Operators Are Poised To Reap Smart Card Benefits

International Railway Journal, Feb, 2000 by Trevor Crotch-Harvey

Automatic fare collection (AFC) has emerged as the early mass adopter of contactless smart card technology, with more than 50 million contactless smart cards supplied so far. Forecasts of exponential annual market growth over the next few years make transport one of the fastest growing smart card applications in the world. Consequently, rail and other transport operators are poised to use this base of cardholders for other new applications and services for their riders.

TRANSIT riders want shorter queues, a convenient method of payment across all modes of transport, and routes and schedules tailored to their needs. Rail operators want more riders, lower costs, and fraud reduction. AFC systems using magnetic stripe cards fulfill those wishes to a certain degree.

Magnetic stripe cards eliminate the need for coins, banknotes, tokens, and tickets because they store value. They expedite passenger boarding and help eliminate human error associated with paper-ticket/collector systems. However, they have their limitations.

A new alternative for AFC and transit revenue management systems is contactless smart cards. Combine this technology with the trend towards outsourcing a total solution that provides systems, services and operations, and you have the next generation transit payment system that is able to achieve a new standard of passenger convenience and operator efficiency.

Smart cards are already being used by millions across the globe to make life easier for consumers and transit operators. They can accept, store, and send up to 100 times more information than magnetic stripe cards. This memory feature, along with the capacity to run contactless applications, sets the smart card apart from its magnetic-striped counterpart.

To run contactless applications, a reader emits radio signals picked up by an ultra-thin antenna embedded in the card. When the smart card passes within 10cm of a reader, the radio signal activates the chip, sending data back to the reader. The readers are linked electronically to the station's computer mainframe.

In most cases, riders don't even have to take the cards out of their pockets for fares to be deducted, reducing queues and boarding time for all passengers. Significantly, this makes the smart card easier to use for disabled passengers.

It is estimated that magnetic stripe ticketing systems incorrectly process one in every 300 tickets, resulting in noticeable loss of revenue. The electronic smart card system, in contrast, fails only once for every 100,000 uses.

It is estimated that fraud eats-up between 5 and 15% of fare revenue in paper and magnetic stripe systems. With electronic systems, complex hardware and software firewalls designed into the card architecture decrease fraud by protecting data from unauthorised use or distribution.

While admittedly more convenient than cash and tickets, mechanical magnetic-stripe systems require considerable maintenance. For example, according to an article in the July/August issue of Card Technology magazine, 60 workers on the new Guangzhou metro in China spend their entire day cleaning dust and grease from commuters' fingers out of magnetic-stripe card readers at 19 stations. The contactless feature of the smart card system eliminates this problem.

Many cities have several different transit systems with one or more operators. It was impossible to know exact passenger routes, so deciding how revenue would be shared ranged from a rough guess with iniquities to a show-stopper issue that prevented cooperation and forced passengers to buy separate tickets. Smart card systems have sophisticated data collection and back-office analysis capabilities to provide all operators with exact and current information on actual end-to-end trip patterns so that traffic flow and volumes are calibrated precisely. This results in more accurate revenue sharing. Systems also provide everything needed to settle and transfer funds daily between many operators and systems.

One card gives the holder access to trains, light rail, buses, and ferries. The chip's advanced memory capacity allows for variable fares based on travel frequency, trip length, time of day used, and eligibility for senior, student, or disability discounts.

Other benefits include lower trip costs and improved service as operators learn more about commuting patterns and volumes. The chip's memory facilitates gathering information about the habits of riders, enabling operators to streamline routes and schedules and target marketing campaigns. The system gives agencies the option of implementing frequent rider schemes or special offers to encourage occasional riders to make greater use of the transit network. The smart card system also simplifies administration, encouraging organisations to make broader use of available subsidies.

For example, in Berlin, riders benefit from the convenience of a contactless smart card and a single multi-modal, multi-operator "tick.et" that works transparently to the passenger. The groundwork exists for e-purse applications allowing riders to purchase a cup of coffee and a newspaper, board a bus, and transfer to a metro or taxi without searching for cash. The smart card can be reloaded via add-value machines. A popular feature is the auto-reload mechanism that automatically downloads a pre-agreed amount from the cardholder's bank account onto the card when the balance falls below a designated level. These "linked applications" offer convenience to riders, incremental revenue for transit operators, and revitalisation of the station as a business hub.