Memorandum from Transport for London (TPT
1.1 The Oyster smartcard has provided substantial
benefits to passengers on all TfL modes since it was introduced
in 2002. Passengers can move faster around the city. TfL's losses
from fraud have been reduced. And it has been the foundation for
a transformation in TfL's relationship with its regular customers.
But it is important to recognise that Oyster may no longer represent
a state-of-the-art smartcard system, as developments in related
industries open up attractive alternative models.
1.2 TfL actively tackles fare evasion through
the provision of dedicated revenue protection teams and believes
that these teams generate net revenue. But it is still not satisfied
with the rigour applied to revenue protection especially on buses.
Further steps can be taken to make the law in this area more relevant
to modern technologies.
2.1 TfL welcomes the opportunity to respond
to the Committee's inquiry into Ticketing on Public Transport.
With four year's worth of experience in running the Oyster smartcard
system alongside its older paper ticket system, TfL feels it has
useful perspectives to offer on the subjects of smartcard technologies
and revenue protection. TfL has also contributed to a separate
submission by the Mayor of London that focuses on integrated ticketing
and concessionary travel.
2.2 Overall, TfL considers that the introduction
of the Oyster smartcard has been unambiguously positive. It has
improved the customer experience in many ways. Certainly customers
can proceed through TfL stations and board TfL buses much more
quickly than used to be the case, and they are unanimously positive
about this. But that is only the start. Customers now have a wider
choice of travel products including the Oyster Pay As You Go stored
value product which was impossible to deliver using paper tickets.
They can also register their possession of a given Oyster card
with TfL and thereby access an improved range of customer services
and benefits. There is no interest within TfL in returning to
2.3 The Transport Policing & Enforcement
Directorate's (TPED's) Bus Enforcement section is responsible
for operational and procedural bus enforcement, including managing
TfL's approximately 295 Revenue Protection Inspectors
(RPIs), ticketing and policy input on revenue, and investigation
and prosecution delivery for Surface Transport. Public transport
providers have a duty to ensure that public and private monies
are protected and paying customers are supported through effective
revenue protection and prosecution activities.
2.4 The pattern and methods of fare evasion
have changed to adapt to new technology and ticketing requirements,
particularly in the last two years. Fare evasion has also increased
on the bus network over the same period. This has been driven
by operational and ticketing changes which reinforce the need
for appropriate legislation and effective sanctions delivery.
Fare evaders are often involved in other forms of crime. Effective
fare evasion detection provides judicial access to these offenders.
3. THE USE
3.1 The Oyster contactless smartcard was
launched by TfL in 2002 and since then has grown to be the largest
transport smartcard scheme in the United Kingdom. To date, more
than 11 million cards have been issued to TfL customers, and they
use their cards for almost 7 million journeys on TfL and train
operating company services every day. 82% of journeys on TfL services
are now made using Oyster. But such a scheme does not come cheap:
TfL pays its PFI contractor substantial service charges to provide
and operate the Oyster system. There are broadly three lessons
from London's experience with Oyster.
3.2 First, Oyster has allowed passengers
to move significantly faster around the city by reducing queues
both for ticket purchase at ticket offices and retail outlets
and for London Underground gate-lines and bus entrances (maximum
throughput for gates was increased from 15 passengers per minute
to 40 on the introduction of Oyster). In addition, at certain
highly-congested Underground stations such as Bank, the reduction
in congestion achieved with Oyster has meant that passenger volume
growth has been accommodated without the need for sizable capital
investment in expanding ticket halls. Oyster has also delivered
real financial benefits by preventing and eliminating several
types of fraud, such as the re-sale of discarded one-day tickets
by touts which so blighted the environment of so many Underground
stations in the 1990s and also the use of forged paper tickets.
Other operators elsewhere in the UK may well be able to replicate
the benefits from fraud reduction, but the non-financial passenger
benefits and capital investment avoidance benefits may be harder
to replicate except for operators in those urban centres where
peak passenger flows result in queuing and over-crowding at levels
similar to London.
3.3 The second main lesson has been that
smartcards can be the foundation for the transformation of transport
operators' relationships with their customers. More than 1m Oyster
card users have chosen to register their card details with TfL
and constantly re-use a single registered Oyster card for their
travel. Where the necessary customer consent has been given, TfL
can proactively warn these customers by email or text message
several days beforehand that the service that they normally use
will not be available and suggest alternatives. Another benefit
is the free replacement of products if a card is lost: where a
customer has registered a card number with TfL, its number can
be "hot-listed" if lost so that the card cannot be reused
on the system. A new card with duplicate products is issued to
3.4 The final lesson concerns the implementation
challenge of a smartcard ticketing scheme. Oyster is a huge, complex
system. To put it into context, where MasterCard processes about
40m payments every day worldwide, the Oyster system processes
more than 10 million individual "taps" each dayit
is at a comparable scale. Building, testing and commissioning
such a system is detailed, demanding work and must be tackled
in a step-by-step fashion with each incremental development to
the scheme released one at a time after thorough testing and assurance.
This is not just a consequence of the project complexity: account
also needs to be taken of the pace at which customers can assimilate
changes to the ticketing system. Smartcards change the fundamentals
of ticketing systems and time must be allowed for customers to
digest these changes and adapt to them.
3.5 It rather misrepresents the situation
to refer in the Committee's terms of reference for this inquiry
to "the ITSO system". There is no single ITSO
system. There is a technical specification, a number of suppliers
of equipment that comply with this specification, and a number
of distinct smartcard schemes that use this equipment. It is not
entirely clear that this set of entities makes up a system in
the fullest sense of the word.
3.6 Because the PFI contract for the Oyster
system was made in 1998, it pre-dates the establishment of the
Integrated Transport Smartcard Organisation (ITSO) and the publication
of the various parts of the ITSO specification. As a consequence,
TfL has never formally analysed the ITSO specification nor compared
it against Oyster. At no stage in the first nine years of the
PFI contract could the benefits of ITSO conceivably have offset
the financial penalties of terminating the contract early.
3.7 At the DfT's request, an exercise is
underway in which the PFI contractor is assessing what would be
required to transform the Oyster smartcard system so that the
various smartcard readers within it could also read and write
to cards compliant with the ITSO specification. TfL believes that
investment in such an upgrade project would be rather wasteful.
The vast majority of TfL's customers are residents or regular
commuters who already have an Oyster card. Visitors can get one
from TfL in person or by post at any address in the UK or through
Visit Britain's arrangements overseas. The beneficiaries of such
an investment programme would be people travelling to or through
London on an ITSO-compliant smartcard carrying travel products
valid within London but purchased outside London. At present,
there is no transport smartcard scheme in the UK that has these
characteristics (although South West Trains has obligations to
provide such a system from 2009). It is not clear what problem
is to be solved through the investment of tens of millions of
pounds in an upgrade that will benefit a small number of travellers
who already have straightforward access to the benefits of smartcard
ticketing in London with Oyster.
3.8 This is proving to be a fertile period
in the history of the smartcard technology industry. The past
12 months have seen a noticeable acceleration of technology trends
in the industry that make assumptions made even as recently as
2004 seem dated. Prior to that date, the requirements of the public
transportation industry were too demanding for the mainstream
smartcard industry to meet. That industry focused on providing
smartcards to the banking payments and mobile phone industries
in the form of very secure cryptographic products for consumers
using contact interfacesthe Chip & PIN cards in peoples'
wallets or purses and the SIM card in their mobile phone handsets.
The demands of the public transportation industry were very different.
The very fast transaction speeds that they demanded to achieve
high passenger throughputs made the use of contact smartcards
infeasible, so the main producers ignored the transport sub-market
and allowed a set of niche transport smartcard providers to appear.
These providers thrived to varying degrees and their successes
prompted some further entrants to compete, such as ITSO. For transport
operators the market seemed relatively under-served and competition
was difficult to create.
3.9 That situation has recently changed
dramatically. Some banks, notably in the United States, have decided
to offer contactless payment functionality on their bank cards
in the hope that in certain contexts customers will prefer to
make a "tap and go" card purchasewithout the
need for a PINthan to fumble with cash and change. This
has been made possible by the steady improvement in the speed
and power of the microprocessors embedded in the industry's standard
smartcards which allows the whole interaction between card and
reader to be compressed into less than a second. Already some
transport operators have adopted this technology for their operations,
albeit on a pilot basis, in Taiwan and New York City where on
certain routes passengers can tap their bank cards to board buses
or to pass through the subway gates. There is also a lot of activity
in the mobile phone industry around a technology called Near Field
Communications (NFC) which allows a suitably-adapted mobile phone
handset to emulate a contactless smartcard. In Tokyo, Japan Rail
East launched a commercial product of this type last year called
Mobile Suica that allows customers to buy travel tickets using
their mobile phone that are delivered in electronic form "over
the air", and then use the handset as a smartcard to tap-in
and tap-out of the transport system.
3.10 What conclusions can be drawn from
all this activity? Broadly, it seems as though the mainstream
smartcard industry is close to reaching the point at which its
standard payments and mobile telephony products can for the first
time meet the needs of transport operators. Bank cards and mobile
phone handsets that use open or widely-adopted industry standards
and that can interact sufficiently fast with contactless smartcard
readers will be available in only a handful of years time. Prices
for contactless cards, readers and associated services are likely
to fall. For transport operators, these changes should open up
real opportunities to weave contactless smartcard technologies
into their ticketing systems at prices that were unattainable
even 3-4 years ago. Doing so may require them to learn to partner
with large organisations in industries that are currently unfamiliar
4. REVENUE PROTECTION
4.1 Current legislation needs updating to
take technological developments into account. It also needs a
degree of flexibility to ensure relevance to future developments.
The legislation governing the modes and their application varies
greatly across the country. London Underground prosecute under
Section 5 of the Regulation of Railways Act 1889 and also under
byelaws made pursuant to section 67 of the Transport Act 1962
or schedule 11 of that Act. Bus Operators primarily prosecute
under section 25 of the Public Passenger Vehicles Act 1981 and
the related the Public Service Vehicles (Conduct of Drivers, Inspectors,
Conductors and Passengers) Regulations 1990. In London penalty
fares can be imposed instead of prosecutions under Schedule 17
to the Greater London Authority Act (1999) for both bus and rail
modes. Bus operators apply the current legislation differently,
varying from a standard fare being charged for fare evasion through
to penalty fares and prosecutions. The current legal framework
does not have set transport-industry wide criteria for proving
fare evasion. On London's bus network, not having a valid travel
product represents adequate proof of fare evasion as PSV legislation
does not require the burden of intent to be proven. London Underground,
however, does have to prove a passenger intended to evade their
fare in order to successfully prosecute. These anomalies allow
fare evaders to abuse the ticketing requirements and can lead
to genuine customer confusion. Amendments to Schedule 17 of the
Greater London Authority Act contained in the Transport for London
Bill are currently progressing through Parliament to ensure its
ongoing relevance to current operations and improve deterrence.
Amendments to the Public Service Vehicle Regulations have been
suggested to the Department for Transport.
4.2 A three-stage penalty fare appeal process
is in place within TfL for the Underground and buses. The first
stage is administered by the issuing mode; second stages are heard
by TfL Bus Enforcement's Investigation and Prosecution Section
and the third stage is heard by the Independent Penalty Fare Appeals
Panel. This panel was established in 2005 and consists of members
nominated by London TravelWatch and agreed by TfL. It meets every
six to eight weeks to consider appeals which have passed through
the first and second stages of the appeals process. TfL currently
believes that the appeal mechanisms in place (which have been
agreed with London TravelWatch) are wholly adequate and robust.
The appeals process also incorporates appeals against the withdrawal
of youth and full time education concessionary travel.
4.3 Current legislation places restrictions
on revenue protection personnel. For example, personnel are required
to interact with the alleged fare evader only on the vehicle on
which the alleged offence has occurred, thereby potentially disrupting
the bus service. They are also unable to charge an alleged fare
evader with obstruction where they fail to provide correct details.
As part of the name and address verification process, the right
to obtain additional information, such as a date of birth, would
reduce the significant number of evaders who manipulate the system
and persistently evade payment. This hopefully will shortly be
subject to change with the powers proposed within the TfL Bill.
Passengers rights are maintained through, for example, the right
to view official's photographic and authority identification,
the Data Protection Act (1998), appeal rights and the Police and
Criminal Evidence Act (1984).
4.4 There is nationwide scope for improvement
in the measures used by the public transport industry to protect
fares revenue. The costs of revenue protection can, however, appear
commercially prohibitive. In London, appearances are deceptive:
TfL business case evaluation indicates a positive 2:1 cost benefit
ratio ie the costs of providing a revenue protection function
is outweighed by the benefits of prevented revenue loss. Revenue
protection measures adopted in London include the complete gating
of all London Underground stations and the provision of full-time
revenue protection teams on the Underground and buses. But on
buses drivers are the main point of control in protecting fares
revenue. Current levels of driver ticket checking in London are
unacceptably low. Increasingly, fares are paid via pre-purchased
ticketing products which require accurate driver checking of ticket
and pass validity rather than on-bus cash transactions. Operators
need to be supported by the judicial processes which adequately
consider financial impact assessments. This is enacted in London
through the use of five regional courts resulting in the successful
prosecution of around 3000 bus network fare evasion cases a month.
5.1 TfL's experience of Oyster suggests
that contactless smartcards are the best way to handle ticketing
in highly-congested urban centres like London. And encouragingly,
the smartcard industry will soon be able to offer transport operators
a range of contactless technologies derived from the payments
and mobile phone industries that will be much cheaper than the
transport-specific technologies that have been available to date.
5.2 TfL is firmly of the view that proactive
revenue protection is a value-creating activity, but is concerned
that it has yet to achieve the levels of performance in this area
to which it aspires. TfL requires support in its work to control
the revenue lost to bus network fare evasion and fraud annually.
Further legal rights would allow RPIs to better tackle to this
issue to allow significantly increased revenue for reinvestment
in London's public transport network. There are some characteristics
of the legislation surrounding revenue protection that require
updating and which currently mitigate against the most effective
revenue protection at present. TfL would encourage the Committee
to consider how these might be re-visited and made wholly relevant
to both recent technological developments and varied operational
requirements. Public transport service providers have a duty to
ensure that public and private monies are protected and paying
customers supported through effective revenue protection and prosecution
activities. A consistent approach to the detection and deterrence
of fare evasion and fraud by national operators together with
a consistent approach by the judicial services is needed to adequately
address these errant behaviours.
29 The main aims of RPIs are to:
and minimise fare evasion on the London bus network.
- Develop and effectively use technology to ensure effective resource
targeting and data analysis.
- Provide a visible,
uniformed presence to deter fare evasion and other criminal behaviour.
- Provide staff and passenger safety and security
reassurance and to assist and guide as needed. Back