The Electronification of Transit Fare Payments: Examining the Case for Partnerships between Payments Firms and Transit Agencies

Several of the nation’s largest payment-card-issuing banks are working with public transit agencies to enable consumers to pay fares by using payment cards, and more such partnerships may be on the horizon. On April 23, 2009, the Payment Cards Center of the Federal Reserve Bank of Philadelphia hosted a workshop to discuss the potential adoption of electronic payments by transit agencies from the perspectives of several subject matter experts from J.P. Morgan Chase & Co. James Lock, vice president and senior adviser, Treasury Services Global Advisory Solutions group; Jameson Troutman, strategy manager with Chase Card Services; and Krista Gallagher, from Chase’s retail banking team, attended the workshop. This paper looks at several electronic transit-fare payment models and the potential opportunities these models present to transit agencies and payments firms - such as the opportunity for transit agencies to reduce costs and to operate a more efficient payments infrastructure or the opportunity for the payments industry to increase consumers’ use of contact-less payment technology. This paper also identifies significant obstacles to widespread adoption of systems that allow consumers to use their credit, debit, or prepaid cards to pay fares directly.