Historically, it has been difficult for payment and ticketing system manufacturers to offer a single reader solution that simultaneously supports closed-loop payment schemes and open-loop debit/credit card schemes on the same reader platform. With the advent of interoperable, multi-functional contactless reader platforms, however, manufacturers are able to configure solutions that, for instance, can process both a PayPass transaction in Germany and top up an Octopus card in Hong Kong.
These more convenient combination open- and closed-loop credit cards are rapidly moving to the top of the user’s wallet. They enable converged applications such as a credit card/transit-pass card that can be used with both closed- and open-loop payment schemes, or an ATM card that could be used to add funds to a transit pass using a closed-loop payment system.
In addition to enabling both types of payment schemes, today’s new reader platforms also support all major contactless smart card technologies and are flexible enough to incorporate new functionality when standards and requirements change.
For card manufacturers as well as automatic fare collection and ticketing systems manufacturers, reliable, fast and secure contactless readers that process both open- and closed-loop payment transactions are essential to future growth. As contactless card technology expands into diverse industries and world regions, and as end-users are introduced to faster, more convenient and secure payment transactions, manufacturers of contactless readers have to stay one step ahead to anticipate new applications and functionality requirements from end-users.
Growth in the prepaid card market helps underscore why contactless reader developers continue to innovate and deliver ever more flexible solutions that process both open- and closed-loop payments. The Mercator Advisory Group reported that the value of dollars loaded onto prepaid cards in 2009 will have more than doubled, to $672 billion, by 2013.
Indeed, the large base of prepaid debit/credit loads has accelerated the transition from closed-loop to open-loop payment schemes. While open-loop schemes have grown by the greatest amount, the closed-loop market still represents a substantial two-thirds of all prepaid dollars. With closed-loop schemes not going away anytime soon, system manufacturers often need readers that will establish a migration path from closed- to open-loop payment and support both payment schemes.
There is more for card manufacturers to focus on beyond how to support evolving payment schemes. The payment industry is also very rapidly moving from legacy magnetic stripe (mag stripe) to 13.56 MHz contactless technologies that significantly improve security, performance and data integrity. This also delivers the advantages of enabling multiple applications in a single credential. In the transit industry in particular, contactless technology has trumped mag stripe as contactless cards and readers have become the preferred choice for new automatic fare collection projects worldwide.
This has positive implications for card manufacturers and system integrators, who now have the opportunity to help transportation authorities improve efficiency to cut cost as well as assist them in partnering with banks and retailers to create a transit card that becomes the payment card of choice for their riders. This enables passengers to benefit from an easy-to-use system that speeds transactions and shortens queues.
To support these trends, the card industry must ensure that today’s payment systems incorporate all popular high-frequency contactless card technologies including MIFARE, DESFire and iCLASS, plus a broad range of protocols and payment schemes including FeliCa, EMVCo, Calypso, MasterCard PayPass, Visa payWave and American Express expresspay.
In addition, integrators must be knowledgeable on how to comply with national/international standards as well as certifications that are fundamental to the integration of payment and public transport ticketing systems. While developing universally compliant systems can be challenging, today’s reader solution developers can turn to manufacturers like HID Global to support them in this task.
The latest generation of multi-technology contactless solutions can be used for diverse applications — from cashless payment with integrated loyalty programs that boost repeat business while enhancing the customer experience, to vending solutions that deliver higher levels of service and satisfaction while increasing revenue and profitability. These systems help retailers to achieve better revenues as their consumers spend more per transaction and make purchases more frequently.
A card that has multiple uses provides added value and convenience which will create the desired “top of wallet” position with consumers. Logically, if customers use a payment card to travel on the train in the morning, they are far more likely to automatically turn to the same card, if it is easy to use, for small purchases on their way to work.
It is no surprise that the major credit card companies and open payment card associations are excited about the increased revenue opportunities presented by these combination cards. With multi-functional, contactless reader platforms that support open- and closed-looped schemes along with the increasing popularity of contactless technology and global standards fueling interoperability, the industry is rapidly evolving to meet the demand for payment systems that deliver increased functionality, convenience and revenue.