Mobile-App Developer Exploits a Growing Market for Virtual Tickets on Mass Transit

Technology continues to drive change in the way riders on America’s mass-transit systems pay fares. While a few agencies have cast their lot with contactless card systems that also accept general-purpose debit and credit cards with contactless chips, other systems are turning to smart phones as add-ons to existing fare systems—an option that can be implemented relatively quickly and at much lower cost than installing all-new card-based technology.

The newest member of the mobile club is the Northern Indiana Commuter Transportation District (NICTD), which operates the South Shore electrified rail line connecting downtown Chicago with South Bend, Ind. Last weekend, smart-phone-based ticketing went live on the South Shore, which carries about 11,000 weekday commuters and is famous among so-called rail fans as the last of the electric interurban train lines that were common in America’s pre-Interstate highway days.

New York City-based startup Bytemark Inc. developed the South Shore Line’s applications for Apple Inc.’s iPhone and smart phones using Google Inc.’s Android platform. Unlike many point-of-sale mobile-payment systems, loyalty programs, and mobile airline boarding passes, Bytemark’s South Shore apps do not display or read barcodes. Instead, they generate Virtual Visually Validated (V3) tickets on the phone screen that the rider shows to the conductor.

NICTD’s is the third publicly announced transit project for Bytemark, which was founded in 2011 with funding from an angel investor. The first was for NY Waterway, which operates ferries in New York City and began using Bytemark smart-phone apps in January 2012. Bytemark chief executive Micah Bergdale tells Digital Transactions News that Bytemark had approached NY Waterway about the possibility of developing a mobile-payment system based on 2D barcodes. Instead, Bytemark learned a bit about the mass-transit business.

“The difference between transit and airlines is the amount of people that have to get on a bus, boat, train in a short amount of time,” Bergdale says. “It’s open boarding.”

Bytemark concluded that not even barcodes would be fast enough for practical use when customers just walk on, often in herds just before departure time, so it developed its patented V3 technology. But the electronic tickets aren’t just mere reproductions of a ticket or monthly pass. They contain various security features, including layers of animation triggered when the passenger taps the phone’s screen for the ferry deck hand or train conductor. On the South Shore Line, for example, color schemes will be generated and will change, telling the conductor whether the passenger has paid the correct fare and whether the virtual ticket is valid on the day of travel.

“By tapping on that you know that it’s not somebody who recorded a video or picture,” Bergdale says.

South Shore Line passengers download the free app from Apple’s iTunes App Store or the Google Play market. They then create an account using an email address or Facebook or Google credentials, a password, and enter a PIN for security and to avoid accidentally activating tickets. They then can add as many credit or debit cards as they want to fund ticket purchases. The application also has non-payment features such as train schedules, maps, and alerts.

The app displays all types of existing paper tickets the line offers, including single, 10-ride, and monthly options, as well as origin and destination stations so that the correct fare is charged to the account.

Electronic tickets can be stored locally on the phone or remotely in an online account. But even if cellular service is unavailable, the phone will still display a validly purchased electronic ticket and submit a token when service becomes available later in order to complete the transaction, says Bergdale. Bytemark operates a gateway that connects to merchant processors Chase Paymentech, Elavon, and Bank of America Merchants Services, he says. For the NICTD system, Bytemark is working with Naperville, Ill.-based independent sales organization BluePay Processing Inc.

Boris Matakovic, the NICTD’s chief information officer, says his agency chose the Bytemark system in part because of its low upfront capital cost of $50,000, a short development time of just a few months, and because it doesn’t require conductors to use bar-code scanners. “There’s a lot of things that come into play when you’re doing digital validation,” he says. “There’s a lot of capital investment. These guys [Bytemark] were the only guys that had experience with visual validation.”

Matakovic says the transit district didn’t make projections about customer use of the mobile apps. But after a soft launch in early May, the app had 600 registered users only three days after its official announcement last week, he says.

Bytemark’s technology went live in January for its second transit customer, the Capital Metro system in Austin, Texas. CapMetro runs local buses, a commuter-rail line, and a new bus rapid transit (BRT) system called Metro Rapid, which is an express-bus service run much like a light-rail line. Bytemark’s apps for CapMetro include both V3 as well as barcodes for use with stationary readers on Metro Rapid because the BRT vehicles have no conductors, according to Bergdale.

Bergdale says Bytemark is talking with other transit systems in North America and Europe and is close to a deal with a ferry system in Scotland. Beyond transit, the company is working on a visual ticketing system with MovieTickets.com Inc., a competitor of Fandango LLC. Bytemark also planning a Series A round of capital funding, but Bergdale wouldn’t say how much the company hopes to raise.