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January 16, 2006

Electronic payments: smarter ticketing leads to smarter ways to pay

Smart card-based ticketing solutions are making cashless payments at the corner shop a reality. However, although the technology has been available for some time and has many advantages, to date there has been little take-up of the stored value electronic cash smart card, also known as the e-purse.

By CBR Staff Writer

Despite its many advantages, take-up of electronic cash remains low.

Electronic cash smart cards operate by allowing the card holder to store cash value on a smart card, which can then be used to pay for goods and services up to the stored cash value on the card.

Although there are many advantages to electronic cash, such as increased security due to decreased cash handling, take-up remains low. This is sometimes attributed to the time that it takes to process a transaction, which can be slower than handling actual cash.

One scheme, the Octopus card in Hong Kong, is bucking the trend. This scheme started as a smart card-based mass transport electronic ticketing system but has now become a much bigger scheme with multiple applications and uses. It can be used to pay for tickets or concessionary fares, for goods and services in stores and online, and for parking and access to buildings. The scheme has been so successful that it is being extended to other countries, such as Holland.

In the UK, Transport for London operates the Oyster smart card-based ticketing system and is in the process of adding an e-purse to the Oyster card. This will be for small, low-value cash transactions at newsagents and corner shops.

Although the success of the Octopus scheme can be attributed partly to its fast speed of operation, it is mostly due to its transport origins. For some time now, smart card observers have referred to transport as the killer application – the one that makes the business case for smart cards viable.

Smart cards are still relatively expensive and only become viable with economies of scale, and when they result in efficiency savings in numerous service areas. Octopus is proving that point. Its mass transport beginnings gave the scheme the critical mass and market penetration it needed to make the smart card scheme viable. It is on the back of that critical mass that the electronic cash stored scheme can now operate successfully. It is available, usable, and, most importantly, is taken up by the masses.

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