Open-Loop Transit Payments Coming to Chicago

by Mercator Advisory Group 0

The use of open-loop payment cards in transit is one of the largest, and last, major opportunities for the electronification of every day spending. While the value of each ride is small, each ride happens twice a day by every commuter and most of them travel five days a week.

This announcement by transit ticketing giant Cubic is significant as it makes Chicago the largest transit market to commit to open-loop payments. For the underbanked / underserved, the Chicago Transit Authority (CTA) will provide reloadable prepaid debit cards that can be used both for the ride and for purchases at other locations. While those cards will, no doubt, have muscular load limits to limit AML and fraud risk, that decision could function as a financial enablement tool for that group.

Another 12 year agreement (Cubic was the incumbent vendor) Cubic will be faced with is the transition from magstripe closed-loop payment to smartcard and smartphone-based payments. So will the riders.

To create the CTA Open Standards Fare System (OSFS), Cubic will transition the agency from its current agency-issued fare media to an open payment system where customers can use their existing credit or debit cards as a ticket, bringing the retail experience to transit ticketing. Like most transit agencies today, the CTA operates a “closed loop” fare collection system, selling its own magnetic tickets and smart cards that can be used only on CTA and Pace.

Riders without credit or debit cards will be issued reloadable prepaid debit cards that can be used for everyday purchases and CTA rides.

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