Pearls of wisdom – how technology informs public transport

15 July 2014

Evolution in technology is seemingly a matter of everyday life and is helping business to develop at pace. Shashi Verma, director of customer experience at Transport for London, looks at the lessons learned from Oyster, and how contactless technology and new initiatives around fare management are enabling customers to reap the benefits of travelling on public transport.

London has always led the way with urban transport ticketing. Transport for London (TfL) has been issuing tickets for 150 years, but, in a modern urban transport environment, a ticket has no meaning. On our network, a ticket does not designate or guarantee a seat, and it does not specify a train or bus service - there are no first class carriages on our trains and buses. All we want from our customers is the payment for the journey they make.

With 12 million journeys being made every day on the Tube, London Overground, Docklands Light Railway and bus network, time spent buying tickets before travelling only creates unnecessary congestion in an already very busy environment. This is why we brought in the Oyster system, which, over the past 11 years, has doubled the speed of going through gate lines and boarding buses. Now, more than 85% of all journeys in London are made using Oyster.

But Oyster itself has its limitations, which is why, since 2005, we have been looking at what could come next to improve travel on public transport in the UK's capital. While much cheaper, easier and more efficient than regularly buying paper tickets.

Oyster still requires those who use it for pay-as-you-go travel to monitor and top-up their credit to ensure they have adequate funds to pay their fare.

This is time that customers could spend doing other things. We want our customers to be able to pay for their travel in the same way they pay for items in the retail environment - directly, with little fuss and with a smooth transaction process.

No touching

As a business, Oyster has drastically changed the fare collection process for us, improving speed and security, and reducing fare evasion in comparison with paper tickets. However, the technology and systems that were available to us when Oyster was first being developed have aged and do not always meet today's customer requirements.

The closed-loop nature of Oyster means all of the vital information is held on the card. This limits its efficiency - a top-up or refund can only be activated by contact with a reader at a station, for example, which is a cumbersome process. Oyster, in its current form, is becoming a redundant business process that we are moving away from for the benefit of our customers and our business.

"By eliminating the step of converting their money into ‘our money’, the network is opened up for customers to travel more freely and makes public transport more attractive to irregular users."

In 2005, we set a challenge for the Massachusetts Institute of Technology to help identify a means for our customers to pay their fares in a way that would maintain all the benefits of Oyster but be more convenient, and time and cost-efficient.

They looked around at what was at the forefront of technology and concluded that, with the breakthrough of EMV (Europay, MasterCard and Visa) technology - bank cards having the same contactless functionality of other smartcards such as Oyster - that this was where we should be heading.

The appeal of contactless payment was obvious: rather than putting up a barrier requiring our customers to have some form of ticket before travelling, we wanted to make our system more available by simply asking for a payment for the journey, debited directly from the customers' debit, credit or charge accounts - just like in the retail environment.

By eliminating the step of converting their money into 'our money' before travelling, the network is opened up for customers to travel more freely, and removing this barrier makes public transport more attractive to irregular users, getting them out of cars and onto more sustainable modes of travel.

Contactless payment cards started being rolled out in the UK in 2007, with the payments industry focusing on London first. The range of retail outlets where contactless payment cards can be used continues to expand, and the UK Cards Association says that the number of contactless transactions in the UK grew from 25 million in 2012 to more than 96 million in 2013.

We launched contactless payment on London's 8,500 buses, where a flat-fare structure made it more straightforward and there was already a receptive audience, in December 2012. On the first day, more than 2,500 journeys were made using a contactless payment card.

The world is no longer London's Oyster

Today, an average of more than 46,000 bus journeys are made each day using a contactless payment card, and around 1,000 of these are first-time users.

The speed of take-up has been encouraging and has given us confidence that the expansion onto the Tube and rail network later this year is appealing to our customers.

Delivering contactless payment card acceptance in the transit environment has not been simple, however, and, most importantly of all, it required a new transaction model to be developed. Some of the rules around how contactless payment cards work in the retail environment, such as requiring a PIN to be entered after a set number of transactions, needed to be tweaked for it to be a viable payment method on the transport network.

"We anticipate that the majority of our customers will identify with and take advantage of the ease and convenience of paying their fares with the same card they use to pay for their morning coffee. "

The development of this new transaction model was not an easy process. Aligning the business processes from two different industries - transport and finance - was challenging, but TfL's pioneering work with the card payments industry, including the card schemes of Visa, MasterCard and American Express, has resulted in a model that will not only work on London's complex system but could also be adapted for other networks around the world.

To support this new transit model, and to move our fare collection system away from the aging Oyster technology, we had to build our own back-office technology.

This allows us to have a more flexible charging system that can be better adapted to meet the needs of the mayor's fares policy and to provide better customer service to our millions of passengers.

By building our own back office, we are able to look even further into the future at ways that contactless payment cards may be used by customers who usually purchase season tickets. While we progress towards the public launch of contactless payment card acceptance for pay-as-you-go users on the Tube and rail network, we are again working hard behind the scenes towards reaching a world where the touch-in of a contactless payment card can be associated with an electronic token recognising a season ticket for that customer.

With all the technological advancements we are making, we still recognise that not everyone is ready or able to move at our pace. We anticipate over the next few years that the majority of our customers will identify with and take advantage of the ease and convenience of paying their fares with the same card they use to pay for their groceries or morning coffee.

However, for the remaining customers, we will continue to have a smartcard like Oyster that can be loaded with credit or used by our customers travelling on concessions.

Having done all of this work, we are now in the position of being able to share our expertise with other transport operators. Further, we have created an opportunity for smaller transport operators across the UK to adopt contactless payment card acceptance themselves without the overheads and challenges that we have overcome.

This also allows us to take advantage of a commercial opportunity - we could theoretically provide the process and settlement service for other transport authorities within our enormous back-office machine. It's a service that would help us maintain funding to continue improving London's vast transport network while giving support to our industry colleagues.

Transport authorities globallyhave been watching London with interest. As a world first, London's implementation will encourage similar systems to be adopted on other networks worldwide - just like they have with Oyster.

Shashi Verma is director of customer experience at Transport for London. He is responsible for the operation of TfL’s revenue collection system – including the Oyster card, the largest smartcard-based ticketing system in the world; advising the mayor of London on fares and ticketing policy; and for running TfL’s customer service operations.

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