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1 Click to edit Master title style Open Payment Systems: How Fare Systems Operate Now and Where we are Going. Bill McFarland, BSCS, MBA Dir. Technical Services INIT Innovations in Transportation, Inc.

2 Cashless Payments Topics Payment Media Open vs. Closed Transaction Flows Account Based Systems Wireless Communications Fees Looking Forward 2

3 Payment Media Contactless Smart Cards NFC 2D Barcode Tickets Paper tickets Conventional Farebox--Cash 3

4 Definitions Open Payments Electronic Payments using media not created, distributed and/or managed by transit agencies. Closed Payments Electronic Payments using media created, distributed and/or managed by transit agencies. 4

5 Advantages/Disadvantages Closed Payments PROs Payment in Advance Low Risk No PCI-DSS / PA-DSS certification No Transaction Fees Easy On-vehicle Validation Simpler Tap-on/off and zone support CONs Card Management User Management Distribution Chain Management Equipment Costs (AFMs etc.) Potential Credit Delays Residual Balance Accounting 5

6 Advantages/Disadvantages Open Payments PROs No Card Management No User Management No Distribution Chain Management Lower Equipment Costs Easy Access for banked customers Certification and Standards CONs Higher Risk Credit Card Data PCI-DSS / PA-DSS Certification Transaction Fees No support for Unbanked No Residual Balance More sophistication in back office 6

7 Transaction Flow Open Payments 1. Customer presents media on vehicle 2. Validator checks media against red/green lists If green transaction accepted/recorded If red ERROR Otherwise??? 3. Transaction recorded and sent to banking interface following PA/PCI-DSS standards NOTE: Red/Green lists distributed to all validators contains credit card info for all known cards. 7

8 Transaction Flow Closed Payments 1. Customer acquires media through distribution network 2. Customer puts value on media 3. Customer presents media on vehicle 4. Validator checks media against red list If red ERROR Otherwise validator checks purse and deducts fare If insufficient value 5. Transaction logged and sent to back office clearinghouse. NOTE: Red list distributed to all validators, and distribution network components contains NO credit card info. 8

9 Processing Nodes Open Payments Validators Back Office Processes transaction Records acceptance status Builds red/green lists TA Accounting Banking Interface 9

10 Processing Nodes Closed Payments Card procurement Channels TA Website TA outlets Retail outlets AFMs Others Validators Back Office Processes transaction Manages user accounts Manages cards Manages vendors Builds red lists TA Accounting Banking Interface 10

11 Account Based Systems What is this? Type of Open Payment User registration Account setup Offers security options Potential to minimize certification Extend Customer benefits 11

12 Benefits of Purse and Accounts Customer fidelity programs Best Fare Computations Easier support for Zone, Tap-on/off, Distance based fares and Transfers. Customer Self Audits Data Mining potential Targeted Advertising potential 12

13 Wireless Technology WiFi LTE Red/green lists Transaction reporting SW updates Potential Game Changer for Open Payments Real-time authentications Real-time additions to red/green lists Real-time updates to Purse balances 13

14 Fees Transaction fees Consume profits Aggregation: a potential savior Force fare increases for non-accounts PATCO concluded too expensive PCI Audits 14

15 Looking Forward Smartphone Applications: Mobile Ticketing 2D barcodes Visual Security Features Autonomous Validation Features Back office integration Inspector Apps NFC Wallet applications Open Card emulation Closed Card Emulation INIT MOBILEticket 15

16 Looking Forward Vehicle Validators to support all types of media: devices Smartcards NFC Account based Transaction based Purse based 2D Barcodes - MOBILEticket Communications WiFi LTE GPS Ethernet J1708 RS-232 Stand-Alone Integrated with VLU and/or Farebox INIT PROXmobil2 16

17 Looking Forward Back Office Suite Inter-agency fare Justification Card Management User Account Management Distribution Chain Management Banking Interface Customer Web Portal Key Management PCI compliance Transaction Aggregation Etc. INIT MOBILEvario 17

18 Multi-agency Considerations Inter-agency commerce rules must be defined EARLY. Probably the biggest detriment to deployment timeline. Back end system must handle rules based distribution of funds from AFC operations. 18

19 Thank you for your attention. Bill McFarland x