Emerging Technology Guide: Smart Ticketing & Open Payments
A guide to the future of public transport ticketing.
The way people move around our cities is going through a major digital transformation. Passengers no longer just want a ticket; they expect a single, seamless, and flexible travel experience. Smart Integrated Ticketing is the key enabler of this shift, offering a powerful platform that goes beyond simple fare collection to unlock new efficiencies, provide important data insights, and reshape the customer journey.
By Brent Boden,
October 2023
Executive Summary
Transport Authorities and public transport operators around the globe are embracing the move from closed loop, card-centric, ticketing systems to dematerialised, smart ticketing and open payment platforms that are user-centric and support flexible fare pricing policies along with the use of contactless payments, mobile devices and digital ticketing.
Among a list of proposed benefits, smart ticketing is able to provide a platform for more efficient and integrated fare pricing, reduce the cost of fare collection and encourage the use of multimodal journeys, making public transport more sustainable and attractive for users. Ultimately, these benefits can contribute to reduced traffic congestion and pollution (improved air quality) as well as better utilisation of the transport system as a whole.
Background
Card-centric (magnetic strip) ticketing technologies have been around since the 1970’s (adopted in Australia during the late 70’s and 80’s), whilst smartcard systems have been progressively implemented across the globe since the late 90’s and 00’s.
These types of systems require(d) all passengers to have a physical ticket or system specific smartcard that is read and verified at turnstiles or by other proprietary readers. As such, these systems are often referred to as Close-Loop environments i.e. the defined equipment, tickets and/or smartcards regulate the ability of commuters to access the transport system.
Whilst the closed-loop nature of these systems has meant that they normally comply with strict security standards, they have often been criticised for the relatively high costs associated with implementation, issuing cards and maintaining ticketing equipment, turnstiles, readers etc.
In Australia, the main smart card systems are Opal (NSW, est. 2012), Myki (VIC, est. 2012) and GoCard (QLD, est. 2008). Other well known, smart card systems, include London’s Oyster card (est. 2003) and Hong Kong’s Octopus card (est. 1997). These systems all commenced operation as closed-loop environments, but many systems are now being progressively updated to provide for contactless payment and digital ticketing.
What is Smart Ticketing
“Smart Ticketing” is a collective term used to describe flexible, open-loop ticketing systems that are typically account or user-centric, rather than ticket or smartcard-centric i.e. allows a user to interact with the system in multiple ways, including, but not limited to the use of the above-mentioned proprietary smartcards, along with other methods such as contactless payment, mobile devices and digital tickets.
Typically, the differences between Smartcard (Card-Centric, Closed-Loop) systems and Smart Ticketing (User-Centric, Open-Loop) systems are as follows:
| Physical Tickets & Smartcards | Smart "Integrated" Ticketing | |
|---|---|---|
|
Architecture |
Closed-Loop |
Open Loop |
|
Account Type |
Smartcard |
User ID (Account) |
|
Equipment |
Proprietary Equipment |
Conform with Open Standards |
|
Data Storage |
Server-based |
Cloud-based |
|
Fare Pricing |
Static |
Dynamic (Flexible) |
By way of further comparison, card-centric ticketing systems are reliant on users maintaining a positive cash balance against the card, as payments are processed within the closed-loop system i.e. the price of each ticket is drawn down against the balance on the (smart)card; if an adequate balance isn’t available at the time of travel, the card is rejected and the user is denied access to the transport network.
Whilst, smart ticketing solutions maintain this option, through the integration of cloud-based platforms and the use of Application Programming Interfaces (API’s) they facilitate payment through various channels such as credit and debit cards, Apple Pay®, Google Pay® etc.
Similarly, whilst smart ticketing solutions maintain the ability to use smartcards, the cloud-based integration also enables the use of other technologies, such as, Near Field Communication (NFC, as used in mobiles), QR Codes and others to purchase and pay for the right to use the transport network.
Benefits of Smart Ticketing
A Smart Ticketing ecosystem delivers three major benefits for public transport authorities and operators:
- Improved Customer Experience: Customers are no longer required to purchase, top-up, scan and retain a physical ticket or smartcard. Rather, they are able to use bank cards and personal devices such as mobile phones, smart watches and other wearable technologies to buy and validate a ticket. This is a particular benefit for infrequent travellers or those who travel between multiple cities, as they don’t need to buy one-off tickets or carry multiple transport-specific cards.
- Enables Innovation: A smart ticketing system can also provide for integration with new mobility services, thereby providing users with the opportunity to plan more efficient routes that incorporate changes between modes of transport. User and account-based smart ticketing systems can also combine transactions from multiple modes and enable the implementation of innovative pricing policies, billing customers once they have completed their trips – for example, applying daily, weekly, or monthly thresholds and/or discounts.
- Higher Revenues & Reduced Cost of Operation: By improving the customer experience, embracing technology and adopting innovative journey pricing, public transport authorities and operators are increasing their potential market size by encouraging a more efficient use of public transport. This, in turn, could increase revenue.
Additionally, as seen in London and other cities, introducing smart ticketing can dramatically reduce the cost of “fare collection” by reducing or eliminating operational and maintenance costs associated with ticket vending machines, turnstiles, and other physical equipment. As a result of upgrading the Oyster card system to enable contactless payments, Transport for London (TfL) was able to reduce its cost of fare collection from 14% to 9% of farebox revenues.
Also, since the beginning of 2020, the outbreak of COVID-19 has posed significant challenges to transport authorities and operators and the continued use of traditional ticketing systems. Many public transport operators temporarily disabled their physical ticketing systems to limit personal contact. Smart ticketing systems can significantly reduce physical interactions across the public transport ecosystem, thereby providing further benefits to users.
Main Challenges to Implementing Smart Ticketing
While the benefits are significant, the path to implementation is complex. The primary challenges are not just technological but also commercial, operational, and require deep cooperation between stakeholders.
1. Legacy System & Infrastructure Upgrades
The single biggest challenge is that legacy, card-centric (closed-loop) systems are not designed to incorporate new and emerging technologies. Their traditional card readers and backend systems cannot process open payments (EMV & NFC protocols) or recognise mobile tickets (QR codes etc.).
Hence, in most instances, the adoption of a fully integrated solution requires both the upgrading or replacement of existing physical equipment and considerable changes to backend systems and I.T. infrastructure to achieve the longer-term benefits.
2. System-Wide Interoperability & MaaS
For a smart ticketing system to work optimally, it requires interoperability between all transport modes to combine trip information, timetables, pricing policies, booking, and payment systems. Given the disruptive transport business models that have evolved in the past decade, this integration could potentially extend to non-government services, such as car sharing, e-scooters, and bikes.
Ultimately, this digitisation of data is the pathway to establishing a Mobility as a Service (MaaS) solution, which would facilitate the use of AI and machine learning to provide optimised travel and trip planning recommendations.
3. Stakeholder & Commercial Complexity
Implementation requires cooperation between numerous stakeholders, including transport authorities, transport operators, and ticketing systems vendors, to combine products and services.
Arising from this complexity, several legal and commercial issues may present themselves as challenges. For example:
- Existing Contracts: Existing smartcard vendors are unlikely to have contracts that require them to support the integration of newer technologies.
- Strategic Decisions: This may require detailed consideration of introducing and integrating parallel ticketing pathways versus the replacement of existing systems.
- New Tech Constraints: The adoption of newer technologies may come with its own constraints (e.g., the use of NFC technology has some limitations, as Apple requires commercial agreements with vendors for it to be used on iOS devices).
Smart Ticketing: Process Workflows
Tap On to Settlement
With open-loop smart ticketing, customers travel using the bank card or phone already in their pocket. The reader checks the card offline at tap on, so nobody waits for the bank. While the customer travels, the back office verifies the account with the issuing bank, and at tap off the trip is matched and the fare calculated.
At the end of the day, each card’s trips are combined into a single charge and settled through the bank. When a check fails, the card goes on the deny list and the unpaid fare is recovered.
The Banking Layer
Behind every tap sits a chain of payment parties: the operator’s back office, a payment gateway, the acquiring bank, the card schemes and the customer’s issuing bank. The issuer is consulted at most twice per card per day: an account check on the first tap, and a final authorisation for the day’s aggregated fare.
Approved charges are settled to the operator’s account, net of fees. Declines feed the deny list, and the operator carries the risk of an unpaid fare until the final authorisation is approved.
The Future of Smart Ticketing
In spite of the challenges outlined above, there are still multiple pathways for developing and implementing smart ticketing solutions across transport networks.
As mentioned above, TfL, with the support of Mastercard and Cubic, designed and implemented a system upgrade that introduced contactless payments to the London transport network in September 2014. By 2016, contactless payments on the Tube, commuter rail and bus networks were accounting for approx. 17 million journeys (45%) each week.
There are various other examples of transport authorities and operators implementing technologies that can be rolled out in parallel to existing smartcard and ticketing systems. One such example is the use of apps on mobile devices that detect passive digital tags at stops and on buses and trams in order to determine the trips made by the user. The user is then charged directly via the dedicated app. Alternatively, apps such as FAIRTIQ can be used to activate journeys without the need for validation equipment.
Given the well-documented issues with the implementation of ticketing systems, these parallel solutions are all progressive steps towards a more fully developed smart ticketing eco-system and potentially de-risks a number of key issues, including the complexity of a full rollout.
However, by comparison, Comutitres GIE, the French entity responsible for managing transport ticketing on behalf of RATP, SNCF and OPTILE, have recently engaged a consortium to replace all Ile-de-France bus and tram onboard ticketing platforms with next-generation technology. The new onboard ticketing platform will be one of the largest projects to be based on the Information Technology for Public Transport (ITxPT) specifications, which support the purchase and integration of interoperable IT architecture.
Similarly, the MTA in New York is progressively rolling out the One Metro New York (OMNY) contactless fare payment system, which, once completed in 2023, will fully replace the MetroCard (magnetic stripe cards).
These replacement projects potentially lend themselves to more robust and integrated longer-term solutions that not only deliver alternative payment and fare pricing, but through the integration of digitised data, provide a platform from which better and more efficient transport services can be provided.
The Next Frontier: Be-In/Be-Out (BIBO)
While many major cities are still navigating the complex migration to Open Payment (tap & go), a new frontier in ticketing is already emerging. Other cities are leapfrogging this step, moving directly to "Be-in/Be-out" (BIBO) systems that remove the need for tapping altogether.
The Anda app in Porto, Portugal, and the FAIRTIQ app (used in Switzerland, Germany, France, and Austria) are leading examples. These apps use Bluetooth technology to automatically detect when a user enters and exits the transport network, calculating the best fare and charging them without requiring any scanning or tapping.
Conclusions
The implementation of smart ticketing is a necessity for the ongoing efficient operation of our transport networks and whilst both routes, system upgrade and system replacement, have their merits, investment decisions will need to be made on the basis of specific circumstances i.e. existing technology, vendor contracting arrangements, complexity of network, interdependencies etc.
However, if the objective is to achieve an efficient federated transport model that ultimately integrates both public and non-public transport services, then the digitisation of (ticketing) data along with the development of interoperable IT architecture will be key to the success of any project.
How We Can Assist
At bpma, we possess the skills and experience to help transport authorities, operators, and cities navigate the complexities of smart ticketing transformation. We can bridge the gap between operating a legacy system and tackling the challenges of deploying effective, future-ready mobility solutions.
Our team provides expert strategic, commercial, and project management support across the entire implementation lifecycle:
With deep experience in program delivery, asset optimisation, and technology integration, bpma is more than an advisor; we are your implementation partner, dedicated to delivering a seamless, future-ready ticketing solution.
Key Terms & Definitions
Application Programming Interface (API) is software programming code that enables the transmission of data between two otherwise, unconnected software platforms or products.
EMV is an open-standard set of technical specifications for chip card payments and acceptance devices such as POS terminals, kiosks and ATMs. EMV stands for “Europay, Mastercard, and Visa”, the three companies that created the standard.
ISO/IEC 14443 is the international standard that defines contactless smartcards and the transmission protocols to communicate with them.
Open Payment refers to the ability of a system to process payments from multiple sources, using application programming interfaces (API’s) e.g. purchasing goods from a website using credit card, PayPal®, Apple Pay® or Google Pay® (as opposed to a business storing payment details and processing payments through their bank).
Magnetic Stripe (card) is a method of storing data by modifying the magnetism of tiny iron-based magnetic particles (in a north or south pole direction) on a band of magnetic material. The magnetic stripe is read by swiping past a magnetic reading head.
Mobile Ticketing is the process whereby customers can order, pay for, obtain and/or validate tickets using mobile devices, without the need of a physical ticket. The mobile ticket typically contains some of new verification, represented visual by some form of technology, such as a QR Code.
Mobility-as-a-Service (MaaS) is a type of service that through a collaborative digital platform enables users to plan, book, and pay for multiple types of mobility services. To provide benefits beyond existing “booking platforms”, MaaS requires access to improved user, demand and real-time data in order to anticipate the best combination of services.
Near-Field Communication (NFC) is a set of communication protocols for communication between two electronic devices over a distance of 4 cm (1 1⁄2 in) or less.
QR Code (abbreviated from Quick Response code) is a type of two-dimensional barcode. Data contained within the QR Code are extracted from patterns that are present in both horizontal and vertical components of the image.