POSITION PAPERS
Transit agencies and banks both want to implement smart credit
cards for fare payment at transit gates and fareboxes. At the moment,
two contradictory systems are vying for dominance in the U.S. One
system has a transit agency chip hosted on a credit card. The other,
based on the Seoul model, has a bank chip on a credit card running
a transit application beside the banking one. This paper explores
the implications of both systems and then advocates the Seoul model
as being better.
U.S. issuers are moving toward the issuance of contactless
cards. Acceptance of these new cards at the gates and fareboxes
of public transit systems will give issuers considerable benefits
in terms of a “top-of-wallet” effect, leading to more
spending and borrowing on the chip card, card distinctiveness in
general, and “stickiness”, whereby the card account
becomes more difficult for the holder to terminate. We estimate the largest of these effects, the “top-of-wallet” effect,
on an issuer with 10% of the market in a city
of 5,000,000 population.
This study estimates the savings to New York's transit system from the implementation of contactless bankcards.
This APTA study analyzes account-linked systems and has good details about the Seoul Transit System, the first and still the largest credit-card-at-the-gate system in the world, operational since 1996.
This Excel file demonstrates that contrary to the opinion of many transit agency CFOs, the float of interest on prepaid fares loaded in cards is very small compared to other concerns. Type your own agency's numbers over the numbers in blue. (This Excel file has no macros; it's safe to download. For the pdf version, click here.)
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