The arrival of contactless payments

By Chris Davies | 27 November 2014

Contactless payments are growing in popularity among customers, and rail professionals should start tapping into this trend to manage the increasing number of rail passengers.

More than any other customer-facing business, the rail industry depends on being able to serve people at speed. Handling ticket sales quickly during rush hour, for example, is essential to keeping passengers flowing through transport hubs and starting their journeys on time.

Paying faster is an essential part of the process. The need to speed up card transactions at ticket offices and machines has become obvious in recent years as commuters increasingly become accustomed to using plastic, even for small amounts. 

The latest Card Expenditure Statistics from the UK Card Association show that card spending overall amounted to £47 billion in June, up £0.2 billion on May.

Additionally, the statistics showed lower average transaction values, likely to have been driven by the increasing use of contactless payments.

In the wider retail environment, contactless is becoming increasingly popular and widespread too. In May this year, 45 million contactless cards had been issued in the UK and £146 million spent using a contactless card. This is an increase of 19 percent compared to April 2014, and a compelling 218 rise percent year on year, according to the UK Cards Association.

Contactless is secure too. It benefits from the same range of advanced security features found on a standard chip and PIN card, with transactions processed through the same secure network.

Contactless was introduced in the UK in 2008, and is especially well-suited to transport, as it enables time-pressed passengers to pay for tickets within seconds. The cardholder simply taps their card on the dedicated reader, and makes an instant payment for any transaction under £20.

There is a natural affinity between contactless payments and the rail and transport networks as many of us are already used to tapping a card to gain access to a station or bus every time we travel. Oyster, used throughout the Transport for London (TfL) network, is a perfect example of this. Introduced in 2003, the contactless, pre-paid transport card was used for 80 percent of all journeys by 2012. TfL announced in 2012 that it was rolling out contactless debit and credit card acceptance across the bus network, and in 2014 removed cash entirely as a payment method. Research showed that only 1 percent of passengers were using cash to pay (on buses) by 2013.

Subsequently, TfL recently announced that it planned to introduce contactless payments on the full Tube network and parts of National Rail, with cards benefiting from the same fare savings which are activated when using an Oyster card.

It’s not just in London that the benefits of contactless card acceptance are being seen. This year, Merseyrail, the busiest transport system outside of London, which carries more than 100,000 passengers on a typical working day, introduced contactless payments across its network.

The priority is ensuring that commuters understand how to use new payment methods. This has been particularly important where contactless cards are introduced on a network originally used for tickets such as Oyster. For example, card clash can occur when the holder presents two ’eligible’ cards to the reader (for example a debit card and a pre-paid ticket). The passenger may intend to use the ticket, but the reader charges the debit card instead. As a result TfL has undertaken a wide-scale educational effort to remind users to keep their cards separate.

Contactless payment technology has significant future business potential as the payment habits of commuters change. The dedicated readers do not just accept cards, but any one of a number of near-field communication (NFC) enabled devices such as smartphones, stickers or wristbands. Although this technology has been available in smartphones in the UK for a number of years, consumer adoption has been very slow so far.  This might change in the near future as Apple is, according to several media reports, planning to add secure short-range wireless technology into the next version of its iPhone. With this technology, iPhone users would be able to pay by tapping their phone on payment terminals and ticketing systems. Widespread adoption of this technology by iPhone users could see mobile payments gain significant traction very quickly.

As consumers come to appreciate the benefits of contactless, appetite for its use across the rail network will grow. Provided companies work with passengers to educate them on how to use the new payment method, it has the potential to bring unprecedented efficiencies to commuters.


By Chris Davies, Managing Director of Global Payments

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development