HID Global’s René Van Ryt on the
opportunities that contactless readers
offer card manufacturers and the
payment industry.

By René Van Ryt, HID Global

Historically, it has been difficult for payment and ticketing system manufacturers to offer a single reader solution that simultaneously supports closed-loop payment schemes and open-loop debit and credit card schemes on the same reader platform.

With the advent of interoperable, multi-functional contactless reader platforms however, manufacturers are able to configure solutions that, for instance, can process both a PayPass transaction in Germany and top up an Octopus card in Hong Kong.

Open and closed book
These more convenient combination open-loop and closed-loop credit cards are rapidly moving to the top of the user’s wallet. They enable converged applications such as a credit card and transit-pass card, that can be used with both closed and open-loop payment schemes, or an ATM card that could be used to add funds to a transit pass using a closed-loop payment system.

In addition to enabling both types of payment schemes, today’s new reader platforms also support all major contactless smart card technologies and are flexible enough to incorporate new functionality when standards and requirements change.

For card manufacturers, as well as automatic fare collection and ticketing systems manufacturers, reliable, fast and secure contactless readers that process both open and closed-loop payment transactions are essential to future growth. As contactless card technology expands into diverse industries and world regions, and as end users are introduced to faster, more convenient and secure payment transactions, manufacturers of contactless readers have to stay one step ahead to anticipate new applications and functionality requirements from end users.

Growth in the prepaid card market helps underscore why contactless reader developers continue to innovate and deliver ever more flexible solutions that process both open and closed-loop payments.

Doubling pre pay
The Mercator Advisory Group reported that the value of dollars loaded onto prepaid cards in 2009 will have more than doubled, to $672 billion, by 2013. Indeed, the large base of prepaid debit and credit loads has accelerated the transition from closed-loop to open-loop payment schemes. While open-loop schemes have grown by the greatest amount, the closed-loop market still represents a substantial two thirds of all prepaid dollars.

With closed-loop schemes not going away anytime soon, system manufacturers often need readers that will establish a migration path from closed to open-loop payment, and support both payment schemes.

Yet there is more for card manufacturers to focus on beyond how to support evolving payment schemes. The payment industry is also very rapidly moving from legacy magnetic stripe (mag stripe) to 13.56 MHz contactless technologies that significantly improve security, performance and data integrity. This also delivers the advantages of enabling multiple applications in a single credential.

In the transit industry in particular, contactless technology has trumped mag stripe as contactless cards and readers have become the preferred choice for new automatic fare collection projects worldwide. This has positive implications for card manufacturers and system integrators, who now have the opportunity to help transportation authorities improve efficiency to cut cost as well as assist them in partnering with banks and retailers to create a transit card that becomes the payment card of choice for their riders. This enables passengers to benefit from an easy to use system that speeds transactions and shortens queues.

Get support
To support these trends, the card industry must ensure that today’s payment systems incorporate all popular high frequency contactless card technologies including MIFARE, DESFire and iCLASS, plus a broad range of protocols and payment schemes including FeliCa, EMVCo, Calypso, MasterCard PayPass, Visa payWave and American Express expresspay.

In addition, integrators must be knowledgeable on how to comply with national and international standards as well as certifications that are fundamental to the integration of payment and public transport ticketing systems.

While developing universally compliant systems can be challenging, today’s reader solution developers can turn to manufacturers to support them in this task.

The latest generation of multi-technology contactless solutions can be used for diverse applications, from cashless payment with integrated loyalty programs that boost repeat business while enhancing the customer experience, to vending solutions that deliver higher levels of service and satisfaction while increasing revenue and profitability. These systems help retailers to achieve better revenues as their consumers spend more per transaction and make purchases more frequently.

A card that has multiple uses provides added value and convenience which will create the desired ‘top of wallet’ position with consumers. Logically, if customers use a payment card to travel on the train in the morning, they are far more likely to automatically turn to the same card, if it is easy to use, for small purchases on their way to work.

It is no surprise that the major credit card companies and open payment card associations are excited about the increased revenue opportunities presented by these combination cards. With multi-functional, contactless reader platforms that support open and closed-looped schemes along with the increasing popularity of contactless technology and global standards fuelling interoperability, the industry is rapidly evolving to meet the demand for payment systems that deliver increased functionality, convenience and revenue.

René Van Ryt is vice president for cashless payment at HID Global, a trusted provider of solutions for the delivery of secure identity to millions of customers around the world. HID Global is focused on creating customer value worldwide with technology-based access, issuance, embedded technology and logistics technology solutions.