Tap and Go

Transport for London and MasterCard are cooperating on an innovative, contactless credit card payment system, as Will Judge and Francisca Delgadillo report
Just over 12 months ago Transport for London (TfL) introduced an innovative new fare collection model for its customers that may in time come to be recognised as the opening of an entirely new chapter in the history of Europe’s urban transportation industry.
TfL has for many years operated the well-known Oyster card, issuing smartcards to all its customers that enable them to pre-purchase tickets or to pre-load credit onto them so they can enter and exit (“touch in and touch out”) London’s public transport network. The Oyster system comprises two principal parts – a huge distributed infrastructure of more than 20,000 distinctive yellow card-reading terminals across the city at train stations, on buses, trams, boats and even on the Emirates Air Line cable car, and more than 80 million Oyster cards that are being used by Londoners and the many millions of visitors to the capital.
On 16 September  2014 a new functionality in the TfL ticketing system was activated.  For the first time customers could choose to use contactless debit and credit cards at the gate-line to pay for journeys on the London transport system. The service was made available to customers travelling on bus, Tube, tram, Docklands Light Rail, London Overground, TfL Rail and most National Rail services in London. Customers paying with contactless pay the same fare as with Oyster “pay-as-you-go”. They also benefit from Monday to Sunday capping. Pay-as-you-go with capping means customers do not need to decide in advance which ticket would be the most suitable, allowing them to be flexible with their travel throughout a day or week. Caps are applied each day on contactless or at the end of the week if a customer has reached a cap equivalent to a weekly Travelcard.
It’s worth thinking through the logic of this new proposition and why TfL invested in it. Although Oyster has become a very popular – indeed iconic – London brand over the last 12 years, TfL wanted to take the ‘hassle’ and inconvenience out of paying fares. Removing the need to remember the expiry date of a pre-purchased ticket; the need to unexpectedly divert from a journey to top-up an Oyster balance at a ticket machine or a Oyster Ticket Stop shop retailer when the balance falls to zero; the need to get a new card prior to travel if you have arrived in London and left your Oyster card at home. TfL also clearly saw that if it could make direct use of standard contactless payment cards provided to its customers by their banks it could reduce the costs of operating the Oyster system substantially, for example by redeploying staff members from ticket offices to gate-lines where they can provide advice to customers; by reducing the need to purchase and issue large volumes of new Oyster cards; and by reducing the expense of operating and maintaining a large fleet of ticket machines.
The results have been spectacular. By early July, in less than a year, the usage of the new system by customers had grown to more than 800,000 journeys per day. This equates to about 20 per cent of all the “pay-as-you-go” journeys on the city’s transport system, and is a significant amount especially given the fact that TfL has maintained Oyster acceptance alongside the new proposition – there was no attempt to force customers to switch to this new way to pay. It seems that TfL’s customers understand that the new way to pay fares is simpler and easier for them and have chosen to switch. And they keep doing so: every day during July TfL observed approximately 20,000 new contactless payment cards transacting that it had not observed before.
Customers paying this way simply walk up to the card readers in stations or on board buses and touch their contactless payment debit or credit card or device on it. Transaction time is very similar to that achieved with the Oyster card, so throughput of passengers remains high enough to maintain efficient transport operations. TfL calculates a daily charge for each cardholder taking account of capping and bills the card used at the end of the day. Customers can visit the TfL website to see details of their journeys and charges and can also get support from a dedicated call centre.
Importantly, it is not just a proposition for TfL’s UK customers. London is the world’s most visited city according to MasterCard, whose Global Destination Cities Index 2015 report quantifies the numbers of overnight visitors staying in the world’s largest cities, so this point was of vital importance to TfL. Because the new proposition is founded upon the global standards for contactless payments maintained by the payments industry, TfL customers from all over the world arrive in London with a compatible contactless card in their possession and realise that they can use it to touch in and out of TfL’s services without having to take any prior action – no need to register; no need to get a special card; no need to load money anywhere; no need to download an app. The proposition really could not be simpler, so it’s not a surprise to learn that TfL has observed payment cards from 77 different countries.
Further, this use of global specifications has meant that consumers adopting the latest payments technology innovations can use their devices to pay this way.  The launch of Apple Pay in the UK in July introduced contactless payments by watch or by smartphone to UK consumers, and it seems likely that consumers in other European markets will enjoy these products in the near future.  Samsung Pay is not far behind.  The good news is that because these smartphone services also use the global standards for contactless payments maintained by the payments industry, TfL is in a position to accept them for fare payments without having to fund any further technical development of the Oyster system.
So what conclusions might be drawn from this successful project for urban transportation policy at the European level? It would seem to contribute directly to two stated objectives held by the European Commission in respect of urban transport, namely increasing the attractiveness and efficiency of public transportation. It is also a huge step forward in terms of ticketing interoperability across borders: the Smart Payment Association published figures earlier this year showing that approximately 616 million contactless payment cards were manufactured and distributed to banks in 2014 for onward issuance to their customers. The figure for 2015 is expected to be close to 1 billion. Hence, over the course of two years 1.6 billion people in every region of the world will have been enabled to pay their fares in London. Within Europe, contactless MasterCard cards are issued in 25 countries today and in some markets – notably Poland – contactless features on more than 60 per cent of all cards in use. One might go so far as to say that London has succeeded in implementing Europe-wide contactless smart ticketing in this project – a significant achievement and one which could be usefully replicated in other key business cities across Europe.
A year after the launch of contactless payments across Transport for London’s (TfL’s) network, POLIS and London’s European Office together with MaterCard gathered in Brussels in September 2015 to review the success of this initiative and to discuss the future of public transport fares management.
The event centred on the role of contactless payments in public transport and fare management, the benefits of this technology for passengers and transport authorities and how it can contribute to the Transport White Paper objective of facilitating multimodal travel across Europe. The six expert speakers from the European Parliament, TfL, MasterCard, the European Commission, Budapest Centre for Transport and Amadeus reflected on the lessons learnt in London and how this can support policy goals for urban transportation across Europe.
The seminar closed with a consensus that smart ticketing which meets the needs of today’s mobile, global citizens and solves the problems cities faces can be achieved by exploiting the established global standards that already exist in the payment industry.
Will Judge is XXXXXXXXX of MasterCard Enterprise Partnerships,
Francisca Delgadillo is Acting Head of International & EU Relations at Transport for London,