All change please: contactless payment coming to London

21 October 2013

Transport for London (TfL) is testing a cutting-edge contactless payment system for London’s rail network ahead of a customer roll-out early next year. After a successful trial run on the buses, director of customer experience at TfL Shashi Verma speaks to Ross Davies about this modern intersection of transport and technology.

Ross Davies: Can you provide some context to contactless payment on London's transport network; what's wrong with buying a ticket?

Shashi Verma: If you go back 15 years, the only ways to pay at Marks & Spencer were cash or an M&S charge-card; debit or credit cards weren't accepted.

M&S was the last high-street department store to hold out but, if you go back to the 1980s, this was the norm. Then, one by one, they all realised that they were in the business of selling consumer goods, not of running a bank.

The transport industry has exactly the same problem now. In London, the Oyster card is essentially a banking system, and there is no reason to run it except for the fact that the payments industry, until now, has not provided a solution that works for us in terms of speed, volume and accuracy.

For 150 years, we have been issuing tickets in London but, in a modern urban transport environment, a ticket has no meaning. All we want from the customer is the payment for the journey they make; the ticket doesn't guarantee them a seat and it doesn't guarantee them a specific train or bus service; there is no first-class service on our trains and buses. So, it's not clear that we have any of the attributes of a ticket - what we have is a payment.

To address this, what TfL is doing right now with contactless payment technology is new; it's globally inventive.

You began accepting payments on buses through contactless means at the end of last year. How do you feel Londoners have taken to the measure?

Very well, so far. This is part of a long-term strategy to enable customers to pay for transport in the same way they pay for everything else. When you go to Sainsbury's, you can use a Nectar card if you want. Meanwhile, every transport system in the world requires you to change your currency for theirs before you are allowed to travel.

That's what we are trying to get rid of - this problem of people trying to make a transaction before they make a payment for a journey. We are almost nine months into the new bus payment system and about 3.5 million journeys have been paid for using contactless transactions.

The average is running at about 25,000 a day, which, in the context of all our bus journeys, is a very small number. But we very deliberately launched with a limited proposition, in areas where there are no season tickets and no capping, so this is only a substitute for cash payments. Cash payments by themselves make up a very small proportion of overall bus journeys - about 60,000 daily. In that context, 25,000 is a very successful number.

Equally, the number of complaints we get about contactless payments is running at under one a day, which is very healthy for a new technology. Typically, when you do introduce new solutions of this kind, something goes wrong, but we are not finding that on the buses.

When you do get complaints, what do they tend to be?

The only complaint we get is people who think they have been charged twice. Actually, no one has been charged twice - we haven't found a single case of that - but when people present a wallet, which has many things inside it, in some cases a contactless card has been read and there is an Oyster card somewhere else in the wallet.

At the beginning, people didn't really know what contactless cards were. Now that these cards are more prevalent in the retail sector, the public are more aware, they know to separate them from Oyster cards.

Let's move onto the rail network - are there plans to implement open-loop card payments in the near future?

The reason we chose to do this on buses first, and the reason we chose to do it with a limited proposition, is that the nature of the transaction on buses is very similar to what happens in the retail environment: you enter the bus, you touch your card and off you go.

"For 150 years, we have been issuing tickets in London but, in a modern urban transport environment, a ticket has no meaning."

However, the moment you get to the rail environment in London, life is much more complicated. At the very least, in the rail environment you touch in and touch out to determine what your fare should be; that's completely non-standard compared with a payments transaction. So, over many years, we've been building the technology that's needed to try and intermediate between these touches on the transport network and a simple financial transaction flowing out of our system that banks can handle.

We've been working with the major card issuers and the payments industry as a whole, and the technology needed to support the use of open-loop payments on the rail system has pretty much been built. It's being integrated right now with the intention that it will start live testing on the rail system within weeks. By the time your readers see this interview, there will be live testing on the system ahead of the big customer launch early next year.

Will the fare calculation be moved to a back-office system?

Yes. As a customer, you would arrive at the transport system; you don't need to do anything to plan before you've arrived, you don't need to get an Oyster card - you just need to pull out your wallet, touch your card on the reader and go. And you carry on doing that over the course of the day.

We take all of those transactions into a back office and reconstruct the journeys that you make - we apply fares to them and then capping; at the end of the day, a single financial transaction is produced. Then, how you settle that transaction is a matter for you and your bank.

Moving onto SIM card-based near-field communication (NFC), we've seen scepticism with regards to the speed of the process. Is this something that could be implemented, or is there a still a lot that needs to be done?

We have, at various times, looked very hard at the idea of putting Oyster on mobiles. In 2007 and 2008, we ran the biggest NFC trial in the western world up to that point. We had very positive feedback from it, which meant that we were seriously interested in launching this commercially, but we reached an impasse because the technology was just too ropey to make it work on a widespread, commercial basis.

Having said that, the industry has moved on, and people are now putting payment applications on NFC SIM cards; we are very interested in seeing how this would work.

What we would like to see is a situation in which the user experience on an NFC handset is at least as good as it is with a card. This means that all the characteristics of speed, security and reliability must be met.

NFC has the potential to improve the user experience over and above a card; there are things that you can do to integrate information about the payments you've made, but also information about the transport service more broadly.

This is why we've always been interested in NFC; it's just been very difficult to get the technology to match the enthusiasm.

Do you think these developments will sound the death knell for the Oyster card?

Absolutely not. Many people either don't have a contactless payment card or don't want to use it in this way.

Included in the first category are the one million children travelling on our system every day, so we will carry on providing a solution for them. Then, there are people who are sceptical about the security of systems of this kind, as well as people who live on a tight budget and can't afford to have money being taken out of their bank account in an uncontrolled manner. These are all Londoners, and we'll continue to serve them.

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