The Evolution of Public Transport Payment Systems: A Look into the Future and the Rise of the SuperApp
Onwards with the Digital Revolution – the Epoch of the Super App
As we reflect on the transformative journey of public transportation payment systems over the past decade, the evolution from tangible tokens to digital transactions paints a vivid picture of technological progression. In the early 2010s, smart cards represented a quantum leap from traditional paper-based fare collection methods. These cards utilised radio-frequency identification (RFID) and near-field communication (NFC) technologies to facilitate seamless access to public transportation networks. Prominent examples of these systems include London’s Oyster card and Hong Kong’s Octopus card, which have not only revolutionised and branded fare payment convenience, but also enhanced operational efficiencies for transit authorities.
Open Payments, a significant leap at the time, was expected to further redefine transit fare systems. This shift towards using bank-issued cards or mobile payment wallets for fare payments was seen as the next logical step in payment convenience. However, its widespread acceptance has yet to be realised. Investment aside, this can be attributed to the substantial degree of maturation that is required of the supporting ecosystem, spanning regulatory compliance, security protocols, and consumer trust building.
Mobile payment wallets have been fundamental to driving this transformation, offering a new level of convenience and integration seemingly enhanced by products such as Apple Express Transit and UnionPay’s Mobile QuickPass. The global health crisis precipitated by COVID-19 further accelerated this shift, whereby contactless transactions became not just a matter of convenience, but also of safeguarding public health and safety. The upshot has been the propulsion of open payments from a forward-looking concept to a more commonplace reality in the realm of public transport payment systems.
Despite their obvious advantages, open payments have introduced new challenges. Coupled with existing fare payment options (typically stored value smart cards and cash), transport operators need to manage a different operational cost factors, including merchant service charges, payment scheme fees, compliance costs, and fraud management costs. These changes in cost structure have become an aspect of modern fare collection for those agencies seeking to be at the forefront of innovation and customer experience, influencing the economics of public transportation.
The digital payments ecosystem is now on the cusp of yet another revolution, with the emergence of ‘Super Apps’. Notably proliferating in south-east Asia, the origins of these ‘one stop digital shops’, a prominent example being China’s ‘WeChat’ (branded ‘Weixin’ within mainland China), were in messaging and mobile payments (i.e. retail purchases, bill payments and transfers). In short time, however, the plethora of services availed has extended into additional sectors, including transportation. By and large, this is currently limited to ‘ride-hailing’ and journey planning, however for a selected few the mobility-as-a-service (Maas) rudiments of being able to ‘plan, book and pay’ for services offered by a choice of public and private operators are part of the offering. Given the convenience Super Apps embody, is it therefore inevitable that they will become the new norm in public transportation fare payments?
Consolidation in the Guise of Convenience – The New Face of Big Business?
Super Apps clearly hold untapped potential in the domain of public transportation payments, however it is far from certain as to whether they will be able to take hold outside of Asia. Whilst platforms like Uber are making headway in integrating multiple services under one digital roof, with offerings including ‘Transit’, there are, on close examination, unique factors that make Asia more fertile ground. Comprising ‘mobile-first’ populations, where smartphones are the primary or only means of internet access for households, Super Apps have typically built on their initial offerings to fill a significant void in the Asian banking sector, providing convenient and secure digital payment solutions. Where low bank penetration and an underdeveloped financial infrastructure had previously been the norm, Super Apps have democratised access to financial services, and become the platform of choice for a diversity of services in the process. In other continents, by contrast, respective sectors are dominated by long established and trusted specialised brands, providing for a vast ecosystem of dedicated apps. Coupled with a privacy sensitive ethos that precludes sharing data across multiple services within a single platform, and the privacy legislation recently enacted by individual countries and states (e.g, the General Data Protection Regulation adopted by EU member states and the United Kingdom, and California’s Consumer Privacy Act, both in 2018), there are thus major barriers for Super Apps to overcome. But that is not to say they will not, for in the words of Peter Drucker, “when value is clear, decision-making becomes easy”. If Super Apps can devise ways to successfully erode brand loyalties, and operate within the boundaries of applicable legislation and regulations, then the rest of the world could too be fertile ground.
Uber excepted, the focus of budding non-Asian Super Apps to date have been primarily financial, examples including Brazil’s Nubank, the UK’s Revolut and the US-based Cash App. Their presence, however, in conjunction with emerging diversified giants such as Grab, Gojek and Tata Neu, confirms that they are undoubtedly becoming the new face of big business. But does this phenomenon foretell major changes for public transportation fare collection?
Super App as Opportunity for Super Cost Savings?
Whilst Super Apps are unmistakably becoming integral to the daily lives of many, they are in a holding pattern as far as public transportation fare collection is concerned. This will remain the status quo until the public and private sectors can land on a model of partnership and regulation that provides for a synthesis of their capabilities. Indeed, the fate of the Super App is analogous and somewhat entwined with multifarious stalled MaaS initiatives.
Transit agencies are beginning to explore synergies with these platforms, however few initiatives have made the leap from journey planning to payment integration for multi-modal, let alone interoperable, travel. The possibility of purchasing public transit passes and tickets within a Super App — and using it for system access — presents a mutually beneficial frontier for transit agencies and patrons, however non-Asian ventures, such as that embarked upon by Denver’s Regional Transportation District and Uber in 2019, are limited.
The cost dynamics associated with traditional credit card transactions are prompting transit agencies and patrons to explore alternative payment methods. As public transit agencies contemplate passing on credit card fees to patrons — a practice increasingly adopted by the retail and hospitality sectors — the appeal of Super Apps as a cost-effective payment solution could therefore gain momentum.
Following the blueprint of trailblazers such as FAIRTIQ, Super Apps could herald a new era for fare collection systems — one devoid of traditional infrastructure requirements. Leveraging sophisticated algorithms that utilise user location and behavioural data, these platforms could facilitate direct payments without reliance on conventional automated fare collection solutions and established EMV schemes.
Once again, therefore, we stand at the intersection of innovation and practicality in public transportation payment systems, creating the imperative to consider not only the technological possibilities, but also their broader economic, social and ethical implications. Synergies between transit agencies and digital platforms could yet redefine convenience, accessibility and sustainability in public transportation for years to come. However, the barriers and discords remain unresolved, Super Apps run the risk of being eclipsed by the next revolution in public transportation, without ever realising prominence.