The big London transit authority, Transport for London, officially announced the launch of the first phase of its open-loop payment service. Open-loop payment systems allow customers to spend value deposited into them at multiple merchants, transfer it to someone else, and/or withdraw it as cash later. Mobile money, pre-paid debit, and other e-money-based systems fall into this category.
Transport for London is now using an open-loop payment system, accepting fares on more than 8,000 buses in and around the British capital with just a tap from contactless credit and debit cards to pay fares.
Their onboard terminals have been upgraded to accept contactless bank cards supporting MasterCard PayPass, Visa payWave and American Express ExpressPay — though generally not yet applications on NFC phones — on the 8,500 buses that serve the UK capital. This is in addition to Transport for London’s closed-loop Oyster card.
A closed-loop system is one in which customers are able to spend value they’ve deposited into their account to be used only for goods and services offered by the provider of that payment system. It is usually impossible to redeem this value for cash or transfer it to someone else’s account. In addition to the Oyster transit card this also applies to gift cards, Starbucks cards, and the like.
Originally the agency planned to introduce open-loop fare collection in time for the Summer Olympics in London, but chose to delay the launch, citing “complex development work in conjunction with the card payments industry.” Shashi Verma, the transit authority’s director of customer experience, had stated they would only roll it out once they were confident it was 100% robust.
This move makes Transport for London the first major transit agency to introduce open-loop payments worldwide. Others, such as those in Chicago and Philadelphia, among a few other large cities in North America, are still gearing up for open loop.
Transport for London estimates a projected 25 million bus journeys to be paid by contactless bank cards in the next year. Banks and others involved in the payment card industry hope the service will substantially increase use of the growing contactless credit and debit cards in the UK, which now accounts for a very small number of total card transactions.
Mike Cowen, head of transit solutions, Europe, for MasterCard Worldwide, told NFC Times that he’s been working on the project with Transport for London for more than five years. He said, “The eyes of the transit world are upon London. All over the world, they are closely monitoring what’s happening in London.”
Near field communication (NFC) is a technology that allows a cell phone to securely transmit and receive information wirelessly. Transport for London said it plans to expand the bank card — and presumably NFC phone — fare payments to its enormous London Underground service next year.
NFC provides a wide range of benefits to businesses and consumers. Key benefits are its simple touch interactions and versatility – suited for a broad range of industries. NFC works with existing contactless card technologies and has built-in capabilities to support secure applications.