The Mobile Handset and Transportation: ApplePay and the London Underground
One of the major trends discussed in the latest IHS Smart Card Overview report is the rise of the smartphone as a master device for a range of smart card applications. Apple announced in June that ApplePay can be used in London’s underground and bus systems. The current system revolves around the contactless Oyster card. Contactless payment options have been heavily promoted recently, because the option to pay in cash was removed from the bus system, and only Oyster cards, NFC enabled bank cards, or pre-purchased paper tickets are now accepted.
As Alexander Derricott, Analyst for Digital Security for IHS, states, smartphones will be a disruptive force in the transportation market, but this disruption will not be felt over the next five years. It is unlikely that end-users will jettison dedicated transportation cards, until the handset-based system has had years of development.
The infrastructure is already in place for the use of ApplePay in the London transportation system, which can now support a range of contactless or near-field-communication- (NFC-) enabled cards. The use of banking cards is widespread: four million unique banking cards have been registered and an average of 1.2 million contactless payments are made each day. The use of banking card for pay-as-you-go journeys now represents 17 percent of transactions.
With ApplePay entering the pay-as-you-go segment, it remains to be seen how it might affect the use of contactless banking cards. ApplePay does seem to be more complicated than the simple contactless payment system, because it requires three steps rather than just one step for banking cards or two steps for Oyster cards.
Oyster card procedure:
1. First top up the card with cash, a weekly pass, a monthly pass or a yearly pass
2. Enter and exit the system.
Contactless banking card procedure:
1. You are able to enter and exit the system without “topping up,” but you do not have access to a pass longer than a week.
ApplePay procedure:
1. Open the passbook application on the handset
2. Place your finger on the TouchID pad
3. Tap the handset onto the gate reader, within one minute
ApplePay also requires that the handset be powered on. If the phone battery dies before the journey is completed, then the user may have to pay the maximum penalty fare.
There are some issues with ApplePay, but as streamlining occurs it will become simpler to use. The potential to include monthly and yearly passes, which is not available in contactless banking cards, will definitely be a selling point. Currently ApplePay is only relevant in the UK transportation market, because the system is not available in the Asia-Pacific region and public transport in the United States is underdeveloped.
It is highly likely that ApplePay will be rolled out soon in the Asia-Pacific region. There have been murmurs that Alibaba will might work with Apple to develop the system in China. The potential effect of ApplePay on a system with an already highly developed NFC infrastructure could be substantial, especially if Samsung and ZTE follow suit with their flagship handsets.
Transportation applications are more easily transferred to smartphones than other payment applications. Mobile handsets will play an increasingly important role, but they will not completely replace dedicated smart cards in the next five years. The major changes are likely to occur in the next full upgrade of current projects, as will there is potential for mobile-handset-centric systems to be designed.
by The Editorial Staff
