Accounting for progress

Larry Yermack looks at the key factors that are shaping urban transportation systems in ‘smart cities’.  He explains why account-based payment systems are essential, and how, over two decades ago, the EZ-Pass electronic tolling system pointed the way to the future

For the first time in the history of mankind, the majority of the world’s population no longer resides in rural enclaves, but lives in cities.  The World Health Organization (WHO) figures show that in 1990 less than 40% of the world’s population lived in cities. In2010 that had grown to 50% and predictions show that it will be around 60% by 2030 and 70% by 2050.

Fuelled in the developed world by two key demographics — ‘baby boomers’ and ‘Millennials’ — urban populations are growing by some 60 million people a year.  To get these urbanites around their cities a proliferation of new paid-for transportation services have developed.

Yet all this expansion is coming at a time when significant infrastructure upgrades — in new roads, tunnels, bridges, overground and underground train lines — are difficult if not impossible to implement, both logistically and financially.

Fortunately, technology is riding to the rescue, bringing the promise (already a reality in some cases) of ‘smart’ cities. In this scenario, populations move around on integrated multi-modal transport networks managed by Intelligent Transportation Systems (ITS).  At Cubic Transportation Systems, our take on this is ‘NextCity’, a comprehensive fully integrated, whole-of-transport journey and payments management system.

Built around an account-based fare transaction processing system that takes data from all the city’s transport modes, NextCity captures integrated real-time data, both public and private. In doing so, it enables operators, regulators and planners to understand how a city’s population is moving, and why they choose different modes at different times.  This holistic view enables transportation operators to predict and manage demand across the entire network, using real-time travel information and dynamic pricing to influence passenger behaviour.

Holy Trinity
Three technology innovations over the last decade make integrated transportation systems possible.  First, the advent of robust, reliable wireless networks enables the aggregation of data from all the different devices that control access to each transportation mode. This can be at a parking lot, subway station, tolling plaza, or bike share location.

Second, the rapid penetration of smartphones — estimated to be in use by 70% of the world’s population by 2015 — is transforming ticketing in particular and travel in general.  Not only can travellers use their smartphone to buy tickets, the two-way communication enables operators to provide individual passengers with tailored, timely, accurate information in real-time, based on what the provider knows about them.  It can inform them of service delays or alterations, suggest alternative routes, or advise them on how to save money.

The third innovation is the development of ‘device agnostic, back-office-centric’ financial processing systems.  So long as the transaction data from the access device is in a format the back-office can understand, the system doesn’t care whether it’s ‘talking’ to a device at a subway, a tolling station or a parking lot.

NextCity is Cubic’s concept, and other suppliers will have their own ideas of what a smart city’s transportation system looks like.  I believe, however, that any solution must have four key characteristics, the ‘Four Is’:  they must be Individualized, Interoperable, Informative, and Integrated.  While the eyes of the urban transportation industry are firmly focused on the future, looking backwards also provides real value.

E-ZPass, conceived of in 1991, brought together seven major toll authorities through a single electronic toll tag that worked across all seven agencies’ facilities.  Over two decades on, E-ZPass is not only still the largest toll collection system in the world, but also has a strong claim to be the world’s largest ITS.  Why this is so will become clear as we look more closely at the Four Is, as will the extent to which E-ZPass itself pointed towards the future of mass transportation in two particular aspects — account-based customer relations and multi-agency interoperability.

Individualized to each customer
Before EZ-Pass, toll patrons were anonymous.  They just threw coins into a basket or gave cash to a toll collector.  EZ-Pass changed that by introducing account-based payments.  When you created an EZ-Pass account and linked it with a payment source and a tag, you were no longer anonymous; you were a ‘customer’.

Starting with EZ-Pass, there has been a steady evolution in ticketing media from the ‘data-poor’ anonymity of cash, tokens and paper tickets to today’s ‘data-rich’ media — first to smartcards like London’s Oyster, and now to contactless debit and credit cards and smartphones.  With each advance, transport providers have been able to capture more data and create a direct, individualized connection between themselves and their customers.  It started with tolls, but now it’s happening with transit, parking and bike- and car-share services.

This benefits travellers, who get improved visibility of their payments, refunds, and so on. It also provides new revenue opportunities for transport agencies, with personalized communications from targeted marketing and improved customer services.