The Increasing Adoption of NFC in Public Transportation

  Mar 2, 2018 4:46:46 AM

In 2015, 243 billion public transport journeys were made in 39 countries around the world. About one third of the world uses smartphones and the smartphone adoption rate will continue to grow. Commuters are looking forward towards adoption of mobility in all aspects of the transit – such as information lookup, journey planning, ticketing and more. Transit agencies along with connected hardware and software ecosystem have been focussing on bringing in value here. This blog focussed on adoption NFC for ticketing and other value adds from the perspectives of commuters, Transit Agencies and ISVs.

Why NFC
Near Field Communication is a short range wireless technology that enables bi directional communication between two electronic devices. The information exchanged via NFC is not only encrypted, but also dynamic. This means, if the consumer is paying via say Apple Pay®/Android Pay®, the information exchanged between the smartphone and the bank is tokenized. NFC technology will be adopted in two out of every three smartphones by 2018.

Commuter convenience
Typically held in hand, smartphones eliminate the need for searching exact change in one’s purse/wallet and smartcards. 92% of the commuters are ready to adopt paperless travel as per a global survey. NFC transactions eliminate ticket vendors and queues thus reducing the frustration from other passengers. The passenger can make the NFC facilitated payment of credit/debit cards, pre-paid tickets, traveller passes etc from the smartphone. The ticket is stored in the phone.

Beyond ticketing, the commuters can tap on to vast array of benefits. These include lookup of timetable and live update of bus schedules, availing travel discounts, location based services, emergency calls, information lookup, ordering food, parking access, taxi services, and more. The NFC tags can be embedded on posters, buses, trams, etc to provide these services.

Benefits for the PTO
In sum, transit agencies have realised that they can increase revenue, improve operational efficiency and provide better class of services by adopting NFC.

Consider the case of New York Metropolitan Transportation Authority. 160 million cards were printed in 2013 at a cost of $9.5 Million. The cost of each ticket vending machine is $50K. One must also consider the cost of repairs and support for each machine. Again cash handling in the vending machines brings in its own overhead. Moving to a simpler system where the commuter pays via NFC from own smartphone will cut down the costs and complexity enormously. Not to mention the validation equipment for NFC technology cost less than specialist validation machines.

Visual inspection of tickets can be avoided. The risk of fraud is cut as counterfeit ticketing becomes a thing of past. Gated fare entry/exit can be managed via NFC. As consumers are adopting mobility lifestyle, transit agencies see opportunities to tap on to new value added services. Transit Agencies can enable the commuter to purchase newspapers or food from vending machines and access to lockers via NFC inside the terminals.

Role of the ISV
ISVs design integrated transit apps – integrating NFC based ticketing, location-based offers, trip planning, promotions and discounts, loyalty rewards, mobile marketing in transit venues and other services. The apps can influence consumer behaviour and comfort level with making mobile payments in other venues and for higher-value purchases.

Many commuters take up multi-modal transportation, spanning across multiple PTOs/transit agencies. The ISVs can provide integrated planning, unified fare management and payment solution powered by NFC technology. Additionally at the backend, the ISV can provide blockchain enabled software to transparently manage revenue sharing between the PTOs/transit agencies. Taking this one step further, ISVs can enable NFC based payments outside transit areas and go for bundled ticketing.

Market Adoption
The first studies for NFC adoption began a decade ago with ITSO concluding that the NFC technology works and the commuters responded very positively. Some recent examples:

1. Barcelona ATM includes 74 PTO, covers 3240 square kms and serves more than 5 million passengers via all forms of public transport. ATM has deployed NFC based solution for ticketing.

2. In 2014, 22 million commuters in Beijing, could pay via NFC for city buses and metros by simply tapping their smartphones on the contactless ticket readers.

3. In South Korea, it is estimated that more than two million people paid the transit fare using NFC handsets accepted across buses, subways and taxis.

In general, several cities in European Union have adopted NFC in transportation. To conclude, with increasing NFC smartphones and with PTOs/transit agencies enabling NFC based payment, NFC adoption in public transportation will continue to grow for the next few years.

Author: Niranjan Rao, Business Development Manager, Digital Transformation Services

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