Innovative Pilot Program Uses Mobile Phones To Pay for Transit Rides, Food
Booz Allen and partners launch technology that promises big changes in the convenience and efficiency of payment-related behavior.
A four-month trial program at San Francisco’s BART transit system is the first in the nation to use mobile phones to pay for both fares and food at quick-serve restaurants, and to reload the mobile “wallet” over the air.
Booz Allen Hamilton worked with BART and mobile telecommunications company Sprint to develop the project strategy, lead the business case analysis, and provide project management support.
“Booz Allen has substantial hands-on experience in this market to help clients launch cost-effective trials for accurately gauging the needs of today’s market,” says principal Willy Dommen.
In January 2008, 230 BART riders launched the trial by paying for their rides at a BART fare gate using a specially equipped Sprint wireless phone to “tag” a reader that activated the gate barriers. Inside the station, participants can hold their phones up to a specific Jack in the Box restaurant or Sprint “smart” wall advertisement to download directions to the nearest restaurant or promotional content. At the restaurant, participants can use their phones to pay for meals by touching a contactless point-of-sale (POC) terminal.
To support the BART pilot, Booz Allen facilitated the development of potential project structures, initiated and developed the conceptual architecture, identified a pool of players for the pilot, and wrote the test plan. Recognized worldwide as a thought leader in this groundbreaking technology, the firm has provided technical support for every step of the lifecycle for similar projects, including writing technical specifications.
The BART-Sprint trial leverages the recently developed near-field communication (NFC) technology, a standardized way for mobile phones to communicate with POS terminals and other devices. Samsung-supplied trial phones were embedded with an NFC-enabled smart chip to allow secure contactless payments.
Today, there’s nothing new about paying bills with an Internet-capable mobile phone. But retail payments exist in different forms, and using a mobile phone to make these payments is a very unique concept. Dommen says, “We’re developing a way for the consumer to take his or her mobile phone to a merchant, make a retail purchase, and the merchant is guaranteed payment.”
Operational data collection and customer surveys are now under way in the BART-Sprint trial. At its conclusion, evaluations will be conducted to determine the commercial feasibility for Sprint and the business case for BART. In addition, each stakeholder’s input will be assessed.
“The BART NFC trial was not a typical procurement,” says Dommen. “It’s an opportunity to assess mobile phone payment in the business environment of everyone involved. We’re working to make this a win-win for all players—telecom companies, financial services companies, transit systems, and riders.”
Mobile Phones Have More Capabilities than Ever Before
Mobile retail payment can use either of two technical approaches. One imbeds a pay application in the phone so it can connect with a merchant POS terminal. This approach involves contactless payment technology similar to that used in contactless credit and debit cards and transportation smart payment cards, such as Washington, D.C.’s Metro SmarTrip and London’s Oyster. This approach does not need fundamental changes to the retail computer system infrastructure.
The second approach involves payments taking place over the air, which is similar to making payments via a computer over the Internet. This method does require changes in the retail infrastructure.
In mobile phone payment technology, just having connectivity is not enough. You also need two applications—one on the phone, and the other on a computer somewhere else—which can both talk to and understand each other, says Dommen.
“Mobile payment is still a developing market,” Dommen says. “Telcos dictate the technical features and functionality in the mobile phones they offer customers, but they’re also looking to do more than just provide the communications infrastructure—they want to generate some transaction fees in the marketplace as well.”
One key trend supporting the viability of mobile phone retail payments is that many capabilities that were formerly imbedded only in computers are now migrating to handheld devices, such as iPhones or PDAs. Today, mobile phones have more capabilities than ever before.
Besides increased convenience, participants in the BART-Sprint pilot are receiving additional benefits as well. They automatically receive the advantages of company loyalty programs, including the 6.25% discount BART provides to purchasers of high-value tickets.
Trial phones will initially have a stored value of $48 for BART rides. When the value drops below $10, the NFC technology will automatically reload the phone over the air with another $48 worth of rides and charge participants the discounted $45 fare. Pilot participants can check their balance using their phones.
Players are also hoping the trial proves to be a greener solution, as BART won’t have to print as many tickets.
story posted April 17, 2008
