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| Subject: Re: The ultimate goal is a transit card that can be used nationally. | |
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Author: 18/11/02 |
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Date Posted: 02:19:11 01/24/03 Fri In reply to: Smartrip---CubicSept. 28, 2001 and ERG--Washington 's message, "Virginia and Maryland to Washington, D.C.'s" on 01:04:51 01/24/03 Fri Posted By Subject Post Time Post ID pourquoi5 (ID#: 224751) Walt-Bonks:Something To Smirk About 18/11/02 2:00:51 PM 5717447 « Previous Message Next Message » Ink's hardly dry on this article-latest from the States-enjoy PQ Chips Push Transit Into New Territory Burney Simpson BACK TO TOC -------------------------------------------------------------------------------- As credit cards reach a saturation point in the U.S., there’s been much talk about opening new avenues for card payments. Visionaries promote the possibilities generated by micropayments, the government, wireless and recurring bills. Usually, that means fast food, a fishing license or your utility bill. But one area that combines all these new ideas is low on the payments-industry radar screen. It’s the bus. It’s the commuter train and subway. Or to put it in big-picture terms, public transit. Transit ties all four of the four non-traditional acceptance venues into a nice package. Fares are typically a $1 or two, the authority is usually a government agency, and riders buy tokens or put money on fare card on a monthly basis. As for wireless, there are systems in place where riders wave their fare cards near a reader that allows entry to the bus or train. No easily-lost tokens needed. Public transit is a highly visible sector, but not nearly as large as some industries already served or coveted by the card industry. According to the U.S. Department of Transportation’s National Transit Database, total fare revenues reached about $7.8 billion in 2000. That included buses, trains—commuter and subway—ferries, and so on. Experts estimate there are about 15 million daily transit riders. The card industry has been relatively quiet when it comes to payments for this market. Partly this is due to priorities. Tolan Steele, Visa U.S.A. vice president, new market development and deployment, says other micropayment fields offer greater returns. “Quick-service restaurants are a $125 billion business. Transit is $5 billion to $10 billion,” Steele says. “Both are appealing, but we have to focus on the larger segment.” Transit is tough because there is no national industry authority. Instead, metropolitan areas are separate fiefdoms with their own operating systems. Transit is years behind the private sector in creating an ultra-fast, national processing network like that of the card industry. But that very drawback represents opportunity, a fact that isn’t lost on the card industry. “There are a lot of innovations in transit” says Steele. “We need to learn how our systems can dialogue.” Intra-City Networks The ultimate goal is a transit card that can be used nationally. Getting there won’t be easy. Most big cities are served by multiple transit systems that handle individual regions. First, those intra-city groups have to create payment networks. Once that works, metropolitan areas could begin communicating with each other. Transit is trying to modernize itself. Several major agencies are running smart card pilots. Some are seeking to hire payment companies to run their clearing and settlement systems. Still, change in public transit is like the transportation it offers. It can be as fast as a rush-hour express train. More often it is as slow as that lumbering bus that stops at every corner. “Transit is just getting out of the nickel-and-dime era,” says Agapito Diaz, chairman of the American Public Transit Association’s revenue management committee. Transit experts suggest that the preloaded contactless cards waved over electronic readers will become the norm as agencies try to reduce payment acceptance costs, including money handling and theft, yet increase customer convenience. These systems require a chip in a hard plastic card, so agencies are opting for smart cards. The contactless card removes the need for the high-maintenance fare readers that call for swiping a card. Such waveable chip cards offer other advantages. Transit managers envisage an auto-reload feature that would allow the rider to set a threshold dollar value on the card, and an account from which value could be drawn. After using the card down to the threshold, the rider could reload the card with a pre-set amount from the account the next time he or she waves it at a reader. Once the auto-reload is operating, the rider could skip the regular visit to a vending machine to add value to a fare card. But that’s down the road. For now, the smart cards also come with a magnetic stripe used for value loading. The smart cards also are similar to their payment cousins in that they cost somewhere between $3 to $10. In comparison, throwaway paper passes cost less than a nickel, and the short-lived, thin plastic fare cards with mag stripes cost less than a quarter, according to experts. In general, agencies are passing the cost of smart cards on to their riders. But there are two offsets to that expense. Riders generally keep their fare card in their wallet and purse, so loss is reduced. Additionally, transit systems encourage riders to register the cards for a nominal fee so they can be replaced if they are lost or stolen. Registration reinforces the idea that the prepaid transit card is valuable, something to hang onto like a credit or debit card. Reducing loss and increasing value in the cardholder’s eyes helps justify that initial cost. Further, the hard plastic cards are longer lasting. “Smart cards are not a whiz-bang technology but the rider can keep the card for three or four years,” says Russell Driver, project manager for the Metropolitan Transportation Commission in the San Francisco area. The MTC has been piloting a smart card-based system since February. San Francisco is joined by a few other cities in trying out these new ideas. And two companies have taken the lead in this transition. Cubic Corp. counts as clients Washington, D.C., Chicago, Los Angeles and its hometown of San Diego. Perth, Australia-based ERG Group provides systems to San Francisco, Las Vegas and several European cities. In March, ERG bought Proton World, a Belgium-based smart card system provider with co-marketing agreements with Visa International and MasterCard International. Below is a brief look at how prepaid cards are used in four large urban areas—Washington, San Diego, San Francisco and Chicago—and how they are evolving toward chip usage. Washington—In the nation’s capital, the Washington Metropolitan Area Transit Authority (WMATA) provides 550,000 bus trips and 650,000 rail trips daily. The Metro rail system began offering mag-stripe cards in 1976. It also operates 50,000 parking slots where users pay with cards. Contactless Smart Cards In May 1999, Metro introduced a contactless smart card program called SmarTrip. Some 300,000 cards are now in circulation. Between 7,000 and 10,000 cards are sold each month, says Greg Garback, executive officer in the agency’s finance department. Though WMATA guards card usage statistics, Garback says that the average reload value put on the smart card is $17. Cards cost $5 but that includes a a balance-protection program. Cubic provides the readerssubcontracts for the cards with Gemplus International, Giesecke & Devrient and SchlumbergerSema. (WMATA has explored marrying card payments and transit through a two-year-old pilot with Wachovia Corp.’s First Union Bank to issue a cobranded credit card with a mag-stripe and a chip. The program has about 400 participants. The agency doesn’t provide details on usage.) In 2003, the agency plans to integrate SmarTrip into transit agencies serving Baltimore and the suburbs between the two cities. Last year, WMATA issued a request for proposals seeking firms to provide clearing, authorization and settlement for the integration. It also would like to outsource a customer-service center along with the card issuing and account maintenance. The agency is expected to award a contract by year’s end. If an integrated, multi-metropolitan system is to work, agencies need to focus on transit and bring in others to work on the money side, says Garback. “Our core competency is moving people,” he says. “It makes sense to get a financial entity to manage finances.” San Diego—Cubic has little interest in the clearing and settlement side of transit, preferring instead to be a universal-ticket system provider, says Richard Johnson, chief operating officer. Cubic has working demos for putting season tickets on cards for several Major League Baseball teams. “Our focus is doing things with point-of-entry or tickets,” Johnson says. Cubic’s model includes shifting customer service to the Web. In September, Cubic announced that the San Diego Metropolitan Transit Development Board would offer riders the ability to buy smart cards and transit passes over the Web. The Web lowers costs, Johnson says. “Our vision of the future is not a clerk handing out a smart card instead of a token.” The $26 million contract with San Diego includes 150,000 smart cards, card-reading equipment and a back-office computer system. Plans call for cards to be introduced in January 2005. Competitor ERG has been running the card program for the Hong Kong transit system, where a contactless chip card can be used for rides, as a payment vehicle at select merchants and as an identification card for a few employers. The Hong Kong system sees about eight million transactions a day on about a dozen transit authorities, says Michael C. Nash, ERG’s vice president and general manager for the Americas. Nash says that ERG seeks to be the system integrator that brings together and manages all aspects of transit operations, including hardware and software, card issuing and maintenance, and the back-end processing and settlement. San Francisco—While some observers say Washington is the smart card leader in the U.S., others would argue that San Francisco is tops. The Bay Area’s effort is considerably smaller than Washington’s, with only about 3,100 active users. But it has the participation of six of the 21 transit agencies operating in San Francisco, Oakland and the surrounding suburban areas. Positive Response The Metropolitan Transportation Commission is the coordinating agency for the transit companies and the TransLink card. The TransLink contactless smart card pilot formally ran from February through August and continues as an independent consultant puts together an analysis of the test. The initial response has been positive, says Driver, the MTC’s project manager. Motorola Inc. was originally named prime contractor for TransLink but later dropped out of the smart card business. That put ERG in charge. ERG provides the hardware and software and has a license to manufacture the cards. The dual interface, 8-kilobyte cards cost about $5, according to Driver. During the pilot, the MTC processed about 160,000 transactions worth $272,000 in fares, says Driver. Those numbers sound meager, but the agency does all the end-of-day processing itself, says Driver. And every cent has been accounted for, he says. “We transfer the value to six participating transit systems. We are reconciled, 100% airtight,” Driver says. The TransLink is a “combi-card”—a dual interface card with a mag-stripe for adding value and a contactless chip that can be read for making payments. The rider puts value on the card with cash or a credit or debit card at a machine in stations or at select merchants. A toll-free service bureau is operated by ERG, which also coordinates the merchant network where riders can add value. Chicago—In Chicago, Cubic provides the cards and readers for the Chicago Transit Authority’s contactless smart card program. The CTA has bought 300,000 chip cards from Cubic, though only a small fraction are currently in use. Limited Test The public is acclimated to prepaid cards thanks to a mag-stripe card system that was introduced in 1997. The CTA subsequently phased out tokens but still accepts cash. The riding public has embraced the prepaid cards: about 1.2 million are purchased every month from vending machines at rail stations, some stores, through employer-sponsored transit plans and at CTA headquarters. Plus, value is added on to about 1.8 million cards every month. The fare cards save the agency about $11 million annually due to reduced fraud and cash handling, according to a spokesperson. That fare card success led the CTA to begin a limited test of contactless smart cards with 3,500 riders in August 2000. The agency now plans to distribute 100,000 of the smart cards by the end of 2003. The so-called Chicago Card will cost $5, or consumers will pay $25 to get a card with $22 worth of rides on it. The card will be usable at all CTA rail stations and buses, and on the Pace suburban bus system. Cardholders can register their card for free with the CTA to protect balances in the event it is lost, stolen or damaged. However, the CTA charges $5 to replace the card. Some aspects of Chicago’s move to a smart card should prove relatively simple to implement. For example, Cubic’s mag-stripe readers are capable of also reading the smart card. Interagency reconciliation should be minimal because most of the rides will be on the CTA itself. Reconciliation with Pace, whose ridership is only a fraction of the CTA’s, already is being done in house for the fare cards, and it will probably stay that way for smart cards, according to the spokesperson. Smart card proponents have to be pleased that large transit systems are adopting the technology. But widespread adoption by agencies, not to mention expansion of the cards into uses beyond transit, is still untested. « Previous Message Next Message » This message has been viewed 27 times Report a BullBoards Violation Ignore pourquoi5 Post View Threads [ Next Thread | Previous Thread | Next Message | Previous Message ] |
| Subject | Author | Date |
| Re: The ultimate goal is a transit card that can be used nationally. | Gemplus Giesecke & Devrient and SchlumbergerSema. | 02:21:17 01/24/03 Fri |