Mobile payment surge expected on Transport for London

Friday 5 September 2014 | 14:04 CET | Background

Vodafone announced the launch of contactless mobile payments via Vodafone Smartpass to enable NFC payments on London's public transport network, following a similar announcement from EE in July. Transport for London (TfL) announced earlier this year that from 16 September 2014 onwards contactless payment cards can be used on the Tube, DLR (Docklands Light Railway), tram and London Overground (train network inside Greater London), while it is already being allowed on London buses.

In December 2012 TfL started to allow the usage of contactless cards as a means of payment on London buses. Then contactless cards could only be used for single adult fare journeys on the bus, which is now extended to those using 7 day tickets on all transport modes. Consumers need to ensure they use their intended card. If they have several contactless cards in their wallet, the contactless terminal on the bus may not be able to read their card, or it may charge a card the consumer didn’t intend to use (called Card Clash by TfL).

TfL is now extending this method of payment to their other means of transport: tube, tram, DLR and London Overground. It states on its website that next to contactless card issued by UK banks as well as non-UK issuers such as American Express, Visa and Mastercard, it also allows other contactless payment methods, such as mobile payment applications, key fobs, wristbands, payment stickers and tags. According to TfL it will be accepting PayTags from Barclaycard, EE Cash on Tap and Vodafone Smartpass.

TfL states that the contactless method is useful for those using Pay as you Go Oyster cards as the customer can’t run out of credit. If the same payment card is used all week from Monday to Sunday then customers will benefit from the Monday to Sunday capping. The action of tapping an Oyster card, contactless bank card or mobile phone to the reader on the TfL network is the same, so unfamiliarity will not be an issue which could stop the uptake of mobile payments for use on the public transport network. As card clash can be a real issue for consumers with various bank cards, this could persuade those consumers that using their mobile phone will be more convenient, as they generally carry their phone in their pocket/bag anyway.

However, the British public doesn’t yet seem convinced about the benefits of using mobile payments, as O2 actually cancelled it mobile wallet in March 2014. O2 said that developments at parent company Telefonica were the main reason. These developments include a mobile payments joint venture with banks Santander (also active in the UK) and CaixaBank. It also signed Monitise as a technology partner. It could however also be that O2 was not attracting enough customers to use the service and/or was losing money on the service. 3 UK does not offer a mobile payment service.  But all this clearly hasn’t stopped Vodafone from following EE with a mobile payment service.

So with two of the UK operators already embracing mobile payments on the TfL network, it remains to be seen what the other two will do. Will they follow suit? Will O2 come back with a new mobile wallet or payment service? Will they stay away and expect consumers to use their contactless bank cards, either the physical card or via their banking app, where possible?  This may also partially depend on how much TfL will be pushing to make consumers aware of the mobile possibilities. It will also make it more appealing if TfL can add more choices of tickets to the system.

Another factor all mobile payment watchers are currently waiting for is to hear if Apple will introduce some form of contactless mobile payment in the iPhone 6. Irrespective of mobile operator, if Apple launches contactless mobile payment on a platform accepted by TfL, that could be another driver for the growth of contactless mobile payments.

All in all some uncertainties remain but in principle this could be a golden opportunity for mobile payments to receive the boost it needs if it wants to become main stream.

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