In short, OpenFare is account-based as many of open-loop systems are. They keep the patrons’ account data in the cloud, not in the memory of the closed loop cards. The difference between the classic open loop and OpenFare is the following:
- Classic account-based systems use a remote cloud to keep accounts. This works well enough for transit systems with stationary validators because they are connected to the cloud with fast telecom lines
- OpenFare proactively synchronizes data in its validators with the cloud, so the account data is right there, at the validator, when the validator needs it. This provides fast tap and decreases the fraud risk. This is important for transit systems applying wireless validators and debit open loop cards
You can find the detail description of both open-loop and OpenFare systems behavior there. Here we will talk about advantages and disadvantages of both systems. The differences are summarized in the following table and further explained below.
| Feature | Classic Open-Loop Account-Based | OpenFare |
|---|---|---|
| NFC tokens bound to account balances | limited number of credit and debit cards | any credit, debit, bank card; some ID cards; other NFC tokens |
| Validator cost | high | low |
| Wireless traffic cost | high for large transits: cellular data tariffs | low with data broadcast |
| Transaction cost for patrons | high for debit cards | low |
| Transaction cost for transits | high for credit cards | low |
| Fraud risks | high for debit cards | low |
| Patron experience | worse | better |
| Can fully replace closed-loop system on vehicle-installed validators? | no | yes |
Cards and Tokens to Use
Classic open-loop transit systems work only with a subset of credit and debit cards. OpenFare can work with all credit and debit contactless cards and many non-cloneable tokens, such as bank cards, ATM cards, contactless driving licenses and other IDs, contactless Apple and Android gadgets.
Lower Validators Cost
Classic open-loop systems require that validators are fully certified card acceptance devices from the payment systems standpoint. The OpenFare validator is simpler. It does not do point-of-sale transactions. It only reads the card (token) identifiers. This reduces the cost. This becomes even more evident in the United States where EMV (smartcard) transition is on its way. OpenFare does not require the validators to undergo such transition.
Lower Per-Transaction Costs for Patrons
Whereas the credit cardholders do not endure the cost of transactions, the debit and bank (ATM) cardholders usually pay to their banks some per-transaction fees (or must pay higher fees to maintain accounts with higher limits of transactions per month). Classic open-loop account-based ystems usually aggregate several trip fares into one daily payment transaction. OpenFare aggregating factor is higher. Patrons can prepay once an amount sufficient for several days of using transit.
Lower Per-Transaction Costs for Transit System
The per-transaction costs that credit card acquirers are responsible for depend on transaction amount average. Less average transaction amounts are relatively more expensive. The low aggregating factor that hurts debit card patrons also hurts credit card transit systems.
Patron Experience
As we already know, the classic open-loop systems may have embarrassing patron traps at tap-off turnstiles or during fare enforcement inspections. OpenFare does not have these traps. If the patron is allowed to access the transit system he or she surely have enough funds to travel.
On the other hand, OpenFare requires that patrons prepay some transit balances. Five or so years ago this was a killing factor. Today, when almost everybody has a smartphone and can top-up the account and use the system within seconds, this is not an essential problem.
Fraud Risks
Classic systems endure the risk of first fraudulent transaction on buses and costs of more extensive fare enforcement policies (to deal with tap-off traps).