Published on December 19th, 2015 | by Rocky Mountain Institute3
Integrated Mobility Payments Are The Future Of Transit
December 19th, 2015 by Rocky Mountain Institute
Originally published on RMI Outlet.
By Kelly Carlin and Charlie Johnson
Imagine you walk out the door to start your daily morning commute. You hop into a rideshare and head to the nearby light rail station. While on the train, you read a few articles to prep for work. Just before arriving at your stop, you get a notification on your phone of a discount at a local coffee shop, so you grab a quick latte, then ride a bikeshare for five blocks to arrive at the doorstep of your office ready for your day.
Today that might seem like an expensive and complicated trip to organize and pay for. Is your credit card up to date on your rideshare app? Does your metro card have sufficient value? Did you remember your bikeshare key?
Driving may sound easier despite the inevitable traffic and mandatory participation in the parking games. However, an integrated mobility system—where you can plan, book, and pay for multiple modes of transit to get you from point A to point B—that makes this trip as intuitive as driving a personal vehicle is not as far off as you might imagine. In particular, there has already been dramatic progress around the globe in building payment systems that enable travelers to seamlessly pay for many modes of transit—everything from trains and buses to taxis and private ferries—and we expect even more exciting developments to come.
Integrated Mobility Payments
Integrated mobility payments will significantly change the way we interact with transit. When envisioning and building a truly integrated payment system, it’s important to look at five core components:
- Multimodal Compatibility: The more modes of transit that you can pay for in one place, the more seamless your journey can be. There’s no limitation—rail, taxis, bikeshares, buses, carpools, ferries, and more.
- User Interface: There are many current technologies for integrating payments across modes. Smart cards dominate public transit today, but mobile ticketing—paying with a smartphone and using it as proof of payment—is on the rise, and soon we may not need tickets at all.
- Unified Pricing Structures: A user shouldn’t have to pay for each leg of a trip just because it involves a subway, bus, and a carshare. Instead, we ought to pay the same way we plan—for an entire trip from A to B. That may involve time or distance-based pricing or discounted fares when we connect private and public travel.
- Geographic Reach: Just like compatibility across modes, travelers win if payment systems are interoperable within an entire metro region, even when crossing agency jurisdictions. Even better if our payments function across broader geographies like an entire state.
- Beyond Transport: While not core to a traveler’s mobility experience, services such as parking, retail shops, tourist attractions, and even EV charging can be folded into the same system. Some payment systems even incorporate business strategies such as customer loyalty programs, travel incentives, and bundled event tickets.
The 5 Components of Integrated Mobility Payments
A Proven Concept
A fully integrated payment platform might seem like a pipe dream, but the individual pieces are already being implemented around the world. It’s only a matter of time before these pieces are combined together into more ubiquitous systems.
While integrating a taxi and a bus on the same platform may sound like a stretch, consider Hong Kong’s Octopus Card, with which you can pay for heavy and light rail, trams, public and private buses, taxis, and private ferries, among other services.
New Yorkers might see mobile ticketing as a concept that keeps getting delayed, but if you live in Portland, Oregon, mobile ticketing for public transit is old news thanks to TriMet’s mobile ticketing app.
Unified pricing structures—paying one price for an entire journey rather than paying separate fares for each mode of transport used—can be another sticking point, but again there are promising examples. Singapore’s public transit has been operating since 2010 with a distance-based fare system that does not penalize travelers for using multiple modes in one journey.
Finally, exciting companies are leading the way in offering full-service solutions. Germany’s Moovel and Qixxit are two mobile apps that can handle payments for public transit as well as many forms of private transit, such as Car2Go and BetterTaxi. Moreover, these apps combine route planning, ticketing and payments, and real-time updates all into one slick interface.
Mobile Ticketing Leading the Way
While smart cards have been a critical driver of modernizing and integrating transit payments, mobile payments are the next wave of progress. Already, at least 12 public transit agencies in the U.S. have some form of mobile payments for transit, and there are likely to be many more soon.
An increased role for mobile is no surprise, yet the numbers driving the trend can still be quite staggering. In 2015, smartphone penetration reached 75 percent of all mobile phones in use in the U.S.; 64 percent of phones shipped globally are expected to be NFC-enabled by 2018 (a method of wireless data transfer that allows devices in close proximity to communicate without the need for an Internet connection); and the U.S. market size for mobile payments is expected to more than double over the next four years. As consumers become more adapted to using smartphones for everything, transportation will likely be no exception.
This trend is favorable for a broader mobility transformation because mobile ticketing and payment systems can easily be combined with other components of multimodal mobility on demand—route-planning software and real-time data updates, in particular. In other words, your smartphone can be the center of your travel experience. Mobile ticketing systems also carry a distinct advantage for public transit agencies especially, as mobile systems are generally easier, cheaper, and more flexible to implement compared to systems that require extensive infrastructure.
A $9 Billion, 10-Megaton Opportunity
In addition to offering an enhanced user experience, integrated mobility payment systems are an immediate economic opportunity for public transit, private transit, and technology providers alike to the tune of approximately $9 billion annually in new revenue and cost savings. Moreover, integrated payment systems could reduce annual carbon dioxide emissions by 10–15 megatons by shifting personal vehicle travel to other modes, helping cities and states reach their climate commitment goals while reducing congestion by lowering personal vehicle travel.
Any transit provider, public or private, should be excited about integrated payments for the potential increase in ridership and the associated new revenue. Connected services also means near-free customer lead generation for transit providers. For those that operate on a contract basis, such as a private bus company, lead generation can make or break a business. But user-oriented providers like rideshare companies also place a high value on customer acquisition, sometimes going to great lengths to lure customers, such as offering 10-minute champagne deliveries. Study after study indicates that reducing inconvenience can improve a traveler’s likelihood of using alternatives to personal vehicles.
Public transit agencies spend a hefty chunk on fare collection—up to 14 percent of their budget. That means public transit agencies stand to save on operating costs if they can shift to cheaper models of fare collection. One study indicates a potential 75–80 percent savings on fare payment infrastructure for agencies that adopt a fully mobile payment system.
And that’s just the tip of the iceberg in terms of value. The mobile advertising market is booming, and the more we use apps in conjunction with mobility, the more new ad revenue potential for transport providers.
Finally, as different forms of mobility are connected through a payments platform, troves of new data will be created, providing value to transport providers and city planners alike to create pedestrian-friendly, vibrant cities of the future.
Users in the Driver’s Seat
Integrated mobility payment systems are an exciting concrete step towards a broader mobility transformation. The developments we’ve seen in transportation payments over the last five years have been dramatic, and we don’t expect this to slow down. Integration, connectivity, and simplicity will be the key trends to watch.
As users, the best way we can shape the options we’ll have in the future is by expecting the best of our products and services in the present. The next few years will be a good time to experiment with new services as they arrive. You might be surprised at the results.
Image courtesy of Shutterstock.