A smarter way to travel – the evolution of ticketing technology15 September 2014
Barry Mansfield looks at the prospects for smart ticketing technology and turns to Grant Klein, director at PricewaterhouseCoopers, for his thoughts on how and why it should be implemented on public transport.
Governments want people to make greater use of public transport in order to help relieve pressure on jam-packed roads and to increase mobility, thereby increasing national productivity. Smart ticketing has the potential to revolutionise how we travel, which will help to meet this objective.
Despite the rapidly changing technological environment that is affecting the ways in which consumers can buy services and use information, though, public transport is yet to embrace this new technology fully. Transport is big business. In the UK alone there are eight billion bus and train journeys every year, bringing in around £15 billion in revenue.
According to Grant Klein, a director at PricewaterhouseCoopers (PwC), "In an industry of that size, we'd have expected too see a significant change in customer experience over the last decade, but with one or two exceptions, such as the Oyster card system used by Transport for London, things haven't really altered that much."
His belief is that smart ticketing can spur a revolution in customers' experience of public transport. Klein urges passengers to imagine always knowing they have the lowest fare for each ticket. "You'll never need a physical paper ticket again," he predicts. "And on top of that, access to real-time information about how your service is running.
"Now imagine having that experience across the entire country: there are benefits for all parties involved."
The pace and extent of progress will depend on a number of factors, however. The results of a recent survey conducted by PwC indicate some of the key benefits of smart ticketing.
First of all, convenience is of the utmost importance. Alterations to the ticketing process must make selecting, purchasing, fulfilling and then using tickets much simpler.
Smart technology means that everything bar the actual use of the ticket can be automated. Second, interest in smart ticketing is growing. Even without incentives, there is an increasing desire to use contactless cards or smartphones in lieu of physical passes, but a mixed-ticketing economy seems inevitable without an active decision to scrap paper entirely.
The third main benefit is that fare commitments provide an extremely compelling case. Ensuring passengers are given a lowest-price guarantee could have a massive impact in winning people over to smart ticketing, without any need for discounted or reduced fares. Fourth, new roles will enable widespread rollout.
Creating a seamless customer experience through smart ticketing across the UK would require a sea change for the operating model for the sector, separating the roles of account provider, retailer and operator. Finally, the business case is reinforced if services are shared.
The core requirements for a smart ticketing service, then, are identical, therefore making use of common, or shared, facilities to support these services will boost the return on investment for all.
The shift from paper-based systems toward smart ticketing will also be happening in the context of urbanisation of populations, which was up 8% in the UK over the last decade. There have also been marked changes in the demographic makeup of cities. In Birmingham, 40% of the city's population is under 25. Planners must adapt to these trends.
PwC's recent Talking Points publication explores the findings of its second annual public transport ticketing survey. Klein is particularly concerned with public perceptions of current public transport ticketing options in relation to the new forms of smart ticketing, alongside drivers and obstacles to their adoption.
The results are encouraging for advocates of electronic options, but they also emphasise that the shift will not happen by itself; customers must be persuaded to switch.
Furthermore, current and future ticketing preferences suggest only a marginal shift away from paper to smart tickets. British transport operators will have to be more proactive in shifting passengers towards the use of smart ticketing (probably based on the ITSO specification, according to Department for Transport reports in 2013).
Price is only one incentive available to public transport operators; enhancing the service and developing a more intuitive customer proposition are just as significant in customers' eyes.
The PwC report notes that deregulation makes it tough to achieve anything similar in scale or impact to London's Oyster scheme, which grew quickly because TfL offered prices that were cheaper electronically than on paper for identical journeys. Elsewhere in the UK, deregulation has taken control of bus services (in fare-setting, say) away from city authorities.
Additionally, changes to central government funding - for example to the bus service operators grant and to concessionary travel reimbursement - have heightened the service planning challenge. The results of PwC's survey of councillors show that the majority of respondents (70%) view bus deregulation as a significant barrier to improving services.
Attendees at the round tables pointed out that as a consequence of deregulation, councils could not fully plan a network with services that connected to each other and to other modes of transport. Smart ticketing was often cited as a possible solution. In fact, 90% of the councillors surveyed said they already had, or were planning to introduce, a smart ticketing scheme.
In London, the use of contactless bank cards was straightforward because TfL had control over fares and fare structures, and so could use this to simplify, and to encourage, changes in customer behaviour. This may explain why so many councils feel restricted by the lack of devolution.
In transport, decentralised control works because councils know they are accountable to voters and local media for any shortcomings. Authorities regard blueprints for devolution as muddled, though, and nearly two thirds of councillors complain that they do not have enough power to deliver transport plans, according to PwC's survey.
Are we nearly there yet?
At round tables conducted outside London, there was also strong backing for the creation of new combined authorities with cross-boundary transport plans. In particular, there were enthusiastic calls for more council powers to integrate and support buses. PwC's conclusion is that the case for investment in local transport is not yet articulated sufficiently well to secure the funding required.
In short, it was agreed that the local transport planning process needed "a more coordinated approach" and "a more coherent aggregated local plan" that is linked to economic development and land planning.
In early July, PwC launched its 'All Change' city transport report at the House of Commons. Klein recalls a "good discussion" with Louise Ellman MP, chair of the Commons Transport Select Committee. Also in attendance were Jon Lamonte, chief executive of Transport for Greater Manchester; Jonathan Bray, director of the Passenger Transport Executive Group; Paul Hackett, director of the Smith Institute; and PwC's head of transport, Jamie Houghton. The group debated the key outcomes from PwC's programme of regional round tables earlier in the year.
Klein warns that the contributions on that day, including the subsequent Q&A session, indicated that urban transport outside London was "not yet a political priority". There was, however, a consensus that greater devolution was of paramount importance.
Klein likes to emphasise the shared benefits of smart ticketing systems. "For public transport passengers, it makes things a lot simpler and faster in the process of buying a ticket," he says. "Operators get more information on what their passengers are doing, so they can tailor their services in future and governments can encourage more people off the roads."
He highlights recent evidence that, "agglomeration needs a boost to help cities outside of London". Other issues to have caught his interest recently are the possibility of using social media to help improve and redesign transport systems, faster Wi-Fi for commuters and web innovations such as TfL's new online refund facility for delays.
Above all, though, Klein has noticed that, "Card clash is the new term in the public transport lexicon." That is an encouraging sign that naturally leads smart ticketing into the mainstream media spotlight.
In conclusion, Klein reckons there are three steps to make smart ticketing reality. "The first is to develop a targeted operating model that allows all different kinds of smart ticketing and customer segments," he advises. "The second is to pilot that idea, probably in a couple of cities, to develop some advocates as you move on. The final, crucial step is that all stakeholders are brought into the shared business case. "We may all potentially benefit, so we need to be working together. It is achievable: many of the building blocks are already there," says Klein.
Funding the future
The Department for Transport's £45-million south-east flexible ticketing (SEFT) scheme promotes seamless and convenient rail travel across the network. As part of this, the government is investing £3.25 million in modernising 'touch in/touch out' ticketing for rail passengers in the south-east.
Oxford's pioneering bus ticketing system has prompted an 8% increase in passengers in the county, officials say. The £10-million smartcard scheme undertaken by Stagecoach and Oxford Bus Company means that tickets on some routes can be used on buses owned by both firms. The Passenger Focus lobby group reports three million extra journeys.