U.K. pushes for smarter mobile fare payments

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The U.K. government is consulting with train operators on smart pay-as-you-go ticketing. The goal is to enable consumers to travel across the U.K.’s entire railway network by tapping in and out with contactless cards or smartphones instead of paper tickets.

But nationwide deployment would require the U.K.’s multiple transit companies to agree on business models, standards, and distribution. They would also need to decide whether to implement smart ticketing based on open-loop payment cards or on dedicated transit smart cards.

The Department for Transport says smart ticketing ensures a fairer, simpler travel fare system. It will save consumers money by automatically calculating fares on the go, and could lead to increased train travel. Consumers would pay for their actual journeys rather than fixed fares, as is the case now.

Contactless payment cards can already be used to buy paper tickets across the rail network, but the new model would enable travelers to use contactless cards as tickets.

The three-month consultation launched by the Department for Transport in February 2019 has three aims:

  • To determine how a pay-as-you-go rail network would work;
  • Where a pay-as-you-go travel area in the South-East of England would cover, as the next step towards the Department for Transport's ambition to deploy pay-as-you-go on urban and regional train networks across the U.K.;
  • The changes to fares that could be made.

The consultation document says that moving to pay-as-you-go ticketing follows the changing nature of U.K. travel, as many people are no longer daily commuters. Yet return and weekly tickets are priced on the assumption that people travel to work during peak periods when tickets are more expensive.

The Department for Transport wants to replicate across the U.K. the success of smart ticketing in London, where 50 percent of all pay-as-you-go Tube and rail commutes involve contactless payment or mobile devices.

“Contactless payments for travel across London spearheaded rapid U.K. adoption of contactless cards,” said Zilvinas Bareisis, senior analyst for Celent. “In London, due to open-loop [pay-as-you-go], customers no longer need to buy or top up Oyster dedicated London transit smart cards. The smart ticketing system tracks their journeys and ensures they pay the best price. Extending this beyond London would bring similar benefits to travelers. But it would require investment to upgrade turnstiles with contactless readers, and to ensure the system can support or simplify various types of fares.”

The Department for Transport initially proposes extending Transport for London's system to the regions surrounding London as a starting point. Firstly, pay-as-you-go is being rolled out to 13 national rail stations near London operated by Govia Thameslink Railway. It will be expanded further to include commuter towns including Luton and Welwyn Garden City later this year. The Department for Transport is considering extending pay-as-you-go travel even further across the South-East to cities such as Brighton and Milton Keynes.

In 2016, Transport for the North started a £150 million project to build pay-as-you-go smart ticketing for the whole of the North of England similar to London.

“The plan is to offer both contactless bank card and transit card acceptance,” said John Elliott, head of transit at U.K.-based Consult Hyperion. “The contract tender responses for the back-office needed are currently being evaluated. If the Transport for the North system is built, the first regions in the North might launch in 18 months to two years’ time.”

Pay-as-you-go contactless bank cards are most suitable for short- or medium-distance commuter journeys or for wide travel areas with low-cost fares, according to the Department for Transport.

“City [pay-as-you-go] schemes like London's are based on a maximum fare of maybe £10,” Grant Klein, PwC UK's transport leader, said. “That’s low enough for a city transit authority to take the risk of losing some fares, and to not deter customers. They know it’s the maximum fare they’ll be charged if they forget to tap in or out."

In the U.K., contactless transit ticketing is restricted to urban travel in larger cities including London, Manchester, Newcastle and Birmingham. The five national bus service operators all accept contactless card payments.

For inter-city rail travel, people can buy tickets online or via mobile apps. Mobile tickets displaying QR codes can be used across England and Wales but not yet in Scotland. Printed e-mailed tickets can be used only on two English rail networks. In London, passengers have the choice of Oyster cards, contactless payment cards or smartphones.

As Oyster was introduced in 2003, it isn’t compatible with smart cards being adopted by other U.K. transit schemes, which are based on newer technology. Also, Oyster is built to support limited numbers of fares, so is restricted to mainline train stations near London.

Klein said moving to smart ticketing isn’t simply about eliminating paper tickets.

“The way to incentivize smart ticketing is if there is a cost-saving — making a smart season ticket cheaper or committing to the lowest fare,” he said. “Our survey of travelers in the Midlands and North of England showed they would make between 1.1 and 1.4 more public transport journeys a week if there were one or more features of smart ticketing.”

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