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Transport for London and the hyping of contactless payments

Despite the hype, the reality is that contactless payments last year accounted for less than 3 percent of all Transport for London journeys. That's how much contactless is improving the lives of Londoners.

March 11, 2016 by Ron Delnevo — Chairman, Cash and Card World

Contactless card payments were invented as a way to displace cash as a payment method. 

So, let's be honest. The card schemes were desperate. They had been around for 50-plus years, were spending zillions on marketing, but cash, inconveniently, wouldn't die.

What to do?

Well, how about forgetting about PIN — previously crucial to EMV — and which the world for years had been told was vital to ending card payment fraud?

Great! No PIN required!

Just touch your card and the deal is done!

It all looked wonderful for the card scheme marketeers.

But then ...

Contactless was introduced in the United States (no EMV there, anyway, at the time) and hardly anyone used it.

So what to do?

Look for a country more likely to accept being Guinea Pigs.

Found it! The U.K.

Specifically, London.

More specifically, London Transport.

London Transport (they actually call themselves Transport for London but we will use their easy name) is a great target. Payment choice for customers doesn't matter to London Transport.

Example? You can use cash on a bus in Los Angeles but not in London. London Transport banned cash two years ago.

Also, London Transport already has its own form of closed-loop contactless card — Oyster — which gives users a huge discount over buying individual journeys with cash.

So the card schemes did a deal with London Transport: Let us muscle in on Oyster (which many Londoners love), so that people can use our contactless cards on buses, trains and the Underground in London.

Oyster has a number of advantages over the card scheme products but what does that matter? Money talks and so the deal with London Transport was done.

The results?

On the face of it, pretty impressive.

In September 2015, London Transport announced that around 625,000 journeys on their network each day were made by customers using contactless cards. That's approximately 20 percent of all pay-as-you-go travel in London. Just over 3 million London Transport journeys each day are pay-as-you-go.

So, contactless is bringing about a big change, impacting (and improving) the lives of most Londoners, right?

Wrong.

Because, you see, there are actually 24 million journeys made each day on the London transport network.

Most people do not pay-as-you-go. They have weekly, monthly or even annual tickets.

So, despite the hype, the reality check is that contactless payments last year accounted for less than 3 percent of all London Transport journeys. And even if all pay-as-you-go journeys were to move to contactless at some point in the future, they would still account for less than 15 percent of all journeys.

So 85 percent of London journeys are completed unaffected, other than, of course, that Londoners can no longer pay a bus fare using cash.

Unlike the lucky residents of LA.

Actually, contactless is probably more of a tourist "thing." London Transport has produced some stats showing that contactless cards from approximately 80 countries have been used to pay for journeys.

The tourists won't usually know how much they are paying for the privilege until they check their bank statements when they get home, but, hey-ho, travel needs to throw up the unexpected if it is to be exciting!

One last point on all the contactless hype.

Much is made of the speed of the transactions. However, as far as the London Underground is concerned, it is actually faster to get through the ticket barriers using a conventional ticket than contactless! 

I know because, unlike most of those claiming otherwise, I have used both!

About Ron Delnevo

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