Making cashless fare collection work

Cashless fare collection is in the headlines because of how it affects commuters and the public transport industry. There are manifold reasons automatic fare collection (AFC) is crucial in delivering a high-quality public transport system.

For commuters, AFC makes paying fares faster, more accurate and more convenient, and shortens travel time by allowing them to board and alight faster. It also makes traveling safer, because pulling out your purse or wallet to make a payment can attract undue attention; and reduces risks of coronavirus transmission by avoiding cash handling or interacting with a conductor. And with information technology-based fare calculation, the amount collected is not subject to the judgement or discretion of the driver or conductor.

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For transport operators, a cashless fare collection system reduces revenue leakages related to cash handling. Costs can be reduced with less need for conductors, cash counters and security guards. In South Korea, for example, transport operators reported a 17-percent increase in collections after switching to an AFC system, indicating that cash leakages had been significant. There is likely to be fewer robberies on buses and jeepneys if no cash is being collected.

For the government, AFC offers a reliable means of collecting travel data and monitoring transport operations, facilitating the regulation of transport services. Real-time data can be used for transportation planning and shared with passengers for their convenience. For instance, a well-designed AFC system can inform passengers in real time about the number of available seats on a bus or the level of crowding. The government would be able to implement an integrated fare structure across different transport modes — so that a commuter transferring from one bus to another or transferring from train to bus can be charged a single base fare for a journey involving one or more transfers — with the fare calculated based on the total distance traveled, regardless of the number of transfers.

We should aim to have an “interoperable” card, one valid on all public transport and in different cities. A card from Manila should also be used in Cebu or Davao. Cards should be available for purchase and loading at all banks and convenience stores, with reasonable fees for loading. For maximum convenience, the fare collection system should accept all kinds of fare media — quick response (QR) codes, mobile phones, credit and debit cards — as they do in many cities in China and South Korea. (A cautionary note: while QR codes are a low-cost alternative to cards, the devices that read QR codes for payment need to be online. This means QR code-based payment systems rely on continuous access to high-quality internet services.)

It will be important to design the AFC system so that it offers the features and benefits expected by commuters, the transport industry and the government. If the AFC industry evolves haphazardly without a clear direction and we end up with a cumbersome payment system, we all lose. While the coronavirus pandemic lingers, there needs to be careful planning of any expansion of the system, so that inconvenience to riders and disruption to transport operations are minimized.

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How do we transition smoothly to a user-friendly cashless fare collection system? For many commuters, paying the full cost of the stored-value card is prohibitive (the full cost is P80, according to AF Payments Inc.). The cost of the card should be affordable to the vast majority of people. While it is tempting to pass the burden of “free” card distribution to the private sector, it is not realistic. To expect AFC providers to give out cards for free may render their industry unviable or limit the scale of the card distribution significantly. Because of the importance of moving to cashless fare collection as soon as possible, the distribution of stored-value fare cards should not depend on the generosity or capacity of the private sector.

Because cashless fare collection is a high priority, the government should find the budget for it. Because President Rodrigo Duterte has expressed support for subsidized card distribution, the Department of Transportation (DoTr) can tap the President’s contingent fund for 2020. An P80-million budget is enough to procure 1 million cards. For 2021, additional funds should be earmarked in the national budget to procure and distribute, say, 3 million cards more.

The DoTr has suggested that cards should be given away for free. This is a bad idea. If this happens, they might just be discarded after each use, which would be a waste. Even those who already have one would ask for a free card. If the card is subsidized, there should be some nominal cost to the user for getting one, so that he or she is motivated to keep the card. A token amount of P10 to P20 is suggested as the subsidized sale price of the card. It is also a good idea to offer discounted fares with the use of fare cards; there should be some incentive for going cashless.

The government should take steps to create an “interoperable” AFC system as soon as possible. This is to avoid a situation where there are several different fare collection providers, all operating as “islands.” This situation would be very inconvenient for commuters who would need to carry several different cards in their wallets or purses. For this system to materialize, the DoTr needs to announce national technical standards and specifications for AFC fare media (cards, mobile phones, QR codes) and for card readers/validators and other devices, and AFC industry business rules on how clearing and settlement will take place among different AFC service providers and issuers of fare media.

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Once the standards are announced, a deadline can be set for full compliance, together with
a target date for the start of the interoperability of the different AFC systems.

It would be desirable to include a user registration system as an option, so that the cards, upon request, can be coded to enable the application of discounts (student, senior citizens, persons with disability). User registration would also facilitate contact tracing. A budget should be provided for the registration process, or this can be funded by the collection of small fees that are charged for the cards.

AFC is a key ingredient in a high-quality, customer-friendly public transport system. It was a neglected area for several years. The solution lies in clear policy direction and effective regulation by the DoTr.

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Article and Photo originally posted by The Manila Times last October 10, 2020 and written by Robert Siy.

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