Ticketing and Concessionary Travel on Public Transport - United ...

Ev 160 Transport Committee: Evidence
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 exp<strong>and</strong>ing ticket halls. Oyster has also
delivered real financial benefits by preventing <strong>and</strong> 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 <strong>and</strong> 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 <strong>and</strong> capital investment
avoidance benefits may be harder to replicate except for operators in those urban centres where peak
passenger flows result in queuing <strong>and</strong> 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 <strong>and</strong> 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 beforeh<strong>and</strong> that the service that they normally use will not be available <strong>and</strong>
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 the customer.
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 day—it is at a
comparable scale. Building, testing <strong>and</strong> commissioning such a system is detailed, dem<strong>and</strong>ing work <strong>and</strong> must
be tackled in a step-by-step fashion with each incremental development to the scheme released one at a time
after thorough testing <strong>and</strong> 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 <strong>and</strong> time must be allowed for customers to digest these changes
<strong>and</strong> 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, <strong>and</strong> 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) <strong>and</strong> 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 oVset 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 <strong>and</strong> 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 dem<strong>and</strong>ing for the mainstream smartcard industry to meet. That industry focused on
providing smartcards to the banking payments <strong>and</strong> mobile phone industries in the form of very secure
cryptographic products for consumers using contact interfaces—the Chip & PIN cards in peoples’ wallets
or purses <strong>and</strong> the SIM card in their mobile phone h<strong>and</strong>sets. The dem<strong>and</strong>s of the public transportation
industry were very diVerent. The very fast transaction speeds that they dem<strong>and</strong>ed to achieve high passenger
throughputs made the use of contact smartcards infeasible, so the main producers ignored the transport submarket
<strong>and</strong> allowed a set of niche transport smartcard providers to appear. These providers thrived to
varying degrees <strong>and</strong> their successes prompted some further entrants to compete, such as ITSO. For transport
operators the market seemed relatively under-served <strong>and</strong> competition was diYcult to create.
3.9 That situation has recently changed dramatically. Some banks, notably in the United States, have
decided to oVer contactless payment functionality on their bank cards in the hope that in certain contexts
customers will prefer to make a “tap <strong>and</strong> go” card purchase—without the need for a PIN—than to fumble
with cash <strong>and</strong> change. This has been made possible by the steady improvement in the speed <strong>and</strong> power of
the microprocessors embedded in the industry’s st<strong>and</strong>ard smartcards which allows the whole interaction
between card <strong>and</strong> reader to be compressed into less than a second. Already some transport operators have