Public transport ticketing may seem like a trivial issue, but it is more important than most of us realize. While trains and tracks have looked mostly the same, ticketing has evolved throughout history to match the pace of our technological advancements. It has taken many forms: tokens, pieces of paper, magnetic strip cards, smart cards, until, finally, our tickets are becoming embedded in our credit cards and phones. This has already been implemented in London, where users can directly pay for their fares at the gates or buses using contactless payment cards (CPCs) or cell phones embedded with NFC technology. If you have never heard of CPCs, it is because they are not available in all corners of the world just yet. Essentially a CPC is a credit card that also operates using near field technology: instead of inserting your car and typing a pin, you simply waive your credit card at a reader and voilà, your ticket is paid for! For security reasons, this is currently limited to low value purchases (£30 in the UK), which is more than enough for a metro ticket. Some countries are starting to roll out these new cards, as they provide an excellent way for credit card companies to increase their market share. If the credit card is convenient enough to use on small purchases, many people might start using them instead of cash. In the UK over 81 million of such credit cards have been issued and their use in the public transport system has been increasing steadily, thanks also to some of the benefits for the users, such as special price caps, and the unification of ticketing, as CPCs can now be used on buses, tube, trains, bike shares and soon even Black Cabs.
This begs the question: what is the benefit of such ticketing system? For the transport operator, they are two fold. First, Transport for London (TfL) saves in operational costs, as they save money in maintenance, smart cards issued, employees, etc. These savings have been estimated to be 11 million pounds per year. Secondly, with increased use of ICTs, TfL is able to collect user behavior data, which can be used to improve the overall efficiency of their system. For the users benefits come in the form of special price caps (those will also be implemented for users of London’s smart card system, Oyster, as soon as both systems can be unified under one central operation), increased transparency through the ability to use an online portal to check their trips, time savings (users don’t need to wait in line to buy tickets or top up cards) and having a single way to pay for all transportation services. However, the first two benefits can also be (soon) expected from the Oyster system and the last one is minimal: there is little or no quantitative information on the time savings, but one can expect that it won’t be more than the amount spent buying a ticket or recharging an Oyster. So what is the real benefit for users? Well, the benefit is on the value of time. Value of time is a measure of the opportunity cost of the time spent on a journey, that is, the amount one is willing to pay to save that time. And most of us can testify that the simple sight of a queue may make us change our minds about our transport choices: the value of time when in line can be very high. How many of us haven’t simply given up and left a line that was taking too long? So while in absolute terms these time savings may seems insignificant, in relative terms they can significantly increase convenience and comfort for users. In a city such as London, where average commuting time is 75 minutes, this can be valuable.
But it is not all benefits: the system has one major pitfall, namely, card clashes. Card clashes occur when users have more than one eligible card on their wallets. This could be, for instance two CPCs, or a CPC and an Oyster. In this case, if you simply wave your wallet at the reader, the reader may pick up one card at the entrance and another at the exit, resulting in a maximum charge being applied to the user because he did not “leave” the system. It is rare but it can also happen that both cards are picked up and the user is charged twice. There have been approximately 1500 instances of card clash per weekday since launch and while some are automatically refunded, users must be attentive and apply for refunds when they are wrongfully charged. This adds a major inconvenience to users who now need to keep track of their credit card statements. It has become such a nuisance; a new wallet has been invented to try to prevent this.During the Fall of 2015, EPFL master students working with the IGLUS project wrote a case study  about the implementation of CPC payments in TfL’s network. After analyzing the different stakeholder involved, the governance structure of the implementation, the expectations and the early results, the students came to an unexpected conclusion: the users were not the main winners of this project. While TfL will be able to save a lot of money, which can then be reinvested in the network, another group of players seemed to have a remarkable influence in rolling out this solution and much to win from it: the financial sector. This is because setting up this system requires their collaboration. First, an acquiring bank was needed to process the payments. Barclaycard partnered with TfL for this, and it receives a percentage of every transaction. Additionally, since the payment and authentication at the gate must be done quickly (a matter of milliseconds) and without a pin, the main card schemes (Visa, Master Card and American Express) partnered with TfL to develop a safe transaction model, which incorporates special risk management strategies for transit use. This is the transit transaction model (TTM), which is now embedded in every new card, facilitating the expansion of this system to other cities in the world. This would only help increase credit and debit card’s market share around the world, as more people would switch from using money for these small purchases such as transit fares. Additionally, the card schemes get paid a transaction fee whenever one of their cards is used at TfL or elsewhere, thus sharing the revenue as well. According to a Visa study, CPCs make up 25% of all pay as you go journeys on TfL. From the same study it was revealed that in 2015 Visa card holders spent £339 million on TfL, seven times the amount previously spent, demonstrating how this solution is beneficial not only for the transportation sector.
The implementation of CPCs as payment methods for transit is almost expected: it is a way to keep up with technological changes in society. While there are some benefits for users who opt for this payment method, they are not overwhelming yet. But there is a clear benefit for transit operators, who can save money and reinvest on infrastructure and who can also better study their customers. Let’s not forget there is also an increasing benefit for acquiring banks and credit card schemes (the real winners), as they receive a percentage of every fare. Overall, the implementation seems to have a positive effect on public transportation. So next time you find yourself in London, keep in mind: maybe your transportation ticket is already in your pocket.
 Neves, Catarina, Theophile Vernhes, Niccolo Ficarelli, and Arnaud Besse-Ciller. "The Integration of EMV Contactless Payment Cards in London's Transportation Network.". EPFL, 2015.
This piece is the original writing of the author(s). The view points in the post is the author's personal opinions and do not reflect IGLUS/EPFL view points. The author(s) is the sole responsible person regarding the accuracy of the information presented in the post and will be liable for any potential copyright infringements.