Smart Cards Moving U.S. Transit

An objective assessment of where smart cards stand in the U.S. transit landscape has to begin with an appropriate frame of reference.

It was only in the mid-nineties that contactless smart cards themselves became sufficiently reliable and affordable for system-wide use. Someone had to leave the station first, and most industry watchers credit the Octopus System of Hong Kong as the installation that put smart cards solidly into virtually all of the Automatic Fare Collection (AFC) systems being installed in the world.

Today, the Octopus system processes 7.2 million transactions per day from 8.6 million smart cards in circulation, but it is important to remember the contract for this groundbreaking AFC system was only awarded to the ERG Group in 1994. Then three years elapsed before the first 250,000 smart cards were issued in 1997, only five years ago. 

Anyone involved with transit systems understands that change takes a lot of time. As with any asset, transit agencies want to extend the useful life of the AFC systems as long as they meet acceptable service standards and are economical, safe and efficient to operate. When it is time for a change, the process is a lengthy one as funding, procurement, implementation and system-wide expansion considerations each take their toll.

Given that frame of reference, it is perhaps less surprising that smart cards are not yet pervasive in the American transit scene. Yet the foundation is already laid, and smart cards are now taking hold in the new generation of AFC systems currently being installed or planned in the U.S.

The operational success of the Octopus System was clear and demonstrated savings in coin handling, fraud reduction and equipment maintenance as well as adding modern payment and cash flow technologies, intermodal capabilities and improved revenue sharing between operators. Soon other major cities around the world followed suit and implemented contactless smart card transit systems including Rome, Nice, Lisbon, Taipei, Nice and Izmir, Turkey among many others.

U.S. skepticism

Here in the U.S., transit authorities also examined smart cards but perhaps with somewhat greater skepticism due to the lack of extensive penetration of smart cards in other U.S. markets in the 1990's. Today, however, smart cards have strong momentum in the U.S. in transit as well as other markets.

"More than 100 million smart cards have been manufactured for use in the U.S. and Canada since 1999, although much of that growth has taken place out of the public's eye," said Randy Vanderhoof, president and CEO of the Smart Card Alliance, an association operating systems smart card system users and technology companies.

The annual market survey conducted by the Alliance provides insight into where these cards are going.

"Transit is not the only application that is taking off, although smart cards have clearly gained acceptance there and a dozen or so operators are implementing AFC systems with smart cards today," continued Vanderhoof. "American Express, VISA and MasterCard have put millions of smart cards in the hands of consumers. Target Stores is now the largest U.S. smart card issuer and will be the first major merchant to deploy smart card accepting terminals. The latest market to emerge is the use of smart card technology for secure identity credentials, particularly in the Department of Defense Common Access Card and the Transportation Security Agency's new Transportation Worker Identity Credential programs."

Transit application update

In the transit application, much of the work that is being done has not yet put smart cards into most riders' hands, but the foundation for widespread use of smart cards in AFC systems is being built. Here is an update on some of the transit operators in the U.S. and Canada in various stages of implementing smart card-based AFC systems:

* Atlanta -- Issued an AFC RFP and is in the integrator selection process;

* Baltimore -- The Maryland Transit Administration has awarded a contract for a smart card-based AFC system that will allow riders to pay for travel on bus, subway, light rail and commuter rail systems statewide, using the Washington DC area SmartTrip card. The MTA plans tests in Baltimore in 2003, and implementation by late 2004;

* Boston - The MBTA is in the final stages of a contract award for a new AFC system that includes smart cards;

* Camden County, New Jersey and Philadelphia -- The PATCO High-Speed Line is in the design phase of a smart card AFC system to replace a 30-year old magnetic-card system;

* Chicago - The CTA tested 3,500 smart cards in a pilot in 2000 and is planning to expand its smart card program this year;

* Los Angeles - Implementation of a smart card-enabled infrastructure is underway that will link all public transit - bus, light railway and subway by 2003. Los Angeles County's Metropolitan Transportation Authority, Metrolink and 17 municipal bus operations have agreed to honor a smart card to increase ridership and convenience on buses and commuter trains from Santa Monica to San Dimas;

* Montreal -- Issued an RFP for their AFC modernization in a full contactless and multi-transport system;

* New York - Plans by the Port Authority of New York New Jersey to rebuild the PATH station destroyed at the World Trade Center include a smart card AFC system that will allow riders to pay fares on buses, subways and PATH;

* San Diego -- A joint committee of the county's transit districts has agreed the districts should purchase smart card AFC for the area's bus systems;

* San Francisco - The TransLink system will use smart cards in the AFC system and is currently being tested through a pilot program of about 5,000 cardholders that started in February 2002.  The TransLink card marks the first time that Bay Area commuters can use one card for riding the bus, train, light rail or ferry; it currently works with six different transportation agencies: AC Transit, BART, CalTrain, Muni, Santa Clara VTA, and Golden Gate Bus and Ferry Transit;

* Seattle -- Awarded their new contactless AFC system to ERG for a 2003 implementation;

* Toronto - Go Transit has operated a smart card AFC pilot since last July, and plans to extend the program to the Greater Toronto region; and

* Washington - The Washington Metropolitan Area Transit Authority is operating a smart card system supplied by Cubic Transportation Systems Inc., subsidiary of San Diego-based Cubic Corp. and has issued at least 200,000 SmartTrip cards.

While the number of cards issued today is small relative to the total number of riders, this summary shows that will soon change as these operators advance on their implementations.

Motivating factors

There are several factors motivating operators to include smart cards in their AFC systems. Surprisingly, one of these is lower operational cost.

While it is true the smart cards themselves can cost many times what a paper ticket does, the cost can be offset with savings in two other areas - equipment costs and maintenance. Simply put, this comes in large measure from the removal or reduction of moving parts in a smart card system when compared to a magnetic stripe system.

Reading and writing data to and from a magnetic stripe requires that either the card or the magnetic head move. Since contactless smart cards use radio frequency to power and communicate with the ticket there are no moving parts. This results in a significant reduction in the maintenance costs based on smart card technology.

Of course these savings are phased in over time because operators are forced to use a mix of old and new ticket technologies in parallel. One of the most important innovations in the past year makes the operational cost reduction numbers even more favorable - a new disposable ticket smart paper ticket called C.ticket that combines the efficiency of contactless smart card technology with the low cost of a paper ticket.

Manufactured by ASK S.A, the new smart paper cards use two technologies developed by ASK, a patented printed antenna and the world's smallest ISO compliant contactless smart card chip.

C.ticket is currently in use in several applications including the Paris Metro and ASK already has shipped over two million has orders for over nine million cards.

The C.ticket solves one of the most difficult problems facing operators as they implement smart cards for transport ticketing - cards for short-term use. Until now, transit operators had no alternative to plastic cards, and those are too expensive for short-term use. Because C.ticket is paper-based, it makes it profitable to issue a contactless smart card for single trip tickets, ticket books or travel passes.

There's another important dimension, however, beyond operational cost considerations is arguably the most important driver for contactless smart card technology -- the capability to deliver information for more complex fare and revenue models. It also creates the opportunity to introduce a single ticket across several modes of transportation even if they are operated by different entities, public or private.

In the past, revenue sharing was often a major stumbling block prohibiting the cooperation of multiple agencies causing inconvenience and irritation among the riders. When cooperation was achieved, it was often fractious and imprecise due to the estimating techniques used to calculate revenue sharing. This benefit, often referred to as intermodality, is one of the most important factors driving smart card technology in fare collection.

For example, San Francisco was one of the first areas in the country to embrace smart cards as an AFC solution. Decision-makers there were motivated in large measure by the problem of revenue sharing between the 26 different agencies and independent operators that work in the Bay Area.

The problem of revenue sharing across multiple operating entities has in fact has been the motivation of many European and Asian operators as well. Unlike a static fare media such as a paper ticket, smart cards can help you determine actual travel path taken by individual riders, note the time of day and provide much more precise information for sharing revenues.  This puts real teeth into a pricing system, which is based on distance travel, which is often not collected and results in an operator cost for the user.

As stated, relatively few U.S. riders are today using smart card technology. But like any other technology used by consumers to access service, smart cards will work behind the scenes and be somewhat transparent to the rider.

What consumers will appreciate is the convenience of contactless card presentation, the ability to use the same ticket for buses, ferries, parking lots and commuter trains. That is what smart card technology has been shown to deliver worldwide for transit riders, and that is what will happen here to as these systems come online for riders and operators.