Capital gains

Get smart? We already are. Intelligent cities are open for business with universal transit systems, says Will Judge.

Contactless smartcards for public transport ticketing have become part of the normal fabric of life in many large European cities over the past decade.  Ask a Londoner how his or her Oyster card works, and the chances are that they will understand the question and that you will get an answer that is correct, at least in part.  Oyster cards are used for more than 85% of journeys on London’s public transport system, so it should come as no surprise to hear that almost everyone who lives in London has got one and knows how to use it; for buying their preferred travel product, loading it onto their card and using it.

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Over 50m Oyster Cards have been issued since the scheme was introduced in 2003

But ask the same Londoner about Oyster’s equivalents in Europe such as the OV-Chipkaart or Navigo or Leap and they will probably look at you blankly.  Which is curious, because out of the many European city transit smartcards that we could have chosen for this thought experiment, it would have been reasonable to expect that the ones provided for public transport users in Amsterdam, Paris and Dublin respectively – cities with direct connections to London and visited by hundreds (if not thousands) of Londoners every day – have a better chance than most of entering the average Londoner’s consciousness.

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How aware are travellers of the other smart cards available across Europe?

However, they do not seem to have done so and this is a pattern that is replicated across Europe.  A quick check on Wikipedia reveals that across the EU-28 there are more than 100 national or city transport smartcard schemes in operation.  It is likely that each one has delivered on its own business case and has enhanced the efficiency and appeal of public transport in its own area.  But for the typical European citizen this is an aspect of life which works solely at the local level: familiarity with the locally-provided transport smartcard is high, but it is less common to find people who have devoted time and energy to getting and understanding the equivalent cards provided by cities and countries beyond their immediate locality.

IMPACTS AND IMPLICATIONS

What are the implications of this fragmented market for European cities and the public transport networks within them?  The primary consequence is that cities everywhere bear the adverse effects of a lack of interoperability between contactless ticketing smartcards.  Although most Europeans pass most of their time in their home city, most do travel to other cities and countries from time to time and in doing so generate very large aggregate visitor flows.  As would be expected given their role as creative, leisure and business hubs, cities attract a high share of these visitor journeys and bear the brunt of the adverse effects:

  • Lost public transport revenues – many visitors arriving in cities are people who routinely and enthusiastically use public transport in their home city but find the challenge of engaging with and understanding a new city’s transport system too taxing to be worth the investment of time.  These travellers can be found in the queue for taxis at the city’s airport or principal railway station and by virtue of their choice to avoid the complexity of an unfamiliar transport system they perpetuate the twin urban challenges of road congestion and worsening air quality in cities.
  • Lost business activity and revenue – the complexity of understanding a new ticketing system not only deters people from choosing public transport at all, but also deters those who invest time in getting and understanding the ticketing smartcard from visiting all the places they might have visited during their stay.  At the margin, some visitors will be put off from making shorter, additional journeys to places of interest, cultural and leisure venues or business contacts during their stay by their anxiety about navigating the ticketing system correctly.  In this sense, the openness and ease of understanding a city’s public transport ticketing system can be thought of as one contributing factor to the overall sense in which a city is an attractive business and leisure destination compared with others.
  • Unproductive staff time – almost every city’s public transport system is characterised by a hard-pressed work force kept busy by the challenge of maintaining good quality, reliable services in the face of every-growing ridership and a complex interdependent set of system assets.  These workers’ time is a scarce, expert resource.  But all too often staff members have to be assigned to customer service and ticket sales roles to meet the needs of people arriving in the city and requesting comprehensive explanations of the public transport system and its associated smartcard.  The pay-off from these tasks is high when the customer being served is a new resident: in this case, the orientation provided may result in the public transport system gaining a new, loyal and enduring customer.  But for visitors spending just a short time in the city the pay-off is low or zero, as many visitors – especially those travelling for leisure or cultural pursuits – do not return often, or at all.
  • Wasted investment in smartcards – linked to the second effect is the frequency with which contactless smartcards are purchased by a city’s public transport system and issued to a visitor for whom the effective operating life of the card is measured merely in days.  To illustrate this point, Transport for London’s public statements indicate that since the start of the Oyster programme they have issued more than 50m smartcards despite the fact that the population of the city is only about 8m (although TfL statistics show that there are over 17m unused Oyster cards in the capital with over £55m left on them in unused credit).  The explanation for this difference is that there is a constantly churning incremental population of visitors in the city, many of whom want to use the public transport system and hence get an Oyster card.  While on any given day the visitor increment on the population of residents is relatively small, the number of people who have ever been a visitor to London rises rapidly over time given the rapid turnover of people within this group, and as a result so does the number of smartcards ever issued to visitors.

WE (DON’T) HAVE CONTACT

Is there an alternative approach to public transport fare collection in cities that generates fewer adverse effects?  Such an approach would need to meet the critical requirements of public transport operators that have driven them to adopt contactless smartcard ticketing – principally speed/throughput and the ability to support distance-based pricing by using a “check-in check-out” model.

Over the decade in which contactless smartcard ticketing has become widespread there has also been a convergence of the ticketing and the payments industries, primarily caused by the adoption of contactless technology on payment cards issued by banks.  In Europe, this trend is well-established: MasterCard’s contactless payment technology has been included in cards issued by banks in 29 European countries and more than a million retail outlets worldwide are ready to accept contactless payments.

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Arrivals from continental Europe should be able to access public transport without having to change their payment method

If we consider these products against the two critical requirements of public transport operators there is actually a good match: the contactless technology allows the cards to be used at speed for low-value payments, and recent work in London and elsewhere has resulted in the creation of a set of transaction rules specifically for public transport operators that allow for distance-based pricing.  And these cards are issued within the global framework for payment cards, so they benefit from global interoperability – a card issued in a person’s home city will interact correctly with a terminal device in a different city as long as both card and terminal bear the right scheme branding marks.

If European cities were to decide to extend the range of contactless cards they accept for fare payment on their public transport systems to include contactless payment cards, they would be able to significantly reduce the four adverse impacts described above:

  • Many visitors arriving in the city would already possess a contactless payment card that is globally interoperable and would be able to immediately “check-in” to the public transport system where they see the right payment scheme branding without having to invest time in getting a local city card and load a product onto it;
  • Such visitors would be able to make spontaneous or additional trips quickly and without hassle while they are in the city;
  • Public transport staff members would spend less time issuing local city cards to visitors and explaining how they function; and
  • The volume of local city cards procured and issued to visitors would fall, resulting in efficiency savings for the city transport authority or operators.

Acceptance of contactless payment cards for public transport fare collection can be introduced alongside continued acceptance of existing contactless ticketing smartcards.  London has already implemented this model on its 8,500 buses, which are able to accept fare payments using the Oyster card and also contactless payment cards.

So far, visitors to the city from more than 30 different countries have used their own payment cards to pay fares this way, without needing to get an Oyster card beforehand.  The next step is to extend the model to the whole public transport network in the city.  Doing so will be a concrete step by the city’s transport authorities to reduce the barriers to riding the system perceived by visitors and to positioning the city as a place that is keen to attract business and leisure visitors from elsewhere in Europe.

Every other European city could capture the same benefits by taking this approach, and in doing so would enhance the degree of practical interoperability in urban public transport enjoyed by European citizens.

FYI

Will Judge is Senior Business Leader, Transit at MasterCard

Email: Will.judge@mastercard.com

Web: www.mastercard.com

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