Stephen Rees's blog

Ottawa Business Journal Staff

The City of Ottawa is joining with transit agencies in the Greater Toronto Area (GTA) to make smartcard technology a reality by 2010, the city said in a release Friday.

With Presto – a contactless, automated fare system developed with the Government of Ontario – the project will result in “significant savings” to the City of Ottawa, according to the release.

The need for such a payment system here featured strongly in the conversations at Transit camp last weekend. This story came out on Friday but did not make Google news alert until today.

One of the reasons that we do not have such a system here now is that none of the financial institutions has shown any interest in small denomination transactions, though Translink and its predecessors have been trying, several times, to get something going. The big banks just see no reason to get involved – it is far too easy for them to keep on making huge profits doing what they do now – basically charging their customers an arm and a leg for very little. They also lend out money at high rates that they have borrowed very cheaply – or even charged people for looking after.

Other larger cities with much greater mode share on transit have a bigger market – and this the people who make ticket machines all fall over themselves to try and sell them fare systems. Other merchants who deal in small amounts see cashless payment as a way to retain customer loyalty. There are a whole lot of store and gift cards out there – some reloadable, all driven at present by magnetic stripes. And the main reason stores like them is the amount of money people have to pay them up front, and the not insignificant sums that get left unspent.

North America is going to have to catch up with the rest of the world soon as most other advanced countries now have chip embedded cards. This is being driven mainly by the amounts lost to fraud. Again, Canadian banks have such a huge cash cushion they simply accept this as a cost of doing business. The money either goes to thieves or system vendors – and as long as the system vendors want more than the thieves are taking … But the big change comes from the use of devices that do not physically have to be inserted or swiped – or even touched. Proximity readers are the next big thing in technology and are already making progress in things like inventory control systems using tags and readers.

All this stuff is very enthralling for systems people and they burble on about “systems architectures” and data capture and similar stuff – and have been doing so for years, with very little to be seen as a result.

For transit systems ideally we need a system that protects our privacy – where we go and when is nobody’s business but our own – and can be reloaded easily. Cell phones and Paypal both seem to be acceptable in their different spheres – and cell phones can already be used to pay for parking both on and off street (something no-one predicted back in 1984 when I started looking at cashless parking on-street – although phone cards seemed promising). What I also thought was interesting was that some people at Transitcamp liked the idea of pay by distance. Most transit systems abandoned that here years ago in favour of flat fares and no change cash or token, and I suspect that transit trips got longer as a result. I still think that passes – paid up front, freedom of the system for a specified time – work best to get car users hooked on transit. But maybe a cashless electronic purse you can use to ride the bus, buy a paper and a cup of coffee would also work. And short rides would cost less. Trouble is we would need an intermediary and so far they are not playing nice with others. Maybe the social conscience of the credit unions could be tweaked?

UPDATE Montreal is getting smart cards