Mobile Payments Are the Future of Public Transportation

Smartphones are replacing wallets in some cities.

Starbucks has shown that mobile payments can work. In Q4 2012, the company processed 2 million mobile payments per week. They are doubling down on their mobile initiative by partnering with Square, allowing customers to connect the app directly to a bank account or credit card.

For years, public transportation systems have been trying to make payments easier and are now looking at smartphones as the next step. Excellent mobile apps exist in nearly every major metropolitan area to help users navigate public transportation, find parking and hail a taxi, but none have been able to break into mobile payments in the way Starbucks has. Mobile payments on public transportation is an area ripe for innovation, and some cities are finally making the move:

The transit authority in Chicago recently unveiled a plan to introduce an “open-loop” payment system for public transportation. Rather than issuing a single pass or pre-paid card, the “open-loop” system will allow users to pay with contactless bankcards (Visa PayWave and MasterCard PayPass) and eventually NFC phones. The Ventra Card, issued by Metabank, will also be available as a pre-paid and reloadable contactless card. Similar to the T-Money card in Korea, it will also be taken at other merchants and used as an ATM card. You can view a brief animated video on how the Ventra system will work beginning in 2013.

Read Turning the Turnstile Mobile: The Big Impact of Mobile Payments on Public Transit on Datacard Edge.

Austin and Salt Lake City also launched a mobile-payments initiative in 2012. Isis, a mobile-wallet system created by AT&T, T-Mobile and Verizon, allows users to pay with the Isis app on their smartphones. It’s early, but promising signs are already emerging:

Isis may just be in its infancy, but the mobile payment consortium’s Chief Sales Officer Jim Stapleton said that its trial in Salt Lake City is producing positive results from both consumers and merchants. Speaking at a media briefing from a smart card conference in Utah on Tuesday, Stapleton said the average Isis user pays for goods or services with the mobile wallet five times or more a week.

Stapleton added that the typical Utah Isis customer follows five different merchants using the wallet’s loyalty card and coupon features, and a customer who signs up for a business’s loyalty program tends to visit that business twice as often as a regular customer.

Read Isis: Salt Lake City mobile wallet users average 5 transactions a week on GigaOM.

Is your city preparing to offer mobile payments? Why, or why not? Let us know in the Comments section below.

Mar 13 2013