When Do Smartcards Make Commercial Sense? How Does a Public Transport Operator Calculate If, or When, It is Prudent to Introduce a New Ticketing System Based Upon Contactless Smartcard Technology? How Large Are the Major Technological and Financial Risks
LOVERING M and ASHMORE D, Steer Davies Gleave, UK
To date, there has been a tendency to answer these business-driven questions with technology-driven answers. In reality, however, work to date strongly suggests that the viability of a smartcard system is strongly driven by the market conditions within wh
To date, there has been a tendency to answer these business-driven questions with technology-driven answers. In reality, however, work to date strongly suggests that the viability of a smartcard system is strongly driven by the market conditions within which it is introduced; not the technical characteristics of the medium and associated systems.
The UK Transport Card Forum, sponsored by the Department of the Environment, Transport and the Regions, recently set up a working group to investigate the above. The group, chaired by International Transport Strategy Consultants Steer Davies Gleave, includes members from regional public transport executives, manufacturers and bus operators.
The Group was mandated with developing a common, accountable, process by which organisations considering smartcard schemes can produce their own business case. It also aims to develop an understanding of what factors make or break the business case, so that these can be closely monitored, both before and during implementation.
The Group was not attempting to be prescriptive. Schemes will operate in different environments, and to assert that there is a generic business case for the technology on the basis of defined case studies can only be misleading. It should also be stated that whilst the findings are based within a UK context, there is no reason why the methodology itself should not be used for other international contexts, provided local conditions are taken into account. To cultivate an understanding of the business case components, the group rigorously developed four realistic but hypothetical case studies. The studies progressively increased in complexity from a single-operator scheme, through a multi operator situation, to a comprehensive one involving multiple operators and public transport agencies supporting a concessionary fares scheme. The fourth case includes a suburban rail network in the transport infrastructure.
Each scheme was documented in terms of underlying assumptions and likely iifecycle costs and benefits. The risk dimension was introduced using risk- modelling techniques, with each input parameter presented in terms of simple probability distributions (often merely upper and lower ranges). Although these cases are based on hypothetical examples rather than actual situations, their results offer some very interesting insights into the viability of smartcard schemes, and the potential key drivers of the business case. For a fuller description of the project see Transport Card Forum (2000).
The remainder of this paper is structured as follows. Section 2 deals with defining the operating environment. Section 3 documents the components of the business case - cost, benefit, risk and potential. Sections 4-7 demonstrate how each case study was developed, the complexity increasing with each stage of development. Section 8 offers conclusions and recommendations.
Association for European Transport