Article Highlights

Key Takeaway:

Apple CEO Tim Cook touted integration of Apple Pay with transit authorities in three U.S. markets this year (2019): Portland, Ore., New York City and Chicago. “Transit integration is a major driver of a broader digital wallet adoption, and we’re going to keep up this push to help users leave their wallet at home in more and more instances.”

Key Data:
Organizations Mentioned:

• Apple
• Mastercard
• Metropolitan Transportation Authority

(This premium article was originally published in August 2019. © Mobility Payments and Forthwrite Media.)

While noting to financial analysts late Tuesday (July 2019) that Apple Pay is now approaching 1 billion transactions per month globally and is in 47 markets, perhaps Apple CEO Tim Cook’s most significant comments about Apple Pay this week was to again emphasize that Apple wants to enable users to routinely tap to pay for bus, subway and other transit rides with their iPhones and Apple Watches. 

Cook, in prepared remarks to financial analysts late Tuesday after the release of Apple’s fiscal third quarter results, said that “transit integration is a major driver of a broader digital wallet adoption, and we’re going to keep up this push to help users leave their wallet at home in more and more instances.” 

Specifically, Cook touted integration of Apple Pay with transit authorities in three U.S. markets this year: Portland, Ore., New York City and Chicago. 

In Portland and Chicago, Cook was referring to putting the respective closed-loop transit cards from these cities, Hop and Ventra, onto NFC secure elements in Apple NFC devices. Apple added Hop to Apple Pay in May and plans to support Ventra later this year. 

Enabling closed-loop transit requires much more development work than supporting open-loop payments. The latter enables riders to tap their contactless EMV credit or debit cards or tokenized EMV bank cards loaded onto NFC devices to ride. Riders in Portland and Chicago have been able to tap to pay with these standardized EMV cards or tokenized bank cards for months, even years. But many riders still prefer to use the local, reloadable, closed-loop transit card. 

In New York City, the Metropolitan Transportation Authority, or MTA, launched the first phase of its open-loop fare collection service in late May. That includes enabling riders to tap Apple NFC devices loaded with credit and debit cards. Apple likely will also support the planned reloadable closed-loop card, the OMNY card, which MTA plans to launch in 2021. 

Supporting both open-loop fare payment and a transit authority’s closed-loop cards adds flexibility and choice for consumers. And some major transit ticketing services only offer closed-loop cards, such as Suica in Japan, which Apple began supporting in 2016; and Octopus in Hong Kong, which Apple plans to enable later this year after delays. Apple, like the other Pays wallets, is no doubt planning to work with other closed-loop transit payments services, and the Clipper transit card serving the San Francisco Bay Area–Apple’s home base–is probably one of them. 

Apple Pay also supports closed-loop transit payments in two of China’s largest cities, Beijing and Shanghai. Apple enables “Express Transit” in these cities, as well as in Japan, Portland and New York City. The feature allows riders to avoid authenticating themselves with Apple’s Touch ID, Face ID or a passcode and not even having to wake up or unlock their devices, just tapping them on transit terminals. The devices, however, do need to be turned on.  

Apple Pay can also be used with credit and debit cards to pay for rides in a range of cities outside of New York and Portland, including London, Vancouver, Moscow, Sydney, Singapore and Guangzhou in China. 

Apple isn’t alone among the major Pays wallets in targeting transit ticketing. Google and Samsung also are supporting both closed-loop and open-loop transit payments. The reason is simple–the application generates lots of transactions, albeit, very low-value ones. 

Ajay Banga, president and CEO of Mastercard, also speaking to financial analysts Tuesday, noted that when consumers can use their contactless credit, debit and prepaid cards or these cards on NFC devices to pay for subway, bus and other transit rides, they will use contactless payment much more often. “If the transport system gets contactless enabled, it tends to ramp faster. If it doesn’t, it tends to ramp slower,” he said. 

Cook noted Tuesday that the nearly 1 billion transactions per month Apple Pay is now generating is more than double the monthly rate a year ago. The new transaction figure is not a surprise, since Apple released a similar figure last March. 

Cook on Tuesday also touted that Apple Pay added 17 new countries in the three months ending June 30, bringing its total number of markets to 47. 

That includes 13 European countries that Apple Pay added in late June alone. But, as Mobility Payments’ sister publication NFC Times reported, most of those additional countries were small, such as Estonia, Croatia, Portugal and Malta, and they have an uneven contactless- acceptance footprint. Moreover, most of the launches consist of only two or three tiny issuers–usually mobile or digital banks, such as Revolut, Monese and N26. 

So Apple will not generate lots of new transactions from these small markets. What Apple needs to make Apple Pay more relevant are applications that encourage users to tap to pay many times per month or even multiple times per day. And there are few applications better suited for this than transit ticketing. 

© Mobility Payments and Forthwrite Media. Mobility Payments content is for individual use and cannot be copied or distributed without the express permission of the publisher.