MasterCard Rides Oyster’s Rails for British Branding Deal

Although it is trailing far behind rival Visa in terms of numbers of contactless cards carrying its brand in the United Kingdom, MasterCard Worldwide has calculated that the contactless game is just beginning in Britain and is willing to spend millions to boost its brand.

One way to do that, believes MasterCard, is to connect it’s brand to the popular contactless card that is used many more times a day in the United Kingdom than either Visa- or MasterCard-branded contactless payment–the Oyster transit card.

MasterCard yesterday announced a "multimillion-pound" deal with Oyster’s owner, Transport for London, to exclusively put its logo on plastic card covers the transit authority will give away this year with every new Oyster card it issues. MasterCard is counting on riders to keep the Oyster cards in the holders when they tap to pay fares on London buses, trams and underground trains. When they do, they will see the MasterCard, and later, PayPass logos while actually paying the fares with the popular closed-loop Oyster electronic purse.

"It’s building customer awareness of everyday payment with PayPass and starting to create a link in the customer’s mind of tapping something that has a MasterCard brand with gaining access to public transport," Mike Cowan, MasterCard’s head of transit in Europe, told NFC Times.

MasterCard as well as Visa Europe are supporting a move by Transport for London to actually accept bank cards directly to pay fares. Plans call for 8,000 London buses to be equipped to accept open-loop payment by early next year. The London Underground will follow.

Before that happens, MasterCard predicts Transport for London will distribute 6 million of the little plastic Oyster wallets bearing its logo during 2011. Last year, the wallets bore the mark of furniture retailer IKEA. The MasterCard-Transport for London deal also apparently includes some MasterCard branding at London Underground ticket barriers around the time of events MasterCard is sponsoring, including the European football league championships in May.

It’s little wonder that MasterCard is hitching PayPass to Oyster’s rails. The payment-card scheme noted in its branding announcement yesterday that riders tap Oyster cards more than 13 million times a day.

By comparison, Barclays and its credit card arm, Barclaycard, which have issued the vast majority of contactless bank cards in the United Kingdom, announced in late 2010 that contactless-payment transactions at the point of sale would only surpass 1 million–for the entire year. For journeys on the London Underground, riders have to tap twice per transaction, when they enter and exit gates.

Partnership Goes Beyond Plastic Wallets?
The partnership between MasterCard and Transport for London likely extends beyond small plastic card wallets and ticket-barrier placards bearing the MasterCard logo, but neither MasterCard nor the transit authority would say more.

Representatives from the payment-card scheme and the transit authority gave a joint presentation at the Cartes and IDentification conference last month in Paris. But they did not mention their partnership, only opportunities for open-loop payment of fares.

The Transport for London representative, Will Judge, head of future ticketing, mentioned PayPass several times during his portion of the talk, but did not utter the name of Visa’s contactless application, payWave, which would also be accepted for fares on London buses next year and which is currently featured on most of the 12 million-plus contactless bank cards rolled out in the United Kingdom during the past three years.

But when asked by NFC Times during the presentation, Judge said the authority did not have any agreement with MasterCard for a period of exclusivity in accepting PayPass for fares and not cards from other open-loop schemes.

Some transit authorities in North America planning to accept open-loop payment might offer this type of exclusivity in exchange for help in building their contactless-payment infrastructure.

Overall, MasterCard has been more aggressive than either Visa Inc. or its European affiliate, Visa Europe, in promoting the move to collect transit fares with open-loop credit, debit and prepaid cards. It was the first to develop a backend processing system–still a work in progress–designed to quickly handle millions of daily fare micropayments.

MasterCard also helped fund a trial of open-loop payment launched on a New York City subway line in 2006 and a second phase, which expanded the pilot to two suburban transit authorities and two other modes of transit. The card brand also launched a trial in 2009 of PayPass payment of fares on 200 buses in the UK city of Liverpool. It earlier rolled out semi-open-loop payment of transit fares in the Taiwanese city of Kaohsiung.

Retail Knock-on Effect?
The revenue opportunity and chance to displace cash is huge, say backers of the drive for open-loop fare collection. According to Transport for London’s Judge, UK transit operators collect £3.5 billion (US$5.4 billion) in revenue a year, not including season passes, about half of it in London. Much of that is in closed-loop transit schemes, such as Oyster. Urban transit in Europe is worth €11 billion to €15 billion per year (US$14.2 billion to $19.4 billion), he said, much of it still in cash. In addition, collecting fares with PayPass, payWave or other open-loop cards would make ticketing interoperable within national boundaries and across borders.

Moreover, banks and card schemes hope enabling riders to pay fares with their contactless bank cards will also encourage more consumers to tap the cards to make purchases in stores. Contactless payment has yet to take off in the United Kingdom since being launched in London in September 2007, in part because of the relative scarcity of acceptance points, but also because of the challenges of introducing a new payment technology, said Cowen.

"One of the key things is behavioral change among cardholders and consumers, and that’s generally a slow process," Cowen told NFC Times. "We believe it (open-loop fare payment) can accelerate this behavioral change."

MasterCard does not release PayPass card numbers for individual markets, but Visa Europe told NFC Times there were 11.6 million Visa payWave cards on issue at the end of 2010 in the United Kingdom. That is much more than for PayPass. A Barclays spokeswoman said the bank had issued nearly 11 million debit and (Barclaycard) credit cards.

While most of the Barclays- and Barclaycard-issued cards are branded Visa, some Barclaycard credit cards carry PayPass. In addition, MBNA Europe, part of U.S.-based Bank of America, announced it plans to roll out 5 million credit cards in the United Kingdom by the end of 2011. Some of these will carry PayPass, as well. And contactless Virgin Money cards also will support PayPass. Other issuers are expected to join the contactless rollout, issuing cards carrying either payWave or PayPass.

A Transport for London spokeswoman said she didn’t think the MasterCard branding on the plastic Oyster card covers this year would confuse commuters when the transit authority later opens its bus readers to both MasterCard and Visa-branded contactless bank cards.

"We’re still over a year away from that coming out, and we’ll be doing more publicity," she said.

The transit authority also is experimenting with putting its Oyster application on NFC phones and with accepting PayPass and payWave directly at its subway gates from phones. But transaction times, especially with higher-security Oyster applications loaded onto NFC-enabled SIM cards, have been too slow in internal tests to date.

HEADLINE NEWS

In-Depth: Government Regulation of Mobility-as-a-Service Seen as Necessary to Encourage Widespread Adoption

Apr 16 2020

NFC TIMES Exclusive Insight – Government legislation will likely be needed for widespread adoption of Mobility-as-a-Service, or MaaS, to occur, according to UK-based Juniper Research, which believes that the regulations will be necessary to force MaaS providers, including transit service providers, to work together, as well as to persuade users to get out of their cars to cut carbon emissions.

Apple Pay Expands Support for Interoperable Closed-Loop Transit Cards in China, Though Not First NFC Pays Wallet to Do So

NFC TIMES Exclusive Insight – Apple on Wednesday expanded support for closed-loop transit payments across China, incorporating China’s T-Union interoperable transit cards in its Apple Pay service.

Insight: Virus Adds Urgency to Increasing Contactless Limits but Won’t Necessarily Drive Growth in Acceptance

NFC TIMES Exclusive Insight – While the Covid-19 virus outbreak is building awareness for contactless and NFC payments and is accelerating the increase in already low contactless transaction limits in Europe, it remains to be seen how much it will convince more merchants to accept contactless in the U.S.

Exclusive: After 10 Months, Sales of Public Transit Tickets in Uber App Still Make Up Small Share of Mobile Ticketing in Denver

Mar 24 2020

NFC TIMES Exclusive – Since last May, when ride-hailing service Uber officially began enabling customers to book and pay for public transit tickets in Denver directly in the Uber app, use of the service remains relatively low, accounting for less than 3% of all mobile tickets purchased by customers of Denver public transit agency RTD, NFC Times has learned.

Former Garmin Pay Technology Providers Sue Device Maker Claiming Unpaid Millions, Though Offer Scant Proof of Claims

NFC TIMES Exclusive –  The founders of former payments wearables provisioning company Fit Pay, which was acquired last September for $3.3 million by smartwatch and fitness band maker Garmin, have sued the device maker and two other parties, claiming they are owed millions in missed earn-out payments.

Helsinki to Roll Out Multimodal Contactless EMV Fare Payments, with Plans for Daily and Weekly Fare Capping

Mar 12 2020

NFC TIMES Exclusive Insight – The Helsinki Regional Transport Authority plans to accept contactless EMV payments on its multimodal system, including its buses, metro, trams and ferries. The rollout, expected to be completed in 2023, will also support daily and weekly fare capping.  

Transport for London’s Lucrative Sponsorship Deal with Google Shows Value of ‘Point of Sale’ Real Estate at Fare Gates

NFC TIMES Exclusive insight – Transport for London’s recent deal with Google to put the Google Pay Logo on more than 5,600 contactless gate readers across the large London Underground network is not the first time that the London transit authority has rented out its prime payments real estate to sponsors. Nor is it the only transit agency that has profited from sponsorship deals tied to its contactless EMV transit payments services. 

Amazon Launches Largest Checkout-Free Store; Clerks and POS Terminal Vendors Need Not Worry…Yet

NFC TIMES Exclusive Insight – Ecommerce giant Amazon expanded its no-checkout concept to its first “full-sized” supermarket Tuesday, in its headquarters city of Seattle, enabling shoppers to scan an app upon entering, pull products off of shelves and “just walk out,” with hundreds of cameras and numerous sensors having recorded everywhere the shoppers went in the store and everything they put into their shopping carts. A card on file in the app is charged as the customers leave.

Czech Banks See Growing Use of NFC Wallets with Smartphones and Wearables for Contactless Payments

Feb 18 2020

NFC TIMES Exclusive Insight – Banks in the Czech Republic say they are seeing significant and growing use of NFC-enabled smartphones and wearables, ranging from 6% to nearly 25% of all contactless payments–three banks told NFC Times–although a large majority of consumers continue to tap their contactless cards, not NFC devices, for in-store payments.

Brussels Transit Operator Sees Need for Global Interoperability of Fare Payments; Compares Benefits to Mobile Roaming

NFC TIMES Exclusive Insight – The head of information systems for a major European transit operator says he believes public transit agencies should support interoperable fare payments globally, like mobile network operators offer roaming when their customers travel abroad.

Oyster Card Here to Stay Despite Strong Growth of Contactless Fare Payments in London

NFC TIMES Exclusive Insight – As more and more transit authorities globally seek to emulate Transport for London’s success in gaining widespread adoption for contactless open-loop fare payments, they should take note that London’s closed-loop Oyster card remains popular, even among visitors to the city.

In-Depth: Tokenization Figures Demonstrate Majority of Mobile Payments Conducted Online

NFC TIMES Exclusive Insight –  Recent research and forecasts have confirmed what industry observers already knew: Despite concerted efforts by the Pays wallets to gain widespread use of mobile payments in the U.S. at the physical point of sale, the large majority of mobile payments are conducted online, not by tapping NFC phones or wearables in stores.