Inside Transport for London’s NFC contactless payments strategy for 2013

Inside Transport for London’s NFC contactless payments strategy for 2013

MasterCard’s Mike Cowen explains how TfL is bringing contactless to the Capital

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Transport for London’s (TfL) announcement that all buses in the Capital will accept payment via credit and debit cards is a huge leap forward for the widespread use of Near Field Communications (NFC) technology. However, getting the systems rolled out onto the bus network – although no small feat – is the easy part.

Thanks to standardised fares across London’s many zones - £1.35 if paying using contactless technology – the bus network can use NFC like any other retailer using tap and pay tech. Because the fare for a single journey is always going to be £1.35 for a single journey, the money can be taken from your account instantly at any Oyster reader on any bus.


However, this most certainly isn’t the case for other aspects of TfL's transport network. If you are, for example, using the Underground, Overground, or Docklands Light Railway, passengers can cross multiple zones the further they travel, which increases the price per journey.

Also, what about daily cap? Or weekly, monthly and annual travel cards? This feature is used widely by residents and visitors in London, as it controls the cost of travelling. These added complexities mean that the usual retail NFC model cannot be applied.

TfL has revealed that it plans to have all these features across its entire network by the end of next year. But how is it making that happen?

Adding fare complexity to contactless payments

Computerworld UK spoke to Mike Cowen, MasterCard’s vice president of product management at PayPass Europe, who has been involved with the project since its conception in 2006, and explained how TfL is ensuring that consumers get the same benefits they are used to with Oyster when paying via contactless debit and credit cards.

“Next year it will be rolled out across the entire system, which includes all of those complex fare calculations. This is more difficult because if you tap your card as you enter the tube system, TfL doesn’t know if you going to go one stop out of Oxford Circus, or all the way to Watford Junction,” said Cowen.

“What happens today is that when you tap your Oyster card, the system does a real-time fare calculation. There are lots and lots of different counters maintained on your Oyster card, the reader will read the values of all of those counters, and it will do the calculation to work out your entry fare.”

“So, TfL might charge you £6 as you tap in, but when it recognises that you only went one stop, it would give you X amount back for the cost of that trip. Each of those calculations happens in real-time as you tap the card, and what happens is that quite a lot of data has to be maintained on the card, as well as a lot of sophisticated technology at every single reader in the system.”

Cowen explained that with the introduction of NFC technology on the network, TfL is hoping to reduce this complexity by bringing all the calculations into the back-office, rather than trying to do it in real-time and update it each time the card gets tapped.

"It makes much more sense to do that complex fare calculation in the back office. As you travel around the system, what you will be doing is effectively creating a record of each of those places and times that you tapped. TfL, in the back-end, will then say person X tapped his or her card in these ten different places throughout the system over the day – that adds up to a total value of X," said Cowen.

"TfL will then take a payment from that person’s account for that amount on a daily basis. Then if you want to understand how that amount was determined, you can go to the TfL website to see how it is broken down."

Cowen revealed that TfL has had to invest in new back-end systems to make this project possible, some of which it has developed in-house, others it has sourced from suppliers. He wasn’t willing to say which suppliers TfL was working with.

The problem of weekly, monthly and annual travel cards will also be addressed by the more centralised architecture when using contactless payments.

"TfL will be introducing weekly capping next year for this. It will work exactly the same way daily capping will work, except extended to a weekly basis. So, if I travel Monday to Thursday, and by Thursday I’ve paid in pay-as-you-go charges the equivalent of the travel card price, for the rest of the week I won’t be charged any travel," said Cowen.

"The other element is monthly and annual season tickets. The longer term plan is that you will be able to go online, buy a monthly or annual season ticket and nominate a credit or debit card that you will be travelling with."

He added: "So when at the end of each day TfL does the fare calculation, it will recognise that you have a monthly zone 1-2 travel card, and 90 per cent of your journeys were within that, but will charge you for the trips you made outside those zones."

The end of Oyster as we know it?

However, what does contactless mean for the current Oyster card system? Will it be made redundant by contactless debit and credit cards? Not exactly. Cowen insists that TfL will always have to provide a mechanism for people to travel, even if they don’t have debit or credit cards.

However, the Oyster system as it is currently set up – with all of the calculations happening at the readers and with data being stored on the card – may cease to exist and be replaced by NFC enabled Oyster cards.

"In the short to medium term the two will co-exist. TfL has the obligation to serve every customer that wants to use the system, and obviously that includes people that do not have, or choose not to have a contactless card," said Cowen.

"However, in the medium term, Oyster may be replaced by something else. It is quite likely that there could continue to be an Oyster card, but the technology that sits behind it could be very different to what sits behind it today."

He added: "I think it’s very reasonable to assume that they will be looking to move from the current card-based, highly distributed architecture that they have today, to a back-office account based system. Part of this is to rationalise their systems and reduce replication."

Because TfL’s NFC technology is based on the EMV contactless payments industry standard, which has been adopted by the major credit and debit card distributors, this means that consumers could also soon be using their mobile phones to access London’s transport network.

Cowen explained: “This is one of the great benefits of adopting a standard like EMV contactless. Because it’s open and standardised, not closed and proprietary like Oyster, TfL would not have to get involved in the deployment of mobile phones in order for them to work on system.

"By enabling the Oyster reader to accept an EMV standards-based NFC credit card, you also enable that Oyster reader to accept an EMV standards-based NFC mobile phone."

The world is watching

Cowen closed the discussion by highlighting the significance of TfL’s project. He said that the global attention on London is 'incredible'. 

He said: "This will most likely be a world first. No other city in the world has done this before now – London is likely to be the first city to roll out these systems across its entire network."

"We have the world watching and if it is successful it is likely we will see this model replicated across the globe."

Now catch up on NFC news:

RBS and Natwest beat Apple with NFC mobile payments from iPhone

British mobile wallets NFC venture cleared by EU watchdog

Visa Europe confirms RBS as launch partner for V.me digital wallet

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