Philadelphia Transit Authority Confirms Plans for Launch of Open-Loop Payments after Delays

_{(This premium archive article was originally published in January 2020. © Mobility Payments and Forthwrite Media.)}

The Southeastern Pennsylvania Transportation Authority, or SEPTA, in Philadelphia plans to introduce open-loop payments of fares, with a pilot scheduled for around June, a spokesman confirmed to NFC Times. It makes SEPTA part of a small but growing number of U.S. transit agencies that are accepting payments of fares from contactless bank cards and NFC wallets or are planning to do so. Update: As of April 2022, SEPTA had still not rolled out open-loop payments. End update.

SEPTA’s open-loop payments service has long been delayed, with officials originally planning to accept contactless bank cards and NFC smartphones directly for fares on board buses and at subway gates as far back as late 2013, long before U.S. banks began issuing contactless EMV credit and debit cards and even before Apple Pay first launched. 

Although SEPTA’s closed-loop contactless Key Card, which launched in 2016, sports a Mastercard-branded prepaid contactless application that can be used for retail purchases, this open-loop application cannot be used for fare payments. Riders use a separate Key Card e-purse on the card to pay fares. 

This type of hybrid prepaid transit card has been promoted in other cities, including Chicago–which later discontinued it­–and in Latin America. Transit agencies have received a cut of revenues from these prepaid applications. But among the problems with the hybrid cards is that while transit customers don’t have to pay to reload the transit e-purse, they do have to pay to load funds in the prepaid account. Also, it’s questionable how much demand exists for the prepaid open-loop applications, at least in the U.S. 

To enable true open-loop payments later this year, SEPTA is spending just under $4.4 million–mainly for more than 4,200 terminals being installed on its transit vehicles and stations, including buses, subway, trolleys and commuter rail. The terminals will have contactless readers that are EMV certified by EMVCo and the major payments schemes. The terminals will also reportedly be able to accept ID cards and QR codes later. 

SEPTA is buying the terminals from U.S.-based Conduent, formerly ACS Transport Solutions Group, which was part of Xerox Corp. The transit agency originally approved a $130 million-plus contract in late 2011 with Xerox to roll out an account-based ticketing system supporting open-loop contactless and NFC payments. Over the years, however, the project took shape as a closed-loop contactless Key Card, with the separate Mastercard-branded prepaid contactless application, while true open-loop payments was delayed.

Officials had originally thought that U.S. banks would be issuing contactless cards and that NFC wallets would roll out much sooner than they did, although this was not the only reason for the delays in open loop by SEPTA.

Whereas SEPTA was going to be one of the first transit agencies in North America to introduce open-loop on multiple modes of transport, when it finally begins its pilot next summer, it will be following agencies in other cities, including those in New York City, Vancouver, Portland, Ore., and Miami, Fla. Chicago launched in 2013 and Boston, whose project was scheduled to launch this year but is delayed. In Texas, Dallas Area Rapid Transit plans to begin testing acceptance of contactless debit and credit cards in June, DART told Mobility Payments‘ sister publication NFC Times. As NFC Times reported last week, the Miami contactless launch in August has gotten off to a slow start in terms of customer take-up. 

Major U.S. banks only started to roll out contactless EMV credit and debit cards in significant numbers last year. By the end of this year, Visa estimates that around 300 million Visa-branded EMV cards–roughly one-third of Visa cards on issue in the U.S.–will be contactless enabled. NFC wallets, such as Apple Pay and Google Pay, which were launched years ago, have not seen widespread take-up, as earlier expected, although they are growing.

For SEPTA and other agencies, open-loop payments becomes another payments option for riders, including out-of-town visitors. The agency hopes this option will increase ridership, although customers will reportedly not get some of the discounts they enjoy with the Key Card.  

As in many U.S. cities, SEPTA is reporting falling ridership. The authority reported that it handled just over 300 million trips in 2018 for all of its modes of transport, down 1.8% from the previous year, according to the American Public Transportation Association. For the first three quarters of 2019, SEPTA’s total ridership fell by 2.9%. 

Other developed countries have more advanced contactless card deployments and a small but growing number of transit agencies globally are also adopting open-loop payments, including in London, Sydney, Singapore and Milan.  

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