Open-Loop Contactless Payments Coming to Vancouver Transit System

by Mercator Advisory Group 0

Open-loop payment card acceptance hasn’t exactly been on the top of transit operator lists. Concerns over speed and cost of acceptance continue to hinder deployments. Indeed, as recently as six month ago, only 50% of transit RFPs for new payments systems included open-loop payment acceptance.

Vancouver’s transit systems have come together to deploy a payments system from Cubic and IBM that accepts both a closed-loop transit card and open-loop contactless payment methods such as payWave and PayPass. Their decision to take a “belt and suspenders” approach is interesting, particularly given the high contactless issuance rates in Canada. The Canadian EMV roll-out has been a break-out event for contactless issuance (almost 100% of MasterCard branded cards are contactless).

Transit systems are inherently cautious given their high volume environment and high availability requirements. Anything that hasn’t been proven in those environments—and contactless is just getting there—has to be looked at with care.

Holders of major-brand contactless cards such as Visa payWave or MasterCard PayPass will be able to tap those cards at Vancouver train stations once fare gates based on Cubic’s Nextfare technology are operational, and will be charged cash fares. That capability takes Vancouver a step beyond the proprietary contactless fare cards used in some big North American cities, including Chicago and Washington, D.C., but stops short of discarding a closed-loop card, as would a completely open-fare system.

San Diego-based Cubic and partner IBM Canada won a bidding process among three finalists that submitted requests for proposals in a process that started with eight consortiums, the spokesperson says. The $84 million base contract includes the design, construction, and installation of the system, including the card-reading fare gates, to be delivered by 2013, according to a Cubic release. After delivery, a 10-year services contract valued at about $13 million per year, plus a one-time $6 million transition cost, takes effect. The contract includes an option for five additional years of services. Seed money for the project was announced three years ago in the form of C$40 million from the province of British Columbia and $C30 million from Canada’s federal government, according to the TransLink spokesperson.

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