Amongst the continuing fundamental changes that are re-shaping the landscape of passenger transport provision, perhaps the most significant element, alongside the new technologies, is the arrival of more and more new players from industries that have previously had relatively little direct involvement in the transport sector, and who are now beginning to take a significant interest in it.
Mobile phone companies, payment card companies, and major IT system integrators are all seriously planning the part they could play in delivering a future web-based transport brokerage system that provides a new vision of mobility and customer relationship management. Ultimately, it could combine information and cost for all modes of transport, both public and private, to support hitherto unrecognisable product offers and buying decisions. Options on which mode to take, including the price, reliability and journey time via different services, would be presented to customers in real time, with demand for different routes and mode choices potentially influenced through pricing to minimise congestion and environmental impact and optimise carrying capacity.
In addition, the high quality data on customer demand and movement that would be delivered through the system would enable new perspectives to be taken on how transport is planned and managed.
It would also allow new value-added options to be provided to customers which could integrate travel choice, journey purpose and a range of leisure and personal services into a single information and retailing package.
Visionary thinkers on how this new business model will be delivered doubt the abilities, resolve and resources of most of the traditional passenger transport service providers to make the necessary leap into this new world alone. Instead, they note the circling group of outsiders looking to jump into the game and re-write the rules. Amongst them are IT and digital giants like IBM, Google, Apple, Oracle and Yahoo; Fast-evolving telecoms providers like Vodaphone, Everything Everywhere and Orange; financial intermediaries like Mastercard, VISA and Barclaycard; and multi-disciplinary system integrators like Cubic, VIX and Trapeze.
How their services will develop, and the impact they could have on transport provision, will be hotly debated at this year’s New Transit - sponsored Travel 2020 conference and exhibition which features presentations from more than 60 experts over two days on November 2-3. Most of the above organisations, and others, will be setting out their thinking at the event.
Significantly, many of the new players assessing their prospective role in transport services are major multi-national corporations, and have a rather unflattering view of how transport is currently provided and the need to step up the pace of change.
Referring to transport provision globally, IBM pulls no punches in stating that: “Many of our transportation systems are inadequate to serve the needs of the 21st century”. It believes that “By integrating technology and intelligence into the physical transportation infrastructure, we can improve capacity, enhance the traveller experience and make our transportation systems more efficient, safe, and secure.”
IBM travel and transport architect Chris Cooper, and one of the Travel 2020 first day speakers, believes that if government sustainability agendas are to be delivered, it will be essential to provide new forms of information and payment to customers. Equally, he says, these services will play an important role in managing transport systems in a way that delivers on public sector efficiency programmes, both in terms of infrastructure spend and reducing journey times - and they will open new markets for operators. In effect, Cooper says, the aim will be to sell “mobility services rather than transport services”. The motive would not simply be to attract more people to public transport through offering greater convenience and choice. Using the data collected by next generation mobile payment systems, which track customer movements, to create new approaches to marketing would be a key factor in influencing behavioural change.
It is clear that a space currently exists in the way transport is sold and information is provided that is waiting to be filled.
Amongst the public transport operators themselves, it is true that the past year has also seen some significant developments in the evolution of their payment and information systems, which could form some of the building blocks towards initial versions of transport brokerage services.
The introduction of new ticketing systems in the UK has gathered pace with Stagecoach completing the installation of smartcard technology across it bus fleet and Go Ahead well on the way to doing so. National Express has stated that it will follow suit. But already, next generation solutions are arriving to leapfrog the single- system approval. A commitment to the introduction of contactless bankcard payment, that promises to provide a more attractive service to the public than smartcards, has been announced by Transport for London and most recently FirstGroup. The intention is that the technology will be in place next year across the capital’s transport network and shortly afterwards on First’s bus fleet in England. Stagecoach is also considering whether to adopt contactless bankcard payment following evaluation of a trial in Merseyside, while Arriva, along with First, have announced that they are considering the new sales and information possibilities that could be presented by Near Field Communication mobile technology.
Meanwhile, European transport undertakings have made their own decisions on how to ride the new wave. Germany’s Deutsche Bahn is rolling out a contactless national NFC- based post-billed ticketing system ‘Touch and Travel’, and in France, government backed trials continue on a multi-purpose NFC- based transaction system like the Cityzi scheme, trialled in Nice.
Increasingly social media and interactive web-based techniques are being used to keep passengers informed and collect their views. And information and ticket sales are starting to be integrated in new ways too.
Speakers at the Travel 2020 conference point to some significant changes being made in the way transport operators and technology providers are viewing their role, that could form early steps towards the new mobility visions being developed by companies such as IBM and Cubic, who have built a much wider role in transport by linking their traditions with other elements of a diverse information technology and systems management business.
Derek Halden, director of consultancy DHC, highlights the moves which are leading to new integrated information and sales services. Halden’s company has set up a new standalone business, Loop Connections, to create integrated multi-modal sales and information apps. He says that previously these services have not existed simply because of the immaturity in the market with companies generally regarding themselves as either information or retailing specialists. Now that is beginning to change.
Mobile payment systems developers like Masabi have begun to alter the landscape of railway ticketing with phone- purchased and validated tickets of the kind successfully pioneered at Chiltern Railways this year. CrossCountry trains has just launched a further mobile app in conjunction with Masabi, which is claimed to be the first to offer live departure times and mobile ticketing as an integrated service. It has been followed rapidly by TransPennine Express, and others are expected to emerge shortly. Incentives for customers to switch more journeys to sustainable transport modes will be meanwhile developed as part of the Loop Connections service, drawing on DHC’s experience in the travel planning sector.
Director Derek Halden expects a number of established information providers and ticketing providers to start assessing how to change their businesses to deliver integrated systems. “It’s interesting that the transport software specialist Trapeze has just bought Concept Data Technologies”, he says. “Trapeze was out there with information, and CDC with ticket sales, so this gives Trapeze new capabilities,” he notes. Halden sees the integration of value added services which provide information and promotions on a range of products personalised to users lifestyles, as well as travel planning, as a natural progression which could offer considerable new revenue streams as well as influencing transport choices.
Transport futurologist Peter Warman, expects the introduction of Near Field Communication enabled phones to have a major impact in the relatively near future. A significant roll out programme is expected next year with companies such as Samsung and Nokia among those at the forefront. Combined with the extension of real time information systems and vehicle tracking capabilities, he believes this will offer possibilities which could lead to stations and bus stops morphing into an entirely different user environment. Potentially, by placing an NFC phone against a smart poster at a stop, real time information on how services are running could be provided instantly, with automatic rerouting options made available if journeys are disrupted.
The increasing availability of higher quality information data is another step that he sees as having a positive impact on moves to create a transport brokerage service. Warman regards electronic bus service registration systems, which have been rolled out by Stagecoach, and real time information obtained through GPS systems built into modern ticketing machines, as important aspects in this respect.
“What has been exciting this year is the push to roll out smartcards on the back of concessionary fares pass requirements,” Warman says. “So there is a payment method worked out. Then it’s about quality of information and getting the ease of access to information, and you can then go on to a brokerage system with a means of booking and paying for it. When that’s in place, you can plan transport on more logical basis according to actually monitored demand.”
It is all about understanding what the user actually wants- and how they are using the transport system as a whole, not just the individual pieces of it. Potential developments that embrace the total mobility equation could include shared taxis, and greater promotion of car clubs and bike hire schemes, and the integration of these more personalised modes of transport into a new type of transport hub at key urban locations to interface with conventional public transport.
The shift towards new payment systems which could provide greater flexibility to users and richer data on passenger movement, is likely to gain momentum in the next two to three years, as a result of the financial services industry’s view that public transport is a key target market for building public confidence in EMV contactless bankcards. UK cash transactions are worth nearly £300bn/year, and the vast majority are below the current £15 cap on contactless transactions. As a result, there is considerable potential for processing banks, issuing banks, and the card companies to profit from a conversion to contactless payment by collecting associated transaction processing fees. Transport is one of the eight categories that make up 50% of the cash spend along with other high value transaction categories such as top up groceries and payment in pubs. Companies like Barclaycard are now seriously targeting the transport sector with their electronic purse systems they hope will largely replace cash transactions in the near future.
“Change in customer behaviour is one of the hardest things to bring about,” says Mike Cowen, Paypass vice president product development for Mastercard. “One of the advantages we see in working with public transport is it is an environment in which many people are already familiar with tap in tap out payment [through existing smartcard systems], and it is an environment which can help to build consumer confidence that they can take that payment method to other retail transactions.”
He sees transport as an ideal testing ground because the introduction of contactless bankcard ticketing could help overcome the public’s reticence to change behaviour in other high pressure environments with long queues where change is often seen as difficult to achieve. In addition, after tapping out, customers would have their card in their hand, making it more natural to use contactless payment to buy drinks and newspapers in rail station retail outlets which are often close to ticket gates.
It is why the financial services sector has put significant resource into promoting contactless bankcard payment to ‘transit merchants’ as a win-win situation. For operators and transport authorities, the benefits from a large proportion of customers switching to bankcard payment include reduced cash handling costs, and those associated with smartcard systems including infrastructure and card issuing. Revenue benefits are also expected from lowering barriers to transport use. “To me it’s all about taking away obstacles that may cause a person not to use public transport,” says Cowen. “If a customer already has a bankcard, they don’t have to obtain a separate transport smartcard or load a product onto it.” In addition he expects that EMV systems capability to offer a daily pay-as-you-go cap would eliminate the need to understand complex fares structures by offering a Travelcard-style product. It is why FirstGroup project director Andy Scholey says his company views EMV ticketing as “essentially a better customer proposition”. In the longer term, First expects EMV to enable it to develop a series of flexible ticket types and fare options that would be less readily available through smart ticketing systems. The key to offering more innovative products through EMV technology is that fare processing takes place in a back office with vast processing capacity whereas smartcards have limited capacity on the card, require specific tickets or cash sums to be loaded onto them and fare processing takes place on bus.
“All EMV is doing is recording where people get on and off a bus, so you can then apply fare rules to those journeys at the end of a day in a back office,” Scholey explains. “That means you can easily charge different fares for different routes by direction of travel and time of day, and easily apply customer discounts and promotions.”
At a global level, Cowen points to EMV as a means of providing transport systems with an internationally interoperable ticketing structure which will enable visitors to foreign countries to use transport systems without having to adapt to local ticketing regimes. “The idea for a globally interoperable payment device is a powerful vision,” Cowen says. “Wouldn’t it be great if we could go anywhere in the world and go onto the transit system without having to change cash to do it or buy a local fare product.
“Contactless bankcard ticketing brings that capability for global interoperability. You only have to look at ITSO and Calypso to see how difficult it can be [for smartcard systems] to establish interoperability standards and achieve critical mass at a national level let alone a global level.”
With the introduction of NFC phones to the UK expected to gather momentum from next year, new possibilities are also emerging for mobile payment. A ‘quick tap’ mobile product was launched in the UK in May by Mastercard, Barclaycard and Orange making use on NFC technology to enable phones to act as e-wallets. Compared to current mobile payment systems offered by barcodes or smart tickets loaded onto phones, NFC technology combined with e-wallets offers significant advantages to operators. It avoids the need to enter discussions with handset manufacturers and mobile operators about loading products onto phones because, in effect, the e-wallet is the ticket.
The data that Mastercard, issuing banks and mobile companies hold on customer movement is also opening up the possibility of more sophisticated information services being offered which extend well beyond travel to take in the context of peoples’ journeys.
It is an business area that a number of mobile phone companies are already eyeing. Vodafone is currently using the data it holds on customers’ social and demographic profiles to assist companies such as Unilever on retail intelligence projects which translate to marketing strategies in terms of the adverts displayed on billboards and the promotions Unilever runs. The transport market is another sector where it sees potential to offer new services tailored to individual needs based on data on generic movement trends gained from the ability to track customers through their mobile phones.
Vodafone Global Enterprise business development manager Max Croot explains that the company can identify through customer tracking whether a group of people of a certain age are going into a railway station, for example. Electronic signage could be changed in real time to highlight relevant promotions. Such aggregate data could also be provided by Mastercard after the introduction of EMV ticketing. This would enable operators to understand the ultimate journey purpose of customers on specific transport services through identifying spending habits.
Vodafone is also developing bespoke services which can allow a more personalised level of information to be provided based on individual customer data. The company is currently working on a project for the Commonwealth Games in 2014 in Glasgow, which enables visitors to rent a handset which provides a menu of points of interest and transport options. Dynamic routing based on customer tracking is part of the service and enables the company to advise people whether they would be better to travel from an alternative station if the nearest one is congested.
More generically, Croot considers that personalised concierge services will start to emerge. “You can build up a behaviour pattern for customers, so if we know someone is in London for a weekend, we could give them promotional theatre ticket or upsell a transport package to offer a weekend bus pass for example. So there’s a good commercial element.”
He believes that in some cases revenue from these add-on services could form a crucial part of the business case for new mobile ticketing. “At end of day you have to add more value than giving passengers a ticket – that’s not going to be enough,” he says. “That’s just moving the model in terms of how revenue is collected. It might be more cost effective, but it’s not necessarily going to pay for itself.”
Although a concierge service can be offered on current smart phones, NFC phones are viewed as a critical part of forming a business case because they could start to see customers behaving in different ways. Croot points out that although 50% of mobile phones are smartphones, only a very small minority of users make use of their full potential. The capabilities of NFC phones to extract information from NFC posters and act as e-wallets could be a catalyst for change in the way customers view their mobiles, and make them a more natural means of organising travel, paying for it and receiving marketing information.
For Croot, Vodafone has a significant role to play in facilitating a broader transport brokerage and behaviour change service through providing data intelligence and consultancy, but its main role would be as the delivery agent. “We are one of the pipes to do it, and as a carrier we will receive our micro payment for the delivery of the message,” he says.
Ultimately he foresees that major IT companies will be the key players because of the need to integrate data stream and systems owned by a large number of organisations. “Companies like EMC, Oracle and IBM are the only people capable of operating those systems at a high level,” he says. “People of that ilk will ultimately operate systems on behalf of others.”
For Cooper and Croot, it is not technology that is the obstacle to providing a public transport brokerage or added value concierge-type service for transport users. From IBM’s perspective, the challenge relates to building a community consensus among all parties involved in the creation of the concept so that it offers benefits and persuades them to co-operate in its creation, especially through data release. In Vodafone’s view, the key challenges are in establishing the nature of the relationships between transport operators, government, local authorities, information providers, retailers, payment handlers and systems integrators.
However, both see the emergence of transport brokerage systems in the future as a certainty. “From our involvement with various travel entities over last 6-12 months there is massive support,” Cooper says. “What we recognise is there is a massive challenge to get through.”
“There are issues to resolve, but it’s not a matter of if it happens but when, and how value added services get brought into it,” adds Croot. “That’s down to the players involved and making the financial models to deliver it.”
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