Four reasons to go contactless with fare collection

The popularity of contactless payments is rising in the U.S., driven by demand for convenient and secure transactions. In fact, research estimates* that more than 50% of in-store transactions in the U.S. are completed with a contactless card or mobile phone tap. While widespread in grocery stores, restaurants and salons, contactless payment adoption has been slow in American public transit systems.

It seems that supply is not keeping up with demand – survey research* from Visa finds that 90% of U.S. commuters expect transit agencies to accept contactless payments. Transit agencies must keep up with these expectations to create the best possible rider experiences and boost transit usage.

What are contactless fare payments?

With contactless payments, riders can use a credit card, debit card, mobile wallet or smart watch to simply tap-and-go at a payment reader, rather than using a dedicated transit pass, tokens or cash. This contactless experience is part of an open-loop system, boosting efficiency and interoperability for transit providers.

Open-loop payments are already popular in many European and Asian cities. For example, Elavon Europe and Visa have enabled contactless payments in Genoa, Italy since 2022 to improve transportation experiences for both residents and visitors. Further, Visa’s contactless payment collaboration with Transport for London* increased overall ridership to more than 2 billion annual journeys, with a 39.6% compound annual growth rate for contactless payment adoption.  Results from early adopters like these show that contactless payments increase operational efficiency and improve rider experiences. Consider these four reasons to go contactless in your transit system.

Payments unlock better rider experiences

Getting from Point A to Point B should be simple, right? Right now, paying for public transportation can actually be difficult – from scrambling to find the right change, to lining up to purchase a ticket and trying to transfer between transit types. Typical bus and train systems leave a lot to be desired, creating frustrated commuters and missed rides. In fact, Visa reports* that 67% of U.S. transit riders have reported missing a train due to long ticket lines.

There is a better way. In an open-loop fare system, riders can tap their card or mobile wallet to pay while boarding a bus or train, speeding up the travel experience and reducing bottlenecks. Contactless payments are faster than traditional card swipes or other closed-loop fare payments because they use NFC technology* to transmit tokenized card data – massively speeding up the time a rider spends making a payment, while also significantly boosting payment security. This means that riders can save valuable time in their commute and enjoy greater peace of mind about the ease of traveling around their area.

Contactless payments increase operational efficiencies

Beyond rider experience benefits, there are compelling incentives for transit agencies to embrace contactless fare collection. Fare payments are inherently low-value transactions that need to take place quickly as riders are entering train stations or boarding buses; contactless payments allow transit agencies to handle large swells of human traffic during peak travel times, without the bottlenecks of cash, proprietary fare cards, or tokens. Further, transit agencies can reduce their physical fare payment infrastructure – think ticket machines and cash management – and focus staff time on route planning and other valuable administrative tasks.

Further, contactless fare payments enhance transaction security for transit agencies. Rather than handling cash or physical tickets, open-loop systems employ fraud-prevention tools like EMV, encryption and tokenization to protect money movement and cardholder data. This secure digital data also creates opportunities for scaling, automating and analyzing payment administration.

The ridership data opportunity

Historically, public transportation systems have relied on cash or tickets for fare payments – which yield little to no information about rider behaviors and route usage. Contactless fares create new opportunities for transit operators to collect valuable data on peak travel times, rider movement patterns in urban areas and customer behaviors. This anonymized data can help agencies plan more efficient routes and schedules, as well as improve other aspects of transit services to meet rider needs – including coordination with mega-event organizers and companies offering commuter benefits programs.

Generating additional revenue for governments

Further, transit operators likely need to increase revenues to maintain infrastructure and invest in system upgrades. The American Public Transportation Association* estimates that transit systems across the U.S. spent $27.6 billion in capital expenditures in 2023 to maintain train tracks, fleets, passenger stations, IT systems, and more. Regardless of public funding allocated for transportation systems, transit agencies need to collect fares from riders and reduce costs to help fund their operations.

That’s where digital fare payments can help, using contactless technology. A Visa study* found that public transit systems incur 14.5 cents in operating costs for every physical dollar they collect in fares, compared to only 4.2 cents for every digital dollar. These substantial savings are attainable for transit operators without having to create their own proprietary fare system; by harnessing the power of open-loop networks, transit operators can accept cards, mobile wallets and wearables from riders and reduce payment acceptance costs.

Contactless payments are the future of public transportation systems around the world. Transit operators can boost operating efficiencies, improve rider experience and generate additional revenue streams for municipalities. Making the switch to an open-loop system is simple and seamless with Elavon.

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