LatAm driving forward on open-loop public transport payment systems

Swiss-headquartered payments solutions company BPC Banking Technologies is working on an open-loop public transport payment system in Latin America that will allow passengers to pay via the likes of QR codes or facial recognition technology, BNamericas was told.

The initiative is one of various underway in the region, where this type of system – which allows passengers to pay directly with any connected device with a balance – is in the development phase.

“There are a lot of projects underway or in the pipeline,” Santiago Egas, senior VP, managing director and board member of BPC Banking Technologies, told BNamericas. “Lots of tenders are being launched in different countries, lots of processes so that these systems enter the cities.”

Initiatives are underway in countries including the Dominican Republic and Brazil, and Visa is among the payment ecosystem stakeholders getting in on the game.

He added: “We, as BPC, are working on an important project in a country in the region… we can’t disclose more information for confidentiality reasons. But it’s going to be a system that allows access via facial recognition, QR codes… with many other things in one of the most important integrated systems in the region.”

Among its portfolio of products, BPC offers O-CITY, an automated fare collection solution that accepts any type of payment device and processes payments for transport fares on cloud servers.

Opportunities exist to deploy the solution in cities where integrated transport systems are already in place, such as Santiago and Buenos Aires. Cities that are due to build or are currently building their first metro lines, like Bogotá in Colombia and Quito in Ecuador, are also particularly ripe targets.

“The potential [for the systems in the region] is incredible,” said Egas. “And if the smaller cities join, the market is huge.”

A goal is migrating current integrated systems to the open-loop model within the next 5-7 years, he said, adding that public transport is a solid base for building smart cities.

CHALLENGES, BENEFITS

One of the challenges is cultural, as governments in the region are used to traditional fare collection systems, while the benefits include lower operating costs, reduced friction for users and lower fare evasion.

Another challenge is boosting levels of financial inclusion so that citizens who want to travel on public transport can pay using contactless methods. This also presents an opportunity, said Egas, whose company works in 90 countries globally.

Digital payments have grown apace since the start of the pandemic. But the region is still home to a large unbanked and underbanked population, among the segments that BPC targets via its various digital payment solutions, which it offers to the likes of banks, payment processors and neobanks.

“Large institutions, the banks, are looking at public transport as an important foundation to structure financial inclusion plans,” said Egas.

Latin America is steadily embracing solutions that help support financial inclusion. Prepaid cards such as Santander Chile’s Superdigital have emerged, for example, and are gaining ground. On another front, in Argentina a group of banks are preparing to launch a digital wallet they are jointly developing. Officials plan to launch it next quarter, local paper La Nación reported, adding that it will be called Modo and compete with regional e-commerce giant MercadoLibre’s MercadoPago digital wallet.