Co-Branded Multi-Application Contactless Cards

Currently, five types of contactless payment systems are used or contemplated for use by mass transit agencies. They are:

• Traditional fare payment systems that incorporate a stored value model. These systems (often referred to as transit applications) use contactless smart cards to carry a data file that is read and updated by readers on buses, fare gates, and platform ticket validators. The data file includes all of the information about the electronic token or pass purchased by the customer that is required for the reader to calculate transaction-specific charges. In most instances, real-time connection to the back office system has not been provided for normal fare payment operations, but instead periodic updates occur throughout the day. To date, implementations throughout the world have used this model, including U.S. transit systems in Washington, D.C.; Baltimore; San Francisco; Oakland; Los Angeles; Chicago; San Diego; Seattle; Minneapolis; Houston; Boston; Philadelphia; Atlanta; and the New York–New Jersey area.
• Traditional payment card industry systems that use existing financial networks to process transactions and load value onto traditional fare payment cards. These systems typically use standard magnetic stripe credit and debit cards, although contactless technology is now being introduced by a variety of retailers (such as quick service restaurants) that generally process small transaction values. Transit agency devices such as ticket vending machines and point-of-sale (POS) systems are simply merchant terminals that process fare payment transactions just as they would any other retail transaction. It is common for most medium and large transit agencies in the United States to accept credit and debit card payment for some or all fare products sold.
• Enhanced payment card industry systems that incorporate an intermediate back office step. This step calculates the correct fare before the transaction is processed through traditional financial networks. These systems sometimes aggregate transactions to reduce transaction fees. An example of this model is the New York City Transit pilot program, which accepts contactless credit and debit transactions for paying subway fares. The Utah Transit Authority has conducted a pilot program, which accepted contactless credit and debit transactions for paying bus fares, and is now launching a full system bus/rail deployment using this approach.
• Basic combined systems that use contactless media. With this system, the contactless payment media carry two types of data files. One is the transit application data file used in traditional fare payment systems. The other is the credit/debit cardholder information needed to process transactions using traditional financial payment card industry systems. The two payment systems are not integrated in any way at the card level. The transit application is used to pay for transit fares; the credit/debit card application is used for other retail purchases. Examples of this model are the London Oyster/Barclaycard and the Taipei EASYCARD.
• Enhanced combined systems that give customers a choice of fare payment methods. Methods include the contactless fare card used in traditional fare payment systems, the multi-application card used in basic combined systems, and the standard credit or debit card used in traditional financial payment card industry systems.

This white paper focuses on the basic combined system and provides an overview of an approach for transit/financial payment convergence that leverages co-branded card business models and the multi-application capabilities provided by smart card technology. The white paper is intended to provide a framework for reviewing the opportunities for a co-branded multi-application transit/financial payment card and an understanding of the key considerations for implementing such a program. The white paper explores the following:

• Current transit payment system architecture and trends and financial industry card marketing programs and contactless initiatives.
• Definition of a basic combined system that leverages existing transit and financial payment technologies and infrastructure.
• Case studies of three overseas programs, the Oyster/Barclaycard, Taipei smart card program and TaiwanMoney card, that have implemented co-branded multi-application contactless transit/financial cards.
• Key commercial, operational support and technical considerations that financial issuers and transit agencies should discuss when contemplating the implementation of a co-branded multi-application transit/financial payment card.