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How to Solve the Contactless Transit Payments Problem

Many times, if you get on a bus or train, there’s an internet connection that allows payment data to be sent automatically from the payment kiosk to the transport system. However, not all buses and trains are online right now, especially if they’re on the outskirts of cities, which makes it difficult for riders to enjoy the convenience of contactless payments as they become increasingly prominent.

Enter 5G technology, which according to  Nick Starai, chief strategy officer of NMI, gives these rural locations hope and the opportunity to take their payments to the next level and avoid cash. This is critical to retain riders as nearly 30% of consumers feel uncomfortable using cash to make purchases right now.

The Fintech Times sat down with Nick to discuss the current state of contactless transit payments.

Tell me more about NMI

NMI is a provider of payments enablement technology, processing over 1.5 billion transactions a year across e-commerce, mobile, retail and self-service channels. Our goal is to provide ISOs, fintech innovators, ISVs and banks with the software tools to process payments safely and securely in more ways and more places. One of the biggest challenges our partners face is the pressure to remain competitive with the diverse payment offerings they can provide to merchants. Our flexible processor connections, wide range of devices, third-party integrations, APIs and SDKs enable our partners to keep up with the ever-changing payments landscape and provide the safe, secure payment experiences that consumers demand.

What are the current problems with transit payments?

Right now, two major problems are facing public transit payments. The first issue is simply that they’re inconvenient. Riders don’t want to be slowed down when they’re on their way to work or running late for a friend’s birthday party – buying or reloading transit cards gets in their way. This can be frustrating for consumers, but with the tech available today, it doesn’t have to be this difficult. The other problem at hand is the perception that overhauling current transit payments systems is timely, expensive and complex. Transit operators must upgrade fareboxes to support contactless open-loop credit cards to provide these convenient, seamless payment experiences to riders. The biggest hurdle for the industry: changing this mindset and demonstrating the investment is worth it in the long haul.

Are these issues different depending on location? Is a city less likely to experience these issues?

The COVID-19 pandemic has accelerated contactless acceptance throughout the world, and enabling open-loop contactless payments has become an immediate priority for mass transit, regardless of whether it’s a big city or a small town. The pandemic has provided many of these transit authorities time to retool and upgrade their fleets to oversee these open-loop contactless payments. While some larger city transit fleets are already “connected” there are methods for open-loop for non-connected fleets. That said, getting fleets online is more ideal to optimize performance. Smaller transit authorities will follow suit as more transportation payments are digitized.

Have these issues been exacerbated by Covid-19?

One of the biggest issues the transportation industry faced amid the COVID-19 pandemic was the lack of riders overall as shelter in place became the norm across the country and many nonessential workers remained remote. As people return to working in the office and going out into the world, the current obstacle is how to entice riders back onto public transportation by ensuring it’s safe and sanitary, and payments make up a large aspect of that.

What is the solution to these issues? How does 5G come into play?

We think in the next few years in the vast majority of cities and certainly the major metros, you will be able to use your contactless credit card or mobile device with an NFC tap to get on trains and buses. With nearly 30% of consumers feeling uncomfortable using cash to complete transactions right now, making sure touch-free payments are accepted will be a key step in ensuring riders feel safe as they return to trains, buses and other forms of public transit. This is where 5G comes into play. As 5G increases the growth in digital payment acceptance locations for the consumers, it will also enable more opportunities for payments to be processed through the mobile device itself. Additionally, 5G ensures better overall performance by promoting higher throughput and less latent connectivity.

Open-loop contactless ticketing enables commuters who take trains or buses in cities to use bank-issued EMV contactless cards to pay fares more securely. A great example of this is OMNY, the fare payment system in New York City. Riders can use their contactless credit card or mobile device to pay their fares and tap when they get on and off the transportation system. This removes the friction for commuters when they want to buy or reload cards with lower card setup fees and is also more secure due to the nature of the transaction.

Why is it important for transit payments to be seamless for consumers?

As stay-at-home orders lift, demand for seamless, contactless transit payments are soaring to help consumers navigate their rejuvenated travels. With that comes the need to reduce friction in accepting and processing payments. For example, one rider might not be comfortable going to a cashier to buy a train ticket, and transit systems now have the ability to allow this rider to simply tap to get on the bus or train using a contactless card, digital wallet or wearable. Providing a convenient experience for riders that meets their expectations for convenience and safety is crucial.

Have these issues had an effect on the public transportation industry?

As with any industry, the most seamless payment is one that consumers don’t even know is taking place. When there’s friction involved and frustration for the consumer, loyalty is diminished. Many people don’t have a choice when it comes to public transportation, so the need to digitize payments and make riders feel safe as they return to their old transit routine will help with the industry’s recovery.

What is the future for transit payments?

I believe the future of transit payments will combine the contactless transactions that consumers demand today so riders can pay for their travel with a simple tap. The adoption of contactless payments in transit will help consumers with the overall adoption of the payment method. When consumers get into the habit of tapping to pay when they get on the bus or train, they will quickly get into the habit of tapping to pay for everything – in grocery stores, at the mall, at the doctor’s office.

Another huge opportunity for the transit industry to look at whether tap to mobile payments makes sense. In scenarios where train conductors come by and punch tickets, being able to accept payment by tapping a contactless card or mobile wallet to a mobile device could be a game-changer in terms of creating a seamless transit payments experience for riders.


  • Polly is a journalist, content creator and general opinion holder from North Wales. She has written for a number of publications, usually hovering around the topics of fintech, tech, lifestyle and body positivity.

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