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back to Services & Technology list  PART I FARE PAYMENT TECHNOLOGIES
PART II FARE PAYMENT SYSTEMS Printer-friendly version
What Is It? Increasingly, automated systems are replacing manual methods of collecting transit fares. They generally use fare cards that can be read at the turnstile by:
The fare and other information about the trip can be stored on a magnetic strip (the oldest surviving technology) or a computer chip. Technologies employed include:
There are advantages to riders and transit operators. The customer does not need to have exact change or even know the precise fare, which removes a barrier to transit use. With proximity cards, boarding time is reduced (though this is not the case for contact cards). By centralizing and automating records of fare sales and making them into electronic transactions, transit operators can reduce operating costs and losses incurred during cash handling. They can also change fares more easily and make adjustments such as time-of-day discounts or surcharges and bulk-ride price reductions. The most common fare media are magnetic strip cards that can be "written," i.e., have cash value added to them at the station, and "read" by machines at turnstiles. Most systems use "contact" cards, meaning that they have to touch the reading device to communicate with the overall system. However, "proximity" cards, which do not require direct physical contact, are starting to be tested and deployed. They allow for more rapid processing of users, and there is much less wear and tear on the components because physical contact is eliminated. The most common proximity cards use radio frequencies. Other variations are based on whether the fare is "loaded" in advance and carried on the card, or whether the card is used to deduct the fare from a pre-existing account (either a dedicated transit account in the user's name or an account maintained by the user through a bank or credit card issuer). The further refinement permitting the use of bank and credit card accounts remains elusive, especially in the U.S. and other countries with complex banking systems because of difficulty in agreeing to a common standard acceptable to all financial services providers and reluctance to assume costs to develop and implement the systems. No matter what their final form will be, these advanced fare payment systems are rapidly replacing manual methods. Magnetic Strip Cards The San Francisco Bay Area Rapid Transit (BART) system was among the first in the U.S. to adopt the magnetic strip card, which it included in its inaugural system more than 25 years ago. The card is in the form of a disposable, low-cost paper ticket. These tickets require read-write units, which are installed in computerized ticket vending machines and turnstiles at each transit station. The ticket vending machines accept coins and bills (and, increasingly, credit and ATM cards) in exchange for a magnetic strip ticket loaded with a cash equivalent. Each ticket is good for one traveler's complete trip. Inserting the ticket into a turnstile at the beginning and end of a trip allows the read-write unit to deduct the fare based on the length of the trip and in some instances the time of day it occurred. The magnetic strip card does have disadvantages. The card must be inserted into the read-write unit in a certain direction, and it must be dry and flat (not bent or folded) in order for the machine to read it easily. The patron must retrieve the card from another part of the machine and pass through the turnstile within a specified time. That can cause patrons to slow down. Generally, the time required for inserting and retrieving the card takes longer than when traditional tokens are used (though they lack many of the magnetic strip card's other advantages). Finally, like traditional fare boxes, read-write units are subject to failure and require maintenance. Smart Cards A more recent development is a contact card that has memory and, in some cases, a microchip (also known as an integrated circuit, hence the term "integrated circuit smart cards"). They tend to be either integrated circuit memory cards, the most common, or integrated circuit microprocessor cards. Memory cards are more often used in transit applications because of their lower unit cost and because their capabilities are generally sufficient for an automated fare system. They cannot manipulate the data stored on them, and a reader is required. They are best for a fixed operation such as deducting fares. A very common application that is already widely adopted is for pre-paid phone cards. Microprocessor cards offer greater security and a wider range of applications. They are commonly used as identity cards and to carry sensitive data such as digital "cash" and biometric identifiers that need to be protected by encryption. They generally use two types of memory, electronically erasable programmable memory and read-only memory. The addition of a microprocessor has the potential to be particularly important for use as a transit fare card because of its ability to carry cash content securely. However, there are important considerations regarding the amount of energy that the microprocessor requires to operate and the way that memory on the card is allocated between read-only and reprogrammable segments that have yet to be resolved for everyday use. More recently, microprocessor cards using flash memory have greatly extended smart card performance and capabilities. Designed for use in GSM mobile phones (the standard for overseas carriers), they enjoy greater memory flexibility. They are fully reprogrammable and can be adapted for different applications, operating systems and user requirements. Radio Frequency Cards Radio frequency cards are the most commonly used type of proximity (or "prox") card. They are also referred to as Radio Frequency Identity (RFID) cards. This technology is already being incorporated into freight tracking and security systems. The card contains a chip which is powered when it comes within a certain distance of the reader unit, which radiates a continuous electromagnetic field. When the chip is activated, it sends a unique identifying number to the reader, which relays it to a controller (or turnstile or farebox, in the case of a transit system) for verification and processing. So-called "passive" radio frequency cards are much cheaper, smaller and more widely used than interactive cards, which require higher power levels to operate. The size of the card and the antenna on the reader determine how close they need to be to communicate. The larger the card and the larger the antenna, the farther apart they can be, though distances are generally limited in order to provide control over access granted by the system. Radio frequency cards are currently being used, in particular, for identification purposes. This is a relatively simple form, where the card need only contain a single identifyer message that it relays to the reading unit. They are being deployed in keyless entry systems and for /,.inventory security in offices and retail stores. Transit Pass Fare Integration Systems As anticipated, the new advanced fare payment and collection technologies have enabled some transit operators to implement multi-modal, "universal" fare payment systems. Washington Metropolitan Transportation Authority (WMATA)- SmarTrip The Washington, D.C., Metropolitan Transportation Authority SmarTrip card is a proximity card that collects fares for the authority's bus and rail systems and is the only method of payment for parking at the lots it operates for its Metro rail system. Users can add to the card's value online or in stations. Employers can "load" deductions for pre-tax commute pass purchases onto employees' cards, too. This was the first public transportation system in the U.S. to adopt proximity smart cards, launching a pilot program in 1999. A wider rollout began in summer of 2004. The cards are now accepted on all WMATA Metro buses and rail. Customers can register their cards to preserve a record of their use in order to receive replacements for lost or stolen cards. Customers can still pay fares with cash, passes and tokens. More information on SmarTrip. Chicago Transit Authority- Chicago Card and Chicago Card Plus The Chicago Transit Authority's Chicago Card program uses radio frequency smart cards that the customer touches to a farebox for entry into rail stations or buses. Two versions offer two levels of flexibility. The "Plus" card enables customers to load value to the card online by authorizing deductions from bank or credit card accounts. Fare card balances can also be monitored online. The "Plus" card can double as a 30-day pass or a one-time fare payment, automatically choosing the least costly alternative. It requires users to register online and provide an email address in exchange for the ability to replace lost or stolen cards for a nominal fee. Both have "pass back" options for a cardholder boarding with up to six other riders at the same station at the same time and getting off together. The less advanced option takes only cash at vending machines in the station and can only be monitored by inserting it in a vending machine. More information on Chicago Card and Chicago Card Plus. Other places where smart card fare collection systems have been tested or deployed include Las Vegas, Atlanta, Minneapolis/St. Paul, Orlando, Los Angeles, San Diego, and Ventura County, CA. Greater Seattle-Puget Sound Region Seven transportation agencies led by King County Metro Transit are in the process of implementing a regional fare collection program for rail, bus and ferry travel in the Central Puget Sound Area. This system will use smart card technology. The project commenced its capital implementation phase on April 29, 2003 and is intended to be operational in 2006. More information on Smart Cards in Seattle-Puget Sound. San Francisco Bay Area
As a result of the demonstration, more than 3,000 Bay Area transit riders have now used a TransLink® smart card; 76 percent of cardholders gave TransLink® the highest mark in satisfaction, with 62 percent "completely satisfied." As of 2005, the system had been extended to additional transit systems in the nine-county Bay Area, including Golden Gate Transit and much of the San Francisco Muni system. More information on Translink. Los Angeles Metropolitan Area Greater Seattle-Puget Sound Region, WA The U.S. lags behind Europe in using smart card technology in commercial applications, mainly through integrating a "smart" component into credit cards. The main barrier is lack of agreement on how to assign the costs associated with the necessary infrastructure investments and the lack of a common standard. Under the current system, most of the costs would fall to merchants rather than to credit card companies and banks, since merchants would be responsible for installing smart card readers linked to computer systems that support the smart cards. Because there is little financial incentive for merchants to upgrade to smart card readers and terminals, the smart cards introduced by the major credit card companies have largely failed. Another barrier to smart card implementation in the U.S. is the complexity of its banking system. Unlike Europe, where there exist only a handful of banks in each country, the U.S. has thousands of banks. In addition, while the large European and Asian banks not only process transactions for merchants but are responsible for collecting what's owed from the buyers, U.S. banks are divided up into many issuers and a few collectors. The attempts by Visa, MasterCard, American Express and Discover to market smart cards have shown that it's much easier to issue cards than to collect funds from buyers. Another reason that the U.S. banking industry hasn't been anxious to adopt smart cards for commerce is that the U.S., unlike many other countries, has been successful in combating fraud associated with magnetic strip cards. Another barrier to smart card implementation is that there are still competing operating platforms for the smart card. Until one of these becomes the standard, or there is interoperability among them, there is little chance of a large-scale deployment. Several years ago, the idea of paying for transit fares, vending-machine drinks and other items that are typically purchased "on the go" via one's cell phone, PDA or laptop computer was ripe with possibility. As cell phones became increasingly popular in the 1990s, and with the dot-com boom of the late 90s, mobile commerce, or m-commerce, seemed to hold great promise. People could potentially use their cell phones to buy a soft drink for 60 cents, a $1 bus fare, or for 99 cents download a song they wanted their friends to hear while out on the town. At least two main modes of m-commerce were envisioned, the first involving using cell phones as a type of credit card or, possibly, an identification card, and the second involving using cell phones as one would a computer with Internet capabilities. The possibility of using cell phones to store not just banking codes but also personal identification numbers such as social security, driver's license and passport numbers, is years away from becoming anything but a Silicon Valley dream; the idea of using cell phones to purchase web content, on the other hand, is not only a reality but seems to be gaining popularity. In the U.S., cell phones constitute perhaps the broadest application of smart card technology to date. A special kind of smart card called SIM, or subscriber identification module, first deployed by GSM (Global Systems for Mobile Communications) in the early 1990s, holds a cell phone user's identification information, including cell phone number and password, allowing users to be linked to a wireless network. SIM cards can be moved from phone to phone, with the new phone receiving all calls to the subscriber's number. GSM, formed by an agreement among major phone companies who wished to increase network interoperability, allows GSM phone users to use their phones across country lines. GSM technology has been the standard for European phones for several years. In the U.S., on the other hand, a similar technology called Code Division Multiple Access, or CDMA, has a far greater number of susbscribers—71 million to GSM's 22 million in 2003—but studies show that a shift is occurring, with use of GSM technology in North America increasing 57 percent from 2002 to 2003. Because SIM card technology has already been coupled with smart card technology, it seems that cell phones would be primed to serve as pioneers in the contactless smart card revolution, with consumers lining up to wave their cell phones under a smart card reader to pay for groceries, train fares and vending machine snacks—in short, all those items that can now be purchased with a credit card and those smaller items typically purchased with cash. People could wave cell phones over a smart card reader while boarding buses or subways without ever having to buy tickets or fumble for change, or hold their phones up to the vending machine to buy a soft drink. But this variety of m-commerce didn't become the splash hit many technology industry members expected it to be. The complex nature of the U.S. banking system was one of the main barriers to its implementation, but there were other barriers as well. For one thing, it requires that a complex (and expensive) smart card infrastructure already to be in place. However, another version of m-commerce, which allows people to purchase items over their web-ready cell phones just as they would over their computers, seems to be once again gaining popularity. Because people are already used to purchasing larger items, from books to home stereo systems—as well as plane and train fares—online, people may feel more and more comfortable logging on to the web and making purchases via cell phone, especially as more cell phones come equipped with web technology. However, the type (and quantity) of items people buy via cell phone are likely to differ substantially from those items purchased at home via the Internet. For instance, people are unlikely to purchase furniture or expensive collectors' items on their phones; rather, they will buy things they realize they want or need while out and about, which could include transit fares. Indeed, m-commerce applications are by and large geared toward these smaller purchases. However, these "micropayments" present their own difficulties, as the abortive attempts in the 1990s to establish companies that enabled the easy purchase of web content, such as news articles, bears witness. While the micropayment formula has seen some success in Asia and Europe, particularly in Scandinavian countries such as Finland, where cell phones users have had the option of paying for vending-machine items, and in some cases, parking meters, car-wash facilities and toll booths, with their cell phones since 2000, the banking system in the U.S. is more complex and more diverse than the European one. In the US., there is no single, standardized way to collect funds from the purchaser when micropayments are made. And, because retailers must pay transaction fees for credit card sales, very small purchase amounts, especially amounts under $1, are not financially practical. But as more and more Web content providers, such as news organizations and music services such as iTunes, require payment for content, companies that specialize in micropayment are once again appearing, and even major credit card companies like Visa are exploring ways to make micropayments practical and attractive. Some of these micropayment companies tack web content purchase onto phone bills; others allow users to set up accounts with a small amount of money that is charged to a credit card or an Internet money-exchange service such as PayPal. Thus, even though micropayments, and in particular, m-commerce micropayments, are still in an experimentation phase, with micropayment and credit card companies made wary by the failure of other, dot-com era micropayment companies, there is an expectation that such ventures will meet with some success this time around. As more people carry cell phones with them—cell phones comprise about 43 percent of all U.S. phones, with the number land-line phones shrinking—and more of these phones have advanced technologies, making small purchases via cell phone may become a quick, convenient method of payment, provided that a payment infrastructure is in place to do so. In April 2004, Detroit unveiled new, high-tech parking meters that can be paid for with cell phones as part of a 90-day experiment. The battery- and solar-powered meters are "online-operated," which means that people could use not only credit cards to pay for them, but cell phones with Web applications. The cities of Boston, Houston and Washington, D.C., have experimented with similar programs. However, the feedback from Detroit residents was mixed, and the city has as of yet no plans to implement the meters long-term. In the spring of 2004, a ticketing firm named RepeatSeat announced the integration of its Web ticket-buying services with cell phone technology. Using wireless technology that is compatible with most current cell phone models, RepeatSeat allows cell phone users to log on to a participating venue's Web site, buy a ticket, and quickly receive a bar-code-encrypted ticket for the performance on their cell phone, which they can present to the venue upon arrival. Of course, there are limitations to such ticket-purchasing applications. Generally, people decide if they are going to an event either at home, in which case they can call the venue or purchase tickets online from their home computer, or, if reasonably confident that a performance will not be sold out, simply buy tickets at the door. In addition, this technology would probably be of little use in transit applications, since with the travel modes where reservations are usually made, such as air and train travel, tickets are usually purchased well in advance, and so the "convenience factor" of booking a couple hours before departure via cell phone would be nonexistent. Indeed, making a simple call to the airline would be much more practical. These new technologies have been widely adopted by rail transit operators, but bus transit systems have been slower to integrate them. That in turn has created interoperability and compatibility obstacles to establishing multi-mode and multi-property fare systems. That continues to be a goal in efforts to spur added transit use by making transfers between modes and providers more convenient. Some speculate that in the future, smart cards that have different uses will be combined into a single card that contains not only information relating to identity (national ID number or social security number, employee or student ID number, passport number) but also to health (health insurance card number) and finances (checking account number, savings account number, credit card numbers). However, with the introduction of such a card comes the need for heightened security. And smart cards, while considered much more secure than magnetic strip cards, are not completely tamper proof. Smart card display terminals can be programmed to "steal" pin numbers and other confidential information for unauthorized use. Also, the microprocessor can be removed from the card and subjected to heat or radiation; such tampering can give criminals access to information stored in the chip. One of the advantages of smart cards is that they can carry biometric identifiers such as fingerprints, hand geometry, iris patterns or facial scans. One way to heighten security is to require users both to scan their biometrics and enter a PIN. But concerns have been raised in the U.S. about the prospect of a national database that links people's fingerprints to stored information about where they have traveled, what they have bought, and the state of their health. But simply getting smart card infrastructure in place in one arena such as transit presents numerous difficulties. A massive smart card deployment for commerce or identification purposes, or a combination thereof, is likely a long way off. In the last few years China, Hong Kong, Malaysia, and Singapore have all deployed forms of "smart" national ID cards on various scales. Malaysia's program, begun in 2001, is one of the first and largest of its kind. A universal smart health care card is currently deployed in Taiwan and is being introduced in 13 European Union countries, including Belgium, Ireland, Spain, Estonia and Slovenia, in June 2004, with plans for full deployment in 2005. In the U.S., the use of smart card technology for identification purposes is making headway, although there has been political resistance to national ID cards. The U.S. Department of Defense adopted smart card technology for its Common Access Cards for employees. Smart card technology will shortly become the standard for U.S. passports. These cards will hold digital images that are cryptographically signed to guarantee authenticity. The European Union is working on passports that carry both fingerprint and iris scan biometric data. Among the biggest barriers to deploying smart card IDs, especially those with biometrics, is the fear of privacy violations, even where it is argued that such IDs would lower the threat of identity theft. Groups such as the American Civil Liberties Union have objected that national smart card IDs will severely compromise individuals' privacy. Recent efforts in the United Kingdom to introduce smart card IDs have sparked some controversy, although a study has shown that 80 percent of citizens in the United Kingdom are in favor of the cards. The program entered its testing phase in spring 2004, with the United Kingdom Passport Service recording facial, iris and fingerprint data of 10,000 volunteers and putting scanning and recognition technology through real-world testing. However, this same study revealed that 58 percent of those surveyed feared that the cards wouldn't be rolled out smoothly and, despite biometrics, stored information wouldn't be safe. There has been little assessment of smart and magnetic strip fare cards in transit applications. American Public Transportation Association Transit Resource Guide #6, "Smart Cards and U.S. Transportation." http://www.apta.com/research/info/briefings/briefing_6.cfm Glossary of industry terms used to describe card access control systems. (from Kerisystems, Inc.) http://www.kerisys.com/end_user_site/pages/reference-shelf/definitions Authors: Carli Cutchin and Phyllis Orrick. Last update: January 26, 2007
What Is It? Increasingly, automated systems are replacing manual methods of collecting transit fares. They generally use fare cards that can be read at the turnstile by:
The fare and other information about the trip can be stored on a magnetic strip (the oldest surviving technology) or a computer chip. Technologies employed include:
There are advantages to riders and transit operators. The customer does not need to have exact change or even know the precise fare, which removes a barrier to transit use. With proximity cards, boarding time is reduced (though this is not the case for contact cards). By centralizing and automating records of fare sales and making them into electronic transactions, transit operators can reduce operating costs and losses incurred during cash handling. They can also change fares more easily and make adjustments such as time-of-day discounts or surcharges and bulk-ride price reductions. The most common fare media are magnetic strip cards that can be "written," i.e., have cash value added to them at the station, and "read" by machines at turnstiles. Most systems use "contact" cards, meaning that they have to touch the reading device to communicate with the overall system. However, "proximity" cards, which do not require direct physical contact, are starting to be tested and deployed. They allow for more rapid processing of users, and there is much less wear and tear on the components because physical contact is eliminated. The most common proximity cards use radio frequencies. Other variations are based on whether the fare is "loaded" in advance and carried on the card, or whether the card is used to deduct the fare from a pre-existing account (either a dedicated transit account in the user's name or an account maintained by the user through a bank or credit card issuer). The further refinement permitting the use of bank and credit card accounts remains elusive, especially in the U.S. and other countries with complex banking systems because of difficulty in agreeing to a common standard acceptable to all financial services providers and reluctance to assume costs to develop and implement the systems. No matter what their final form will be, these advanced fare payment systems are rapidly replacing manual methods. Magnetic Strip Cards The San Francisco Bay Area Rapid Transit (BART) system was among the first in the U.S. to adopt the magnetic strip card, which it included in its inaugural system more than 25 years ago. The card is in the form of a disposable, low-cost paper ticket. These tickets require read-write units, which are installed in computerized ticket vending machines and turnstiles at each transit station. The ticket vending machines accept coins and bills (and, increasingly, credit and ATM cards) in exchange for a magnetic strip ticket loaded with a cash equivalent. Each ticket is good for one traveler's complete trip. Inserting the ticket into a turnstile at the beginning and end of a trip allows the read-write unit to deduct the fare based on the length of the trip and in some instances the time of day it occurred. The magnetic strip card does have disadvantages. The card must be inserted into the read-write unit in a certain direction, and it must be dry and flat (not bent or folded) in order for the machine to read it easily. The patron must retrieve the card from another part of the machine and pass through the turnstile within a specified time. That can cause patrons to slow down. Generally, the time required for inserting and retrieving the card takes longer than when traditional tokens are used (though they lack many of the magnetic strip card's other advantages). Finally, like traditional fare boxes, read-write units are subject to failure and require maintenance. Smart Cards A more recent development is a contact card that has memory and, in some cases, a microchip (also known as an integrated circuit, hence the term "integrated circuit smart cards"). They tend to be either integrated circuit memory cards, the most common, or integrated circuit microprocessor cards. Memory cards are more often used in transit applications because of their lower unit cost and because their capabilities are generally sufficient for an automated fare system. They cannot manipulate the data stored on them, and a reader is required. They are best for a fixed operation such as deducting fares. A very common application that is already widely adopted is for pre-paid phone cards. Microprocessor cards offer greater security and a wider range of applications. They are commonly used as identity cards and to carry sensitive data such as digital "cash" and biometric identifiers that need to be protected by encryption. They generally use two types of memory, electronically erasable programmable memory and read-only memory. The addition of a microprocessor has the potential to be particularly important for use as a transit fare card because of its ability to carry cash content securely. However, there are important considerations regarding the amount of energy that the microprocessor requires to operate and the way that memory on the card is allocated between read-only and reprogrammable segments that have yet to be resolved for everyday use. More recently, microprocessor cards using flash memory have greatly extended smart card performance and capabilities. Designed for use in GSM mobile phones (the standard for overseas carriers), they enjoy greater memory flexibility. They are fully reprogrammable and can be adapted for different applications, operating systems and user requirements. Radio Frequency Cards Radio frequency cards are the most commonly used type of proximity (or "prox") card. They are also referred to as Radio Frequency Identity (RFID) cards. This technology is already being incorporated into freight tracking and security systems. The card contains a chip which is powered when it comes within a certain distance of the reader unit, which radiates a continuous electromagnetic field. When the chip is activated, it sends a unique identifying number to the reader, which relays it to a controller (or turnstile or farebox, in the case of a transit system) for verification and processing. So-called "passive" radio frequency cards are much cheaper, smaller and more widely used than interactive cards, which require higher power levels to operate. The size of the card and the antenna on the reader determine how close they need to be to communicate. The larger the card and the larger the antenna, the farther apart they can be, though distances are generally limited in order to provide control over access granted by the system. Radio frequency cards are currently being used, in particular, for identification purposes. This is a relatively simple form, where the card need only contain a single identifyer message that it relays to the reading unit. They are being deployed in keyless entry systems and for /,.inventory security in offices and retail stores. Transit Pass Fare Integration Systems As anticipated, the new advanced fare payment and collection technologies have enabled some transit operators to implement multi-modal, "universal" fare payment systems. Washington Metropolitan Transportation Authority (WMATA)- SmarTrip The Washington, D.C., Metropolitan Transportation Authority SmarTrip card is a proximity card that collects fares for the authority's bus and rail systems and is the only method of payment for parking at the lots it operates for its Metro rail system. Users can add to the card's value online or in stations. Employers can "load" deductions for pre-tax commute pass purchases onto employees' cards, too. This was the first public transportation system in the U.S. to adopt proximity smart cards, launching a pilot program in 1999. A wider rollout began in summer of 2004. The cards are now accepted on all WMATA Metro buses and rail. Customers can register their cards to preserve a record of their use in order to receive replacements for lost or stolen cards. Customers can still pay fares with cash, passes and tokens. More information on SmarTrip. Chicago Transit Authority- Chicago Card and Chicago Card Plus The Chicago Transit Authority's Chicago Card program uses radio frequency smart cards that the customer touches to a farebox for entry into rail stations or buses. Two versions offer two levels of flexibility. The "Plus" card enables customers to load value to the card online by authorizing deductions from bank or credit card accounts. Fare card balances can also be monitored online. The "Plus" card can double as a 30-day pass or a one-time fare payment, automatically choosing the least costly alternative. It requires users to register online and provide an email address in exchange for the ability to replace lost or stolen cards for a nominal fee. Both have "pass back" options for a cardholder boarding with up to six other riders at the same station at the same time and getting off together. The less advanced option takes only cash at vending machines in the station and can only be monitored by inserting it in a vending machine. More information on Chicago Card and Chicago Card Plus. Other places where smart card fare collection systems have been tested or deployed include Las Vegas, Atlanta, Minneapolis/St. Paul, Orlando, Los Angeles, San Diego, and Ventura County, CA. Greater Seattle-Puget Sound Region Seven transportation agencies led by King County Metro Transit are in the process of implementing a regional fare collection program for rail, bus and ferry travel in the Central Puget Sound Area. This system will use smart card technology. The project commenced its capital implementation phase on April 29, 2003 and is intended to be operational in 2006. More information on Smart Cards in Seattle-Puget Sound. The U.S. lags behind Europe in using smart card technology in commercial applications, mainly through integrating a "smart" component into credit cards. The main barrier is lack of agreement on how to assign the costs associated with the necessary infrastructure investments and the lack of a common standard. Under the current system, most of the costs would fall to merchants rather than to credit card companies and banks, since merchants would be responsible for installing smart card readers linked to computer systems that support the smart cards. Because there is little financial incentive for merchants to upgrade to smart card readers and terminals, the smart cards introduced by the major credit card companies have largely failed. Another barrier to smart card implementation in the U.S. is the complexity of its banking system. Unlike Europe, where there exist only a handful of banks in each country, the U.S. has thousands of banks. In addition, while the large European and Asian banks not only process transactions for merchants but are responsible for collecting what's owed from the buyers, U.S. banks are divided up into many issuers and a few collectors. The attempts by Visa, MasterCard, American Express and Discover to market smart cards have shown that it's much easier to issue cards than to collect funds from buyers. Another reason that the U.S. banking industry hasn't been anxious to adopt smart cards for commerce is that the U.S., unlike many other countries, has been successful in combating fraud associated with magnetic strip cards. Another barrier to smart card implementation is that there are still competing operating platforms for the smart card. Until one of these becomes the standard, or there is interoperability among them, there is little chance of a large-scale deployment. Several years ago, the idea of paying for transit fares, vending-machine drinks and other items that are typically purchased "on the go" via one's cell phone, PDA or laptop computer was ripe with possibility. As cell phones became increasingly popular in the 1990s, and with the dot-com boom of the late 90s, mobile commerce, or m-commerce, seemed to hold great promise. People could potentially use their cell phones to buy a soft drink for 60 cents, a $1 bus fare, or for 99 cents download a song they wanted their friends to hear while out on the town. At least two main modes of m-commerce were envisioned, the first involving using cell phones as a type of credit card or, possibly, an identification card, and the second involving using cell phones as one would a computer with Internet capabilities. The possibility of using cell phones to store not just banking codes but also personal identification numbers such as social security, driver's license and passport numbers, is years away from becoming anything but a Silicon Valley dream; the idea of using cell phones to purchase web content, on the other hand, is not only a reality but seems to be gaining popularity. In the U.S., cell phones constitute perhaps the broadest application of smart card technology to date. A special kind of smart card called SIM, or subscriber identification module, first deployed by GSM (Global Systems for Mobile Communications) in the early 1990s, holds a cell phone user's identification information, including cell phone number and password, allowing users to be linked to a wireless network. SIM cards can be moved from phone to phone, with the new phone receiving all calls to the subscriber's number. GSM, formed by an agreement among major phone companies who wished to increase network interoperability, allows GSM phone users to use their phones across country lines. GSM technology has been the standard for European phones for several years. In the U.S., on the other hand, a similar technology called Code Division Multiple Access, or CDMA, has a far greater number of susbscribers—71 million to GSM's 22 million in 2003—but studies show that a shift is occurring, with use of GSM technology in North America increasing 57 percent from 2002 to 2003. Because SIM card technology has already been coupled with smart card technology, it seems that cell phones would be primed to serve as pioneers in the contactless smart card revolution, with consumers lining up to wave their cell phones under a smart card reader to pay for groceries, train fares and vending machine snacks—in short, all those items that can now be purchased with a credit card and those smaller items typically purchased with cash. People could wave cell phones over a smart card reader while boarding buses or subways without ever having to buy tickets or fumble for change, or hold their phones up to the vending machine to buy a soft drink. But this variety of m-commerce didn't become the splash hit many technology industry members expected it to be. The complex nature of the U.S. banking system was one of the main barriers to its implementation, but there were other barriers as well. For one thing, it requires that a complex (and expensive) smart card infrastructure already to be in place. However, another version of m-commerce, which allows people to purchase items over their web-ready cell phones just as they would over their computers, seems to be once again gaining popularity. Because people are already used to purchasing larger items, from books to home stereo systems—as well as plane and train fares—online, people may feel more and more comfortable logging on to the web and making purchases via cell phone, especially as more cell phones come equipped with web technology. However, the type (and quantity) of items people buy via cell phone are likely to differ substantially from those items purchased at home via the Internet. For instance, people are unlikely to purchase furniture or expensive collectors' items on their phones; rather, they will buy things they realize they want or need while out and about, which could include transit fares. Indeed, m-commerce applications are by and large geared toward these smaller purchases. However, these "micropayments" present their own difficulties, as the abortive attempts in the 1990s to establish companies that enabled the easy purchase of web content, such as news articles, bears witness. While the micropayment formula has seen some success in Asia and Europe, particularly in Scandinavian countries such as Finland, where cell phones users have had the option of paying for vending-machine items, and in some cases, parking meters, car-wash facilities and toll booths, with their cell phones since 2000, the banking system in the U.S. is more complex and more diverse than the European one. In the US., there is no single, standardized way to collect funds from the purchaser when micropayments are made. And, because retailers must pay transaction fees for credit card sales, very small purchase amounts, especially amounts under $1, are not financially practical. But as more and more Web content providers, such as news organizations and music services such as iTunes, require payment for content, companies that specialize in micropayment are once again appearing, and even major credit card companies like Visa are exploring ways to make micropayments practical and attractive. Some of these micropayment companies tack web content purchase onto phone bills; others allow users to set up accounts with a small amount of money that is charged to a credit card or an Internet money-exchange service such as PayPal. Thus, even though micropayments, and in particular, m-commerce micropayments, are still in an experimentation phase, with micropayment and credit card companies made wary by the failure of other, dot-com era micropayment companies, there is an expectation that such ventures will meet with some success this time around. As more people carry cell phones with them—cell phones comprise about 43 percent of all U.S. phones, with the number land-line phones shrinking—and more of these phones have advanced technologies, making small purchases via cell phone may become a quick, convenient method of payment, provided that a payment infrastructure is in place to do so. In April 2004, Detroit unveiled new, high-tech parking meters that can be paid for with cell phones as part of a 90-day experiment. The battery- and solar-powered meters are "online-operated," which means that people could use not only credit cards to pay for them, but cell phones with Web applications. The cities of Boston, Houston and Washington, D.C., have experimented with similar programs. However, the feedback from Detroit residents was mixed, and the city has as of yet no plans to implement the meters long-term. In the spring of 2004, a ticketing firm named RepeatSeat announced the integration of its Web ticket-buying services with cell phone technology. Using wireless technology that is compatible with most current cell phone models, RepeatSeat allows cell phone users to log on to a participating venue's Web site, buy a ticket, and quickly receive a bar-code-encrypted ticket for the performance on their cell phone, which they can present to the venue upon arrival. Of course, there are limitations to such ticket-purchasing applications. Generally, people decide if they are going to an event either at home, in which case they can call the venue or purchase tickets online from their home computer, or, if reasonably confident that a performance will not be sold out, simply buy tickets at the door. In addition, this technology would probably be of little use in transit applications, since with the travel modes where reservations are usually made, such as air and train travel, tickets are usually purchased well in advance, and so the "convenience factor" of booking a couple hours before departure via cell phone would be nonexistent. Indeed, making a simple call to the airline would be much more practical. These new technologies have been widely adopted by rail transit operators, but bus transit systems have been slower to integrate them. That in turn has created interoperability and compatibility obstacles to establishing multi-mode and multi-property fare systems. That continues to be a goal in efforts to spur added transit use by making transfers between modes and providers more convenient. Some speculate that in the future, smart cards that have different uses will be combined into a single card that contains not only information relating to identity (national ID number or social security number, employee or student ID number, passport number) but also to health (health insurance card number) and finances (checking account number, savings account number, credit card numbers). However, with the introduction of such a card comes the need for heightened security. And smart cards, while considered much more secure than magnetic strip cards, are not completely tamper proof. Smart card display terminals can be programmed to "steal" pin numbers and other confidential information for unauthorized use. Also, the microprocessor can be removed from the card and subjected to heat or radiation; such tampering can give criminals access to information stored in the chip. One of the advantages of smart cards is that they can carry biometric identifiers such as fingerprints, hand geometry, iris patterns or facial scans. One way to heighten security is to require users both to scan their biometrics and enter a PIN. But concerns have been raised in the U.S. about the prospect of a national database that links people's fingerprints to stored information about where they have traveled, what they have bought, and the state of their health. But simply getting smart card infrastructure in place in one arena such as transit presents numerous difficulties. A massive smart card deployment for commerce or identification purposes, or a combination thereof, is likely a long way off. In the last few years China, Hong Kong, Malaysia, and Singapore have all deployed forms of "smart" national ID cards on various scales. Malaysia's program, begun in 2001, is one of the first and largest of its kind. A universal smart health care card is currently deployed in Taiwan and is being introduced in 13 European Union countries, including Belgium, Ireland, Spain, Estonia and Slovenia, in June 2004, with plans for full deployment in 2005. In the U.S., the use of smart card technology for identification purposes is making headway, although there has been political resistance to national ID cards. The U.S. Department of Defense adopted smart card technology for its Common Access Cards for employees. Smart card technology will shortly become the standard for U.S. passports. These cards will hold digital images that are cryptographically signed to guarantee authenticity. The European Union is working on passports that carry both fingerprint and iris scan biometric data. Among the biggest barriers to deploying smart card IDs, especially those with biometrics, is the fear of privacy violations, even where it is argued that such IDs would lower the threat of identity theft. Groups such as the American Civil Liberties Union have objected that national smart card IDs will severely compromise individuals' privacy. Recent efforts in the United Kingdom to introduce smart card IDs have sparked some controversy, although a study has shown that 80 percent of citizens in the United Kingdom are in favor of the cards. The program entered its testing phase in spring 2004, with the United Kingdom Passport Service recording facial, iris and fingerprint data of 10,000 volunteers and putting scanning and recognition technology through real-world testing. However, this same study revealed that 58 percent of those surveyed feared that the cards wouldn't be rolled out smoothly and, despite biometrics, stored information wouldn't be safe. There has been little assessment of smart and magnetic strip fare cards in transit applications. American Public Transportation Association Transit Resource Guide #6, "Smart Cards and U.S. Transportation." http://www.apta.com/research/info/briefings/briefing_6.cfm Glossary of industry terms used to describe card access control systems. (from Kerisystems, Inc.) http://www.kerisys.com/end_user_site/pages/reference-shelf/definitions Authors: Carli Cutchin and Phyllis Orrick. Last update: January 26, 2007 |
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