in the past year has added merchant holdouts such as
Also, the new
“We’ll help each other … the Apple Card, being a digital-first program, will be the use case for transit payments with smartphones as for contactless cards,” said Kirkpatrick. “It’s another way in which consumers will be able to pay for transit while in transition.”
The help may be two-way.
“If transit went contactless and no other merchants did, that wouldn’t be as compelling,” Kirkpatrick said.
Outside of the U.S. there are ample examples of how
“Opening London Transport for London network to open-loop contactless cards is credited with spurring the growth of contactless transactions more broadly in the UK.,” said Zilvinas Bareisis, a senior analyst at Celent. “After all, many people use public transport daily and it’s a great, habit-forming type of transaction.”
One of the differences between these markets and the U.S. is the earlier adoption of contactless payments, and the earlier deployment EMV cards. That created a consumer and merchant base for open digital transit payments that did not exist in the U.S. until recently. The EMV upgrade in the U.S. ushered in contactless support, creating a network of mobile-ready merchants to accompany transit systems.
“In markets where contactless is part of the fabric of the payment system, it was easier to get to market,” Kirkpatrick said. “With fragmented merchant adoption in the U.S. there wasn’t ROI to update the transit terminals.
Boosting U.S. transit use through digital open payment systems will remain a challenge, in part because U.S. systems have more problems than fare collection, ranging from
And attempts to automate U.S. transit are hardly new and have not been successful.
There are some differences this time. Beyond Apple Pay's growth and participation in the Mastercard project, there are security and standards improvements that didn't exist during those past efforts.
Mastercard and Visa have pushed
“Tokenization has been the vision that payments are going digital, and to recognize that trend early and invest in the tech that enables Apple Pay transactions and thus this transit payments move,” Kirkpatrick said. “Any connected device, and digital-first program that has our tokenization in the background allows the card number to turn into a dynamic token that’s harder for fraudsters to penetrate.”