Smart Ticketing = Smart Cities

Written by Saloni Walimbe, Global Market Insights
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Smart ticketing is gaining more and more prominence lately, with the launch of innovations such as the open-loop concept, which enables passengers to simply utilize their debit or credit cards or mobile devices with payment functionalities, like wearables, for ticket payments.

As the world undergoes a change owing to burgeoning technological developments, so do customer expectations. This is particularly apparent in the way industries are gradually migrating to the online platform, given the widespread availability of mobile devices like tablets and smartphones, loaded with applications that deliver high levels of convenience in nearly every aspect of life.

This transition has begun to make its mark in the public transport sector as well, in recent years, especially in urban locations, which demand high flexibility, convenience, immediacy, and elimination of queues for ticket purchase. In short, customers are vying for “frictionless travel.”

Given this shift in perspective, it is anticipated that the presence of paper tickets will soon become a thing of the past, as innovative technologies continue to emerge, making smart ticketing a rising concept in transit systems in prominent cities worldwide.

In an increasingly technology-dominated world, where smart devices are being increasingly used to access almost everything, digital ticketing solutions like oyster cards and digitalized boarding passes are enabling customers to store all the data required for travel on a single device, thus reducing their reliance on conventional paper tickets. The technology, which appeared initially in the railway services is gradually starting to make its way into wider transit networks, allowing customers to bypass traditional payment methods and purchase tickets easily through the digital medium.

Companies such as ITSO (Integrated Transport Smartcard Organisation) have been facilitating the rise of the smart ticketing market since as early as 2002, by enhancing technologies that allow customers to purchase and access tickets easily. At its simplest, smart ticketing is a system designed to electronically store travel tickets on a microchip, which is embedded onto smartcards or into smart devices.

Smart tickets are available in various forms and can be either dispensed by machines or purchased online through smartphone apps or websites. The digital versions of these tickets can even function as virtual tickets, eliminating the need for a physical component altogether.

In the physical form, smart tickets can take the form of smart cards, backed wither by magnetic strips or embedded with NFC (Near Field Communication) and RFID chips, similar to an ATM card. These tickets are either read or scanned via a machine, which blinks or beeps once a smartphone or card has been scanned. Tickets stored on smartphones are generally accessible via websites or through email, as well as via customized NFC-based applications like Google Pay or Apple Pay.

Global Transition to Cashless

The popular adage “cash is king” is gradually seeing a decline over recent years, particularly during the COVID-19 period. Recent trends suggest that digital currency will soon replace conventional cash, with many nations worldwide making conscious efforts to reduce the dependence on physical cash. Sweden is a notable example of this, considered to be a pioneer of the cashless society, given that nearly 900 out of the 1,600 bank branches in Sweden have ceased accepting cash deposits.

A cashless society refers to an economic state or concept wherein all financial transactions are conducted via the transfer of digital information, rather than the exchange of physical currency like banknotes and coins.

A closer look at historical trends may reveal that cashless societies have existed since as early as the nascent stages of human societies, most notably in the form of the well-known barter system.

In the modern era, cashless societies manifest themselves in the form of credit and debit cards, POS (point of sales), mobile wallet applications, internet banking and mobile banking, among others.

This trend is now making its way into every nook and corner of the world, including transit. The COVID-19 crisis is considered a major reason for this, putting the world on high alert following studies that reveal how the virus can survive for up to three days on inanimate surfaces like glass, metal or plastic, depending on varying conditions.

For transport services, where cash is still a predominant feature, this is cause for major concern, given the exchange of the currency through an unknown number of hands. In response to this situation, the WHO (World Health Organization) itself has advised passengers to maintain optimum hygiene practices, such as washing their hands after touching banknotes and has also promoted the use of cashless payments to further curb the spread of the disease.

While the benefits of cashless payments with regards to the current pandemic are obvious, there are several more benefits of eliminating cash handling from a broader perspective.

One of these benefits is the considerable cost saving associated with digital payments. Studies suggest that transit authorities incur over 3.5 times more expenditure on physical fare collection as compared to digital fare collection. These savings can stem from a number of sources, from a significant reduction in travel from collection & deposit of cash, shorter times for reconciliation, mitigated costs due to accounting errors and lower risk of cash-related crime.

This ongoing move into a cashless society is reflected in the way digital ticketing is gaining traction over recent years. For instance, in 2019, Ireland announced plans to introduce “next-generation ticketing” in its public transport, in a move designed to possibly replace the Leap Card by 2027. According to a market consultation notice issued by the National Transport Authority, the country was looking to engage with service providers in order to implement an ABT (Account-Based Ticketing) system throughout its transit ecosystem, including the rail, bus, and light rail networks.

The introduction of this system was aimed at facilitating a move towards cashless transactions and allowing passengers to pay for their journeys via bank cards, mobile phones, or even official passports or IDs, thus eliminating the need for a special transit card. Payments were to be validated through means such as contactless credit and debits cards, Google Pay or Apple Pay, as well as through QR codes and electronic tokens.

Rise of PAYG

In several parts of the world, the rise of a cashless society, especially pertaining to public transport has already become a reality. Various metropolitan locations like Tokyo, New York and London are leading the way to eliminate the use of paper-based tickets and even proprietary travel passes in their transportation networks.

In the future, it is anticipated that passengers will simply require a smartphone or a credit card in order to purchase or access tickets. Mass transit transactions will allow passengers to bypass ticket barriers and manage their payments on the move.

In an effort to ensure the efficiency of public transportation systems in the future, many innovations are now coming to light that go beyond physical infrastructures and usher in new payment styles, especially smart ticketing.

Prominent nations worldwide are already setting standards in this regard, with passengers on any transit system in New York, London or Tokyo being able to use their credit card or mobile payment app to purchase tickets, by corresponding with a sensor located in the system or station. This has reduced the need for queuing in front of ticketing machines, as companies allow for payment processing either via closed or open loop formats. In closed loops, passengers use proprietary systems for payment, wherein they receive smart cards, similar to credit cards, which can be topped up with the money for ticket purchase.

However, it is the open-loop concept, that is gaining more prominence in recent years, as it allows passengers to simply utilize their debit or credit cards, smartphones or other mobile devices with payment functionalities, like wearables. This method reduces the need for an additional card for digital ticketing and instead allows for a more seamless transit experience by allowing passengers to simply tap their device or card on corresponding sensors. Technologies like NFC contribute heavily to this by enabling transactions on the go, thus forgoing the need for additional waiting times at ticket machines.

The method this system is built on is referred to as PAYG (Pay-as-You-Go). The PAYG method can usher in significant gains in terms of time and convenience, in addition to potential financial savings and stability. Furthermore, the emergence of loyalty programs and special promotions can further propel the popularity of these smart ticketing systems.

PAYG systems benefit not just regular customers of transit networks but also offer higher convenience to occasional travelers, by eliminating their need to carry anything more than their usual payment tools like debit and credit cards or mobile devices to access tickets at the economical process.

PAYG and other cashless payment systems are transforming transactions worldwide, especially in regions that show a heavy reliance on their mass transportation systems. Companies like VISA are taking heed of this in recent years, by helping to launch contactless transit payments in more than 20 cities across 12 countries. For instance, in Rio de Janeiro, VISA partnered with the Planeta Informatica in Brazil, to develop a Secure Transit Module designed to bring PAYG fares to the mass transit users in Rio. This solution was built to enable any transit system to easily adopt NFC payments through VISA-enabled smartphones, cards, or wearables, like watches.

Government Support Needed

According to reports, the urban population overtook the rural population worldwide in 2007. This urbanization trends has witnessed consistent growth over the years and is expected to see a dramatic rise in the years ahead, to the extent that almost 70% of the global population will be urban by 2050, with myriad cities having more than 10 million inhabitants, thus driving up the reliance on the world’s resources. This, in turn, has necessitated the faster development of smart cities to cope with the burgeoning population levels, most of whom are becoming increasingly more socially and economically competitive in the growing globalized market. There are many elements that contribute to the advancement of smart city infrastructures, chief among them being smart transportation.

However, smart city development faces certain obstacles along the way, most notably funding. Reports suggest that lack of investment is one of the key hurdles to the rollout of smart transportation systems in smart city development.

In order to bridge this gap, many public and private sectors, government bodies, technology companies, banks, and investment funds alike are taking up the responsibility toward working collaboratively to develop lucrative funding models designed to accelerate smart city development, especially smart ticketing and transit solutions.

For example, the Palaszczuk Government in Queensland has committed more than $371 million for investment in Smart Ticketing, with an aim to develop one of the most progressive ticketing solutions across the globe. This project has been proposed for the busiest transit hub in Queensland, Brisbane Central Station, which accommodates more than 11 million customers annually. The funding covers the development of an advanced global ticketing solution to provide a more personalized public transit experience for commuters and visitors in Queensland.

In 2019, the UK rail minister announced to passenger rail firms the intention of the government to maximize its investment of £80 million in smart ticketing, requesting details on how each firm could potentially make these systems the default options for travelers by the following year.

In 2020 meanwhile, the UK’s TfN (Transport for the North) unveiled its initial plans for a NIP (Northern Infrastructure Pipeline), an investment plan spanning 30 years, geared toward infrastructure projects to underpin greener growth in the north. The pipeline, worth £5 billion, includes proposals pertaining to active travel, road, rail and smart ticketing, some of which may commence over the upcoming 6-18 months, to help the economy recover from the onslaught of the COVID-19 pandemic.

The plan is aimed at restructuring and transforming the resilience and capacity of the rail networks in the north, as well as laying the foundations for projects such as the Northern Powerhouse Rail, in order to future-proof the railway network in the region. It is also aimed at highlighting the need for expediting green transitions, including hydrogen and battery-powered train pilots, as well as the rollout of important charging infrastructures for electrically powered systems.

Additional information is available from Global Insights.

Saloni Walimbe is currently following her passion for content creation by penning insightful articles relating to global industry trends, business, and trade and finance. With an MBA-Marketing qualification under her belt, she has spent two years as a content writer in the advertising field.

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