Memorandum from TransAction Resources
Ltd (TPT 14)
1. EXECUTIVE
SUMMARY
The ITSO organisation has developed a standard
for interoperable transport ticketing that has been recognised
through its adoption as the basis for ISO 24014-1, the new international
standard for Integrated Fare Management System architecture.
However, the time has come to move from development
to implementation in a timely fashion, and this raises the question
of funding and the business case. It is extremely difficult to
drive the adoption of new technology if the business case is not
sufficiently robust. Organisations are reluctant to invest precious
funds without some projected return that may be quantified.
The ITSO standard includes a stored value e-purse
that, if activated, has the potential to deliver a future income
stream to ITSO and its members. This revenue may be used to strengthen
the business case significantly and to offset the costs of implementation.
It is recommended that a policy be adopted which
recognises, and allows for, this future potential in a way that
does not detract from the delivery of the ENCTS within the required
timeframes. As the e-purse is already in the technology platform
there should be no apparent conflict.
It will also be critical that a sufficiently
secure ITSO compliant chip is chosen, unlike the Oyster card and
the Scottish Entitlement card, to allow the adequate protection
of cardholder funds in the future. The cost of these chips has
fallen significantly in recent years and they are now much more
affordable.
2. INTRODUCTION
TransAction Resources is a specialist consultancy,
founded in 1994, which operates in the field of electronic payments
and loyalty. Our client base consists of large retailers and merchants
in many countries and also the Victorian and Federal governments
in Australia. We have people based in both Australia and the United
Kingdom.
Of particular relevance to this inquiry, is
our experience gained during work for the Transport Ticketing
Authority (TTA), a state Government Business Enterprise which
has responsibility for implementing the New Ticketing Solution
for trams, buses and trains (both rural and metropolitan) across
the state of Victoria. A contactless smartcard, branded "myki",
will be piloted during 2007 and will replace an existing paper
ticket system.
We have been involved in the development and
implementation of a Payments Strategy and a Retail Strategy for
the TTA which will contribute to minimising their costs, generating
some income, and encouraging take-up and usage by the travelling
public.
As a consequence of this experience, we have
been closely studying the UK transport market, with a specific
focus upon ITSO, its present status, and potential opportunities.
Also in the transport sector, we have done some
work in relation to the proposed EU implementation of an interoperable
road user charging system that would allow heavy goods vehicles,
and later motorists, to travel across the EU Member States using
a single electronic "tolling" device. Our work related
to the payments and clearing requirements of such a system, and
how these might best be implemented.
3. RESPONSES
TO QUESTIONS
3. Is the industry taking up modern smartcard
technologies adequately and appropriately?
The ITSO organisation has done an excellent
job to develop and deliver an interoperable technology standard
that has the potential to operate across the UK, and possibly
internationally as well. To achieve widespread implementation
in a timely manner, however, sufficient funding is required.
The UK approach has been to encourage local
authorities and transport executives to implement local programmes
and to establish their own business case for doing so. The initial
costs of implementing a smartcard based transit system are high
and economies of scale are reduced if a fragmented approach is
taken. Funding is often not available for large scale card issuing,
on-vehicle and on-station equipment and its installation, plus
associated implementation and transition costs.
If a means can be found to generate a future
income stream from ITSO transit smartcards, then the business
case becomes easier to establish and a projected return on investment
may be quantified.
The ITSO technology platform includes a secure
e-purse, which can store value and can be used to make payments
for travel, and potentially to make payments for other non-transit
products and services. Merchants accepting electronic forms of
payment such as credit and debit cards pay fees for each transaction.
This would allow the ITSO organisation, and its members, to generate
a future income stream to offset the cost of implementation.
It is clearly understood that the short term
priority will be the delivery of the ENCTS and that other projects
must not interfere with, or divert resources from, achieving this
goal. However the basic platform for a future e-purse already
exists in the ITSO standard and therefore, provided a sufficiently
secure chip is chosen, there is no need for this future potential
to impact upon ENCTS delivery in any way.
Indeed, if the organisations charged with implementing
ENCTS understand that a future income stream is available to them,
they may be encouraged to invest in this project much more readily
than if that potential is denied them.
5. What can be learned from the experiences
of areas such as London and Scotland where smartcard technology
is already in place?
In addition to the Oyster card in London, and
the ITSO smartcard in Scotland, it is also worth considering the
Octopus programme in Hong Kong. The Octopus transit smartcard
is now also used for non-transit payments and is widely held and
used by the travelling public.
The Oyster card in London has been successful
for TfL as a transit card but they failed in their later attempt
to exploit the commercial potential of their e-purse. This was
largely due to the fact that the Oyster card makes use of a Mifare
4K chip which is not sufficiently secure for a general payments
instrument. The announced Barclays project to add an Oyster chip
to a Visa contactless payment card is the end result of a decision
to select a particular technology platform that was suitable for
the transit objectives but limited beyond that scope. At the time
that TfL and their partners made that selection, they were not
even contemplating any future applications beyond transit. It
is also the case that the cost of more secure chips has fallen
dramatically in the intervening years so they are now much more
affordable.
In Scotland, a concession ITSO-compliant smartcard
has been issued, but the required equipment to read and process
these cards on board vehicles has not been purchased or installed.
Consequently the smartcard benefits have largely not been realised
and the concession card is being used as a "flash card"
to identify passengers entitled to receive a concession. The Scottish
card is also a Mifare 4K card and would not be considered secure
enough to implement an e-purse in the future.
OTHER ISSUES
It is noteworthy that the International Standards
Organisation has adopted the ITSO conceptual framework as the
basis for its new standard for Integrated Fare Management System
architecture (ISO 24014-1). This ensures that the UK transport
system and the ENCTS will be compliant with international standards
when selecting ITSO as the platform for future interoperable ticketing
systems.
This may open up the possibility of pan-European
interoperable ticketing in the future which would be in line with
current European transport policy. The Calypso transit technology
used by many European cities is both ITSO and ISO 24014 compliant.
4. RECOMMENDATIONS
— Adopt a policy that will allow
for the future potential of an income stream to be generated from
the activation of the e-purse on ITSO cards provided that this
does not in any way interfere with, or delay, the required delivery
of ENCTS.
— Ensure that the card technology
platform chosen for the implementation of ENCTS is sufficiently
secure to adequately protect the funds of the cardholder.
— Seek to achieve a long term
position whereby the ITSO transit technology platform becomes
self-funding to some degree.
— Undertake a Requirements Study
to evaluate and document the issues and preliminary economics
of an implementation of the ITSO e-purse. This study must be structured
to ensure no impact upon ENCTS delivery.
7 March 2007
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