Near field communications

This Los Angeles Metro TAP farebox uses NFC to read users' fare cards. Photo by Flickr user fredcamino

Introduction

Near field communication (NFC) is the technology that enables smart cards to be ‘contactless.’ They use an unpowered chip that communicates with the on-board or in-station fare collection system and deducts value when used. Smart cards or cell phones using NFC only need to be waved over the fare payment machine aboard the transit vehicle or before going through the turnstile leading to the vehicles. This is in contrast to ‘contact’ smart cards, which need to be inserted into the machine. NFC is a specific type of radio frequency identification (RFID) technology that limits the communication distance to four inches or less.

NFC technology is already in use in mobile phones for other applications, such as transferring files between phones or computers, but it has only been applied for transit payments in a few places (there is a pilot project in New Jersey using Google Pay).

Advantages of NFC

Contactless smart cards with NFC technology may be easier to use than contact cards for people who have difficulties with fine motor skills. Contactless smart cards also speed the boarding process and are convenient for passengers who prefer to pre-pay for transit service. They also reduce some of the problems associated with cash systems, such as the cost of transporting and guarding cash. However, because of the popularity of cash payment with customers it will likely need to remain a payment option. For this reason, a study in Los Angeles showed that a financial incentive for using a smart card helped to boost its use.

Because the financial services industry offers NFC-enabled contact-less bank cards, an NFC reader may be configured to accept cash payment in addition to accepting automated fare media.

Challenges in Application

Smart cards and NFC technology face some challenges to being applied to transit fare payment. Choosing an open or closed system will determine how much partnership or collaboration will be needed for managing the system. More information on open and closed systems can be found in the article on automated fare media. Open systems will require more collaboration, but the burden of managing the system can be shared with other merchants or transit providers. Open systems in NFC technology also offer the advantage of giving riders the choice of using their cards for a variety of purchases and uses. For example, in Japan, smart cards are used to pay for transit, as well as public telephones and parking. In general, though, benefits and costs can vary widely and, according to one recent study, the costs of deployment and implementation are primarily borne by the system provider, while the benefits are enjoyed by passengers and individual operators.

Additional Reading

Transit Cooperative Research Project. “TCRP Report 32: Multipurpose Transit Payment Media.” 1998.

Sponsored by the Federal Transit Administration, this report outlines the benefits of and challenges of implementing a wide variety of fare media, including near field communications and other smart card technologies.

Smart Card Alliance. “Near Field Communication (NFC) and Transit: Applications, Technology and Implementation Considerations.” 2012.

This white paper, published by an industry group, discusses the potential to expand NFC technology in transit fare payment. In includes the possibility of using NFC-enabled smart cards for open bank payment, as well as the more common smart cards, as well as a detailed description of the full NFC ecosystem necessary. The appendix provides a comprehensive list of transit systems that currently use NFC technology.

Keitel, Philip. Federal Reserve Bank of Philadelphia."The Electronification of Transit Fare Payments: Examining the Case for Partnerships Between Payments Firms and Transit Agencies." 2011.

This Federal Reserve Bank Payment Cards Center discussion paper examines alternatives for accepting cash fare payment from contact-less bank cards. The report discusses fees levied by financial institutions, avoided ticket vending machine infrastructure and maintenance, and consumer experiences with contact-less bank cards.