Wednesday, June 2, 2010

Municipal 'smart cards' in the works

City councillors have been talking about implementing a 'Smart Card' service so that citizens can simply use their pre-paid card to access any number of municipal, and perhaps even private' services--including bus fares--perhaps as soon as 2012.

From an article in the Ottawa Citizen:
By the year 2012, Ottawa residents should be able to buy their morning coffee, hop on the bus, borrow library books, and go for a skate in a community arena, all using the same pre-paid smart card, says College Councillor Rick Chiarelli.
Hey, that sounds kind of familiar. If fact, if I were to drop the 'pre-paid' and 'smart' adjectives before talking about this futuristic card, it sounds like something I already use all the time, to pay for public and private services: A credit card.

In fact, taking advantage of existing card payment technology, New Jersey and New York transit agencies (all three of the Metropolitan Transportation Authority [MTA], the Port Authority of New York and New Jersey [PATH], NJ Transit [NJT]) have partnered with MasterCard to install the PayPass tap-and-pay system on certain buses and trains in the area. From the official press release announcing the pilot program:
The Metropolitan Transportation Authority (MTA), Port Authority of New York and New Jersey (PATH), NJ TRANSIT (NJT) and MasterCard Worldwide today announced the launch of a six month pilot program in which MasterCard PayPass will be accepted for fare payments on select train and bus routes throughout New York City and New Jersey. Today's announcement enables riders of the three transit systems to purchase fares and transfer between transit systems simply by tapping a single type of contactless credit or debit card or device.


"The technology that we're testing will make life easier for our customers and help reduce our cost of doing business at the same time," said MTA Chairman and CEO Jay H. Walder. "By using an open network we'll break down regional barriers and let people travel across the region with a card that's already sitting in their wallets. We're thrilled to be working with the Port Authority, NJ TRANSIT and MasterCard to test these innovations for our customers."
A deal like the above one with MasterCard or some similar arrangement could provide certain benefits over installing an unique O-Card system, first and foremost being the existing infrastructure for payments already in place. It would also place the management of the system on the shoulders of a company whose primary responsibility is management of these types of payment systems; no matter how competent any city might be, few have any experience with this industry. It would also offer citizens from outside Ottawa a very simple way to pay for transit in the city, rather than having to purchase a pre-paid O-Card.

On the other hand, there are significant obstacles a personal credit-based MasterCard when paying for city services. Primarily, the fact that not everyone can actually have a credit card (based on their personal credit ratings), while every citizen should be able to access municipal services. And perhaps more importantly, the pre-paid nature of the O-Card would preclude interest charges, while a credit card virtually promotes them. So there are distinct and inherent differences between the two models.

Somewhere in the middle there may be a solution which blends the benefits of each style. Whether it comes through a partnership with some payment company, or the incorporation of certain practices into a city-managed pre-paid card, but there are ample possibilities for making the system as effective and cost-efficient as possible.

UPDATE: Transit Toronto recently had a blog post about that city's pilot project using Presto cards for tap-and-pay fare payments.


maplestar said...

I've moved from Ontario to the US and every debit card down here is on either the Visa or Mastercard systems. When I lived up there, my credit union offered a Mastercard debit card. Instead of drawing against a credit account, it worked like an Interac direct payment, taking the money from my chequing account.

Credit shouldn't be an insurmountable obstacle.

Phil said...

To add to maplestar's comment, it's been mentioned in the news the last couple of months that Visa and MasterCard had been planning to roll out their own debit cards in Canada to compete with Interac. However, new voluntary rules from the government to restrict merchant fees have caused Visa and MasterCard to reconsider. This, of course, doesn't stop Interac from rolling out their own "paypass" system that could be used here and elsewhere.

It's not mentioned in the article, but it's been mentioned elsewhere that Ottawa's smart card will be part of the Presto card system that's been rolled out for the GTA's transit agencies. So, at least visitors from the GTA would be able to pay for our city services using their card and vice versa (and could be expanded as other cities in Ontario join in).

kEiThZ said...

Why not just use Presto?

Another standard? argggh.

Anonymous said...

I'd rather not have my credit card involved in my bus fare payments. You're right, not everyone can get a credit card. There is also the fact that these would be ordinary purchases on your credit card and you'd have to pay interest on them. There is also the issue of privacy. I don't want my credit card recording that I made a purchase on the #95 Orleans. Sure, a city card would do that as well but it would be a lot more local and be viewed by less eyes than a credit card.

I'd rather have a City of Ottawa smart card. Preferably one where I could add money directly from my bank account like a Hydro Bill.