Mercator Perspectives

Will Transit Cards Move the GPR Market?

Transit cards may move the general purpose reloadable prepaid card market into new markets and to new levels of volume. Companies have begun using the public transportation infrastructure in several cities as a way to broaden the reach of prepaid cards.

In September the Port Authority Transit Corporation (PATCO), which serves commuters in southern New Jersey and Philadelphia, launched its ‘Wave & Pay’ Visa prepaid card. The card can be used to pay commuter fares and anywhere Visa is accepted. The card can also be reloaded for free on the Web and at kiosks in stations, as well as accepting direct deposit. On Nov. 15, the Chicago Transit Authority announced that it too would be working with Cubic to launch an open-loop prepaid card that can be used for paying fares. This system is expected to launch in 2014.

Transit could affect the GPR business both in regards to the traditional market of people without bank accounts and with the potential market among people who have bank accounts but use prepaid cards for budgeting. On the unbanked side, those in urban areas are likely to be frequent users of transit systems. If these people are paid in cash and can quickly and easily add funds on their daily commute, then the transit option is likely to become an attractive one. On the up-market side of the business, commuters with bank accounts may find the cards attractive as well. While open-loop payment methods will be a competitor, commuters are able to load tax-advantaged transit benefit funds onto these cards which can be held in a separate purse. Since the card can be used for things like parking and the morning coffee in PATCO’s case, the card becomes an all-purpose commuting payments tool.

While load limits, competition from other forms of payment, and issues such as personal security in loading the cards at transit stations may affect the growth of these cards, the large audience, low cost, and potential integration into the daily routine of millions of people could make open-loop transit prepaid cards formidable competitors.

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