Contactless smartcards used for public transit fares have become part of the normal fabric of life in many large cities around the world. In Europe alone, there are more than 100 national or city transport smartcard programs in operation. The vast majority of these programs have delivered real improvements to public transportation – less crowding in ticket halls, faster boarding and more buses running on time – while also driving operating efficiencies for transit operators.
While these programs quickly become part and parcel of normal life for residents in a city (witness the extent to which the words Octopus and Oyster have had their meanings stretched in Hong Kong and London respectively) they typically are strange, unfamiliar things for visitors. And for the cities that run them that’s a real problem, because in many ways the whole point of a city is to act as a hub at which residents and visitors or travellers can interact and do business.
Broadly, cities see the unintended consequences of these localised smartcard solutions in three ways:
- First, many travellers visiting the city find them so baffling that they give up on the public transportation services completely and stick to taxis. This drives traffic congestion, which in turn is a material contributor to lost business efficiency and a significant source of air pollution.
- Second, there is potential loss to the local economy. Many visitors who could potentially have made additional stops to eat and shop locally within the city during their stay are deterred from doing so by the “hassle factor”: the complexity of figuring out how to make the journey.
- Finally, for those journeys that visitors do actually make, the city bears the costs of issuing them with smartcards. This takes the form of educating visitors as to how smartcards work, providing them with retailing top-up facilities such as ticket machines, and resolving issues such as lost cards and failed transactions. All this activity duplicates services provided by the payment industry and drains public authorities and transport operators of precious funds that could be used for capital investment in enhanced services or new infrastructure.
Is there an alternative approach to public transportation fare collection in cities that generates fewer negative effects? We believe there is.
Over the decade in which contactless smartcard ticketing has become widespread there has also been a convergence of the ticketing and the payments industries, i.e., the use of general purpose payment cards on transit systems. Contactless payment technology allows such 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.
Acceptance of contactless payment cards for public transport fare collection can be introduced alongside continued acceptance of closed-loop smartcards. London has already implemented this model on its 8,500 buses, enabling acceptance of fare payments using Oyster cards and also contactless payment cards, and the service is going to be extended to the whole transport system this summer. Chicago has already implemented this model. So how would such initiatives address the three issues identified above?
In the first case, the payment industry’s global acceptance brand marks will give travellers confidence that they can pay fares on an unfamiliar transport system with the payment card that they have brought with them from home.
In the first nine months of contactless payment card acceptance on London’s buses MasterCard processed transactions for cards issued in more than 35 countries other than the UK. And this confidence means that the opportunity cost effect will be reduced, resulting in more business being done in the city. And finally all these visitors are able to travel without overly burdening the transport operator with demands for card issuance, customer support and top-up facilities.
Do you want to learn more about MasterCard’s vision for Connecting Cities? Check out this brief video.