Michigan Transit Agency Launches Open-Loop Payments

The transit agency serving the city of Grand Rapids, Mich., became the latest in a small but growing list of agencies to launch open-loop payments in the U.S.

Interurban Transit Partnership, known as The Rapid, is also the smallest of the agencies in the U.S. so far accepting contactless credit and debit cards and open-loop credentials in NFC wallets–not counting a number of mainly open-loop pilots in California.

The Michigan agency delivered a total of just over 5 million rides last year. Among the other–much larger–agencies that have fully rolled out open loop in the U.S are those in New York, Chicago, Miami, Portland, (Ore.), Dallas and, most recently, Tampa and St. Petersburg, Fla.

The Rapid launched open loop on a capital budget of a little more than $300,000, according to board records.

The board in April 2021 hired Germany-based fare system provider INIT with a no-bid contact to “integrate” open-loop payments on the agency’s closed-loop contactless terminals on all fixed-route and rapid buses.

Updated: The agency had already been working with INIT, which provided a fare system and its PROXMobil3 validators for 150 buses. These validators were already EMV-ready and the $331,000 open-loop contract for capital costs was mainly for INIT to upgrade the terminals and its back office with software extensions to support open loop. INIT also provided EMVCo certification, though not actual PCI DSS certification. End update.

Those closed-loop terminals, supplied by INIT around five years earlier, were already “capable of contactless fare collection with contactless credit and debit cards and NFC devices,” according to an agency board report from 2020. “But there needs to be additional programming and set-up to enable this.”

Agency staffers justified not going out to bid for the $331,000 open-loop contract, saying that “procurement through potential other vendors would be extremely cost prohibitive to integrate.” They did not say how much more it was estimated to cost with other vendors in the board documents.

The agency had budgeted $300,000 for the project in 2020, as part of its five-year capital improvement plan. It said the money would come from the federal CARES Act. There was no estimate for operational costs for the open-loop service in the board documents, and an agency spokeswoman did not respond to a follow-up request for information on costs for the service.

While The Rapid approved the open-loop contract in 2021, it said it had actually started working with INIT on the project in 2020, which means the open-loop technology took nearly three years to plan and implement.

It’s not clear whether there were delays. A board report earlier this year did say there had been a “couple of speed bumps” in the project, which at the time was supposed to launch in mid- to late February of this year. Instead the project launched on Monday.

Update: When asked what work INIT did for the roughly $300,000 contract, a company spokeswoman told Mobility Payments that the cost of the project covered not only the functionality itself, but also system and banking-account configurations, inspection devices, website improvements, some customized application work and five years of extended maintenance.

INIT also helped the validators and rest of the payments system to meet level-3 certification specifications from payments group EMVCo.

When asked why the work took two years from the time the contract was signed to launch of the service, and if there were delays, the INIT spokeswoman said the certification work itself can take over a year. The vendor was also working on other open-loop projects in the U.S., including for the Tampa Bay-area agencies.

“Grand Rapids signed their contract when the process was just getting started,” she said. “We also planned to deploy Tampa first to streamline further deployments. Once Tampa was deployed, it took a short amount of time to deploy Grand Rapids. Two other INIT projects are planned for open payment deployment this year.” End update.

Meeting minutes from 2021 also show that The Rapid had originally planned to support Visa-, Mastercard- and American Express-branded cards and credentials in NFC wallets connected with Apple Pay and Google Pay. The minutes stated that cards from Discover Financial Services “cannot be processed at this time due to limitation imposed by Discover.”

But in its announcement of the launch this week, the agency said it would, in fact, accept Discover-branded cards, along with those branded Visa and Mastercard, as well as open-loop credentials in wallets connected with Apple Pay, Google Wallet and Samsung Pay.

The open-loop service will also support daily fare capping after the second ride, just as with the agency’s closed-loop Wave cards. Fare prices will also be the same for open and closed loop, though concessionary discounts for seniors and disabled persons are not available with open loop, but are with closed-loop.

The agency will also continue to accept cash and paper tickets.

Other, larger agencies in the U.S. also have closed-loop terminals that are technically ready to support open loop, but unlike The Rapid, they have been holding off on launching the EMV technology, as Mobility Payments reported.

“The Rapid decided to launch contactless payments to increase accessibility to our services,” an agency spokeswoman told Mobility Payments in a statement. “We knew this was something that our customers could really benefit from, and in the era of all things digital, it felt like a natural next step in our commitment to sustainable efforts and technology enhancements.”

_{© 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.}