Mass transit payment startups gain steam as India unlocks

As India gradually resumes public transport services, fintech startups, such as CityCash and Chalo, are focusing on mass transit payment products. While covid-19 forced consumers to buy everything from groceries, electronics to clothing online; for mass transit or public transport systems, such as buses, trains and metro rail, cash remained the primary medium of payment.

Payment startups are in talks with state-owned bus corporations and waterways for mass adoption of near-field communication, or NFC-enabled, ‘open loop’ prepaid cards for transit ticketing. It is a huge market as public transport is used by more than 68 million commuters daily, according to industry estimates.

Following the Reserve Bank of India’s notification allowing online payments even in areas with erratic internet connection, mass transit payment startups can experiment with new models that were earlier not recognized.

India is almost a decade behind in mass transit payment system. Several public sector entities, including Kochi Metro and Delhi Metro, had introduced card-based payments, but they are ‘closed-loop’ payment instruments. Startups want to bring a shift in this as well by introducing more open-loop payment cards that can be used not just in buses and metros, but across small shops and auto-rickshaws, among others.

Vineet Toshniwal, founder, CityCash, said cities like London, Dubai and Hong Kong have developed their own “mobility payment cards” which run on an open-loop payment model and has been operational for over a decade.

There is a large market opportunity for open-loop payment cards in the bus ticketing space. Toshniwal said public transit is used by almost 200 million Indians annually, of which 70-80 million people use it daily. But most of these payments are made with cash. Till date, CityCash has issued around 3 million cards to consumers since it went live in September 2019 and is accepted in 20,000 buses in Maharashtra.

Mass transit payment startup Chalo approaches the mobility payment problem in a “full-stack” manner. It offers both the payment hardware such as NFC-enabled point of sale device, a mobile application that helps tracks buses and routes in real-time, and an NFC-enabled prepaid card to make offline transactions.

"We start with the deploying GPS hardware in the buses (for live tracking), and a QR code-based payment solution using a mobile app along with the prepaid card option... We are looking at a full-stack approach and a holistic approach because even today, we don't have the appropriate acceptance or validation technology in the bus and 50% of the people who travel on buses are not digitally savvy, they do not pay via UPI or do not own a smartphone," Vinayak Bhavnani, co-founder and chief technology officer, Chalo said in an interview.

Chalo also offers an electronic bus-pass product that can be availed using the Chalo mobile app. It is currently operational in cities such as Indore, Bhopal, Patna, Guwahati, Kolkata, Thiruvananthapuram, Madurai, Vijayawada, and Udupi. The startup is also currently looking to onboard card-based payments for e-rickshaw owners. It is also in talks with the Kochi water transport authorities to install GPS in their water ferries, and to accept Chalo cards on ferries as well.