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NFC and the rise of the smart token

The world of contactless payment is shifting, says John Elliott, of Consult Hyperion. Public transport ticketing needs to take a step forward, not back.

Earlier this month, the Transport Secretary, the Rt Hon Justine Greening MP, expressed her view that the Government and the rail industry can – and must – do more for passengers and for taxpayers. Her goal, outlined in a paper entitled 'Reforming our Railways: Putting the Customer First', goes on to state her commitment to building on recent efficiency gains in order to improve the performance of the industry, as well as the passenger experience.

As part of this vision, the Government has announced plans to expand existing smart ticketing schemes such as London's Oyster card by rolling out smartcards across both England and Wales, and across different operators.

Although this may sound like progress, it may actually be a step backwards for both operators and passengers. London's Oyster scheme has undoubtedly been a success, but a great deal of technical and commercial progress has been made in payment systems since 2003.

Payment schemes

Standards for electronic payment/ticketing schemes currently fall into two categories: either proprietary or open. Proprietary products such as Oyster were specifically developed for the transport environment, offering fast throughput and an all-in-one medium to meet the needs of multi-modal operators. These standards can be specific and tailored, as they do not have to conform to any interoperability requirements.

By comparison, open standards such as ITSO and EMV (Europay Mastercard Visa) are designed for national or global acceptance. Each is primarily designed for a target environment – ITSO for transport and EMV for payments – but both could be used to cross the boundary. As such, open payment systems offer the prospect of using contactless bank cards and new media for transport ticketing in place of dedicated smart cards like Oyster.

This widespread acceptance of contactless debit and credit cards for travel in the UK would help to reduce the production and distribution costs connected with traditional paper-based and smart card ticketing channels. Unlike proprietary systems, these open standards offer operators benefits that include greater interoperability, low issuance and improved security. In addition, this type of open payment model could reduce costs through the use of off-the-shelf equipment from a range of suppliers, rather than bespoke equipment made to proprietary specifications.

The opportunity to use contactless debit and credit cards in this way will also offer much greater convenience for passengers, since they will be able to use a card that they already have, instead of having to carry and top-up an Oyster card, and they will not need to take any action before they travel. As such, visitors arriving in the UK with their contactless bank card would no longer need to queue up to buy an Oyster card or top-up their Oyster card in order to use public transport.

Token improvements

The major payment schemes are already working on producing a dedicated data area on bank cards that will allow operators to record tap data which could be used for other payment models and revenue inspection, and so all of these benefits of a smart card system can be retained, including the significant operational, cost-saving and security benefits associated with reduced cash-handling costs.

However, the major shift is away from the smart-card based systems (ITSO, Oyster) designed in the 1990s to modern account-based systems (held in the back office) which use 'smart tokens' to identify which account to use to pay. In the future we could see any smart token being used to authenticate (payment card, Oyster card, ITSO card).

In the not-too-distant future, NFC mobile phones will also be used to pay for travel or store transport tickets in a similar way, using the same contactless technology as Oyster, but as part of an open, rather than proprietary, system. This is just shifting the smart token inside the mobile phone and taking advantage of its Internet access to provide other channels for purchases and account top-ups. Near Field Communication (NFC) is a short-range, high frequency wireless communication technology that enables the exchange of data between devices that are close to each other.

Tipping point

We predict that more NFC-enabled smartphones will be being issued than non-NFC-enabled devices by 2013. The ultimate tipping-point for mobile contactless transactions is expected to be around 2015, however, as this is the date by which the combination of NFC-enabled smartphones, contactless and mobile POS and 'mobile wallet' applications will drive the rapid growth in the number of mobile contactless transactions.

Technological developments like these will continue to drive progress in this area, providing much greater flexibility as well as broader social inclusion, thanks to the strategic collaboration between some of the world's leading mobile technology developers, smart card manufacturers, service providers, and standards bodies. As such, by pursuing open – rather than closed – payment systems to achieve these goals, it will be possible to make public transport more convenient for passengers, and also less costly for operators.


• The Transport Secretary's paper can be downloaded from

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