We love cities because they act as creative magnets, bringing work, culture and entertainment opportunities together to create rich, vibrant menus. But crowding and congestion is taking its toll and far too often city travel is both complicated and frustrating.

The way we pay for travel is at the heart of much of this frustration.  Reforming transit payment systems is key to encouraging increased use of public transport networks and creating sustainable cities.  MasterCard commissioned the Future Foundation to research the views of a range of global transport commentators (and everyday citizens) on this critical topic. Here’s what we found…

The dangers of complexity

City authorities want to make multi-modal journeys – i.e. ones where you might first take a bus, then hop on a train and finally switch to a shared bike – as effortless as possible.  Many, however, maintain separate payment systems for each mode of transport, which adds time and stress to a single journey.

This can have a considerable negative impact on travelers.  The Future Foundation’s report found that, for travelers, the fear of missing a connection was the most frequently cited cause of anxiety. UCLA urban planning expert Professor Martin Wachs explains: “We psychologically weight the time we spend [changing transport modes] two or three times as heavily as we weight moving time.”

The benefits of a single payment system can therefore be profound. It can improve travelers’ confidence dramatically, leading to more people using public transport. When combined with flexible pricing to spread passenger loads through the day, it also provides a means to manage increasing demand, culminating in less crowding in ticket halls, faster boarding and more services running on time.

A lack of compatibility

Plenty of cities have experienced real improvements to their networks by implementing this kind of single payment system – Hong Kong, for example, has its ‘Octopus’ systemwhile London has ‘Oyster’. But if we take a global view, we see that almost every city has its own way for people to pay for public transport; some use cash, tokens or one-time tickets, while others use multi-use swipe or contactless smartcards. In Europe alone there are over 100 national or city transport smartcard programs and very few – if any – are compatible.

While the benefits of each system are felt by residents, they are typically viewed as strange, unfamiliar things to visitors. With the World Tourism Organization predicting that international arrivals will increase by nearly a billion between 1995 and 2020, cities will ultimately bear the adverse effects of this lack of compatibility:

• Visitors find public transport so baffling that they give up completely and stick to taxis. This drives traffic congestion, which is a material contributor to lost business efficiency and a significant source of air pollution.
• There is potential loss to the local economy. Visitors who could have made additional stops to eat and shop locally within the city during their stay are deterred from doing so by the ‘hassle factor’.
• For the journeys that visitors do make, the city bears the costs.  This takes the form of educating visitors as to how the transport system works, providing them with retailing facilities, and resolving issues such as lost cards and failed transactions.

Technology as a unifier

A significant opportunity exists to link these disparate urban transport networks to a global framework. Over the past decade there has been a convergence of the ticketing and payments industries. Chicago, for example, has already implemented the use of ‘contactless’ general purpose payment cards across its whole transport system, while London has introduced it on its 8,500 buses.

This sort of integration gives visitors confidence that they can pay fares with the card that they brought with them from home.  In the first nine months of contactless payment card acceptance on London’s buses, for example, MasterCard processed transactions from cards issued in more than 35 countries. Reduced complexity in the system and increased traveler confidence ultimately means more business being done in the city.

Smartphone development adds a further layer to payment integration, offering travelers a navigation device as well as a means of universal payment. The public clearly recognizes the smartphone’s potential, with over half (55%) of the Future Foundation’s international research sample displaying an interest in using one as a means of accessing public transport. This includes over a third (36%) of leisure travelers in the U.S., two-fifths (43%) in the U.K., three-fifths (58%) in Brazil, and two-thirds (64%) in South Korea.

Significantly, a majority of current smartphone users – particularly in emerging markets – would consider using their phone to pay for services in the future.  Over three-quarters (76%) of South Korean citizens would consider this, but agreement levels are even higher among urban Chinese (81%) and urban Indians (79%), with Brazil (67%), Argentina (66%) and Australia (51%) following behind. This willingness to embrace technology offers huge potential for city transit operators in these markets.

Collaboration to a brighter future

Whether channeled through universally accepted payment cards or smartphones, the consolidation of travel payments promises significant benefits, both to consumers and cities. It relies, however, on collaboration between disparate groups that are inherently ‘local’ in nature. Transit operators need to stop viewing ‘not invented here’ as a bad thing and should look outside their own borders to share data and support innovation in this space with peers, as well as with global transit and payment industry leaders. Unfortunately, this isn’t currently happening at scale.

While there is evidently much more to the city experience than payment systems, the importance of how we access travel services should not be underestimated.  If city transit operators can embrace smarter solutions on a global scale, the results could be transformative.

To read the full MasterCard and the Future Foundation report on Connecting Cities, “Mobility: The key to unlocking the potential of cities”, please visit http://newsroom.mastercard.com/documents/report-connecting-cities/.