CONTACTLESS TRANSIT Implementation in the UK - June 2019 - UK Finance
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UK Finance Contactless Transit 1 CONTACTLESS TRANSIT Implementation in the UK June 2019
2 Contactless Transit UK Finance
ABOUT UK FINANCE
UK Finance is the collective voice
for the banking and finance industry.
Representing more than 250 firms
across the industry, we act to enhance
competitiveness, support customers and
facilitate innovation.
UK Finance has worked with a wide range of stakeholders during the Contactless Transit project
and subsequent discussions. Our member firms from the card payment ecosystem – card issuers,
acquirers and schemes - have been integral to the development of the Contactless Transit
Framework. At the government level we have worked with the Department for Transport,
Department for Regional Development Northern Ireland, Transport Scotland and Transport Wales.
At the regional level we have engaged with Transport for London, Transport for the North, and
Transport for West Midlands. We have also worked closely with Transport Focus on their research
projects.
Above all the Contactless Transit project relied on capturing detailed business requirements from
the transit industry, and we are grateful for the time dedicated by both bus and train operators to
the Project and to updating us on progress for this report.
UK Finance Contactless Transit 3
PREFACE
Contactless debit and credit purposes - for example, in the Northern Powerhouse – and
cards are continuing to grow in a view that this could be facilitated by easier to understand,
popularity, even as the range of faster ticketing options for low value travel.
payment options – cash, real-time
payments – diversifies to meet the With all these benefits in mind, in 2015 UK Finance’s predecessor
needs of different demographics1. began a project with UK card payment providers, transit
While contactless payments are operators and government bodies to develop a framework,
widespread in the retail world, based on the experience from Transport for London, that would
contactless payment cards and related devices such as phones allow any transit operator to enable contactless payments on
and watches have also been used on London’s transport their systems. The Contactless Transit Framework was launched
systems for the past five years with great success, and there is jointly by the Department for Transport and the card payment
a growing desire to see contactless card payments as an option and transit industries in January 2016. Work continued into 2017
for travelling on public transport outside of London. to develop further detailed guidance for transit operators and
to support early implementations of the Framework.
Contactless transit embraces the technology consumers
already have in their hands and reduces the use of bespoke I am delighted to say this Framework has been used to great
hardware and tickets. Research shows that some passengers success by the bus industry in the UK, with 100 per cent of the
are willing to sacrifice knowing the exact cost of their travel for major bus fleet contactless enabled. Customers are providing
the convenience of not having to pre-purchase tickets2; and glowing reports on social media and drivers are the strongest
young people are more likely to use public transport if they are advocates, embracing the quicker boarding times and reduced
confident they will always have the right means to pay without cash handling. We have been contacted by transit operators
having to find the exact change3. As contactless cards operate globally to learn lessons from our work and have even seen our
on open, global standards, they not only provide the potential Framework translated into Spanish for use in Costa Rica and
for customers to travel between transit operators on the same other countries.
device, they also enable international tourists to use public
transport without having to understand proprietary ticketing There has also been a resurgence in interest in contactless
systems. transit for the rail sector, but there are complexities with
implementing contactless transit for higher fare journeys. We
At the same time, cities are being required to be smarter in continue to work with the card payment industry, government,
their deployment of resources, with over 80 per cent of the train operators and suppliers to explore whether the tangible
UK population now living in cities (this reflects a global trend benefits being realised by the bus sector through contactless
whereby the 55 per cent of the world population living in transit can be extended to rail journeys.
cities is estimated to grow to 68 per cent by 20504). In this
context contactless transit helps by removing some of the
cost of ticketing, such as producing smartcards, and promoting
account-based ticketing which can help transit operators
understand passenger flows. This coincides with a political Stephen Jones
desire to see regional areas more connected for economic CEO, UK Finance
1. UK Finance 2018 Payments Report: there are 124 million contactless cards in the UK, and 7.4 billion contactless payments were made in 2018.
2. Transport Focus 2014 research found that for local/cheaper travel, passengers were willing to have less control over getting the most cost-effective fare in order to benefit from using
the convenience of contactless payments.
3. Transport Focus 2018 research found that the experience of boarding the bus can be a stress point for young people, with concerns largely focussed around the interaction with the
driver.
4. https://www.un.org/development/desa/en/news/population/2018-revision-of-world-urbanization-prospects.html
4 Contactless Transit UK Finance
TABLE OF
CONTENTS
A. Executive summary 5
B. Background 7
C. Bus industry 13
D. Rail industry 19
E. Regional 24
F. Macro-industry activity 31
G. Technology 36
H. Conclusions 39
Annex. Documentation 40
Annex. Glossary of terms 41
UK Finance Contactless Transit 5
A. EXECUTIVE SUMMARY
This report reviews the rollout and adoption of EMV Contactless
(cEMV) as an alternative form of ‘ticketing’ outside of London since the
creation of the cross-industry Contactless Transit Framework in 2017.
It draws on quantitative data provided by transit operators, and on
qualitative research with various stakeholders from the payments and
transit industries and government bodies.
What has worked well • Ubiquitous acceptance, with significant
improvements made to the card scheme
• The UK bus sector has exceeded
processes to enable the acceptance of cards
expectations in rolling out cEMV across 100
from 140 different countries around the
per cent of the UK’s ‘Big 5’5 bus fleet. The
world on UK transit networks.
speed of uptake of cEMV on UK buses has
also exceeded expectations, with an average
• Technology challengers entering the
of 25 per cent of UK bus journeys made
market that offer alternative, and potentially
outside London now being carried out using
disruptive, commercial models.
a cEMV debit, credit or prepaid payment
card. The customer, driver and business
reaction to cEMV acceptance on buses has Areas requiring further work
been very positive. • Contactless on rail has seen limited progress,
although a strategy for PAYG in the South
• Transport for London continues to see
East is beginning to emerge.
growth in the adoption of contactless
with 54 per cent of Pay-As-You-Go (PAYG) • Contactless for Transit Model 2 (PAYG) has
journeys now made using contactless been rolled out by the bus sector but some
payment cards and devices6. Mobile wallet- of the functionality, such as aggregation and
based payments are growing and represent 16 capping, still needs to be deployed.
per cent of those journeys7.
• Interoperability is complex, with concerns
• Large scale regional initiatives, such as being raised over the different commercial
Transport for the North, are underway and approaches being proposed. This is of
have the potential to further reshape and particular concern to the deregulated bus
simplify how travel is paid for. operators. There are different regional
back office approaches evolving, with no
• Regional plans continue, with contactless
overarching national back office plan or
launches on the tram network in Manchester
approach to standardisation, all of which are
and city-wide cEMV acceptance in Edinburgh
needed to ensure interoperability.
recently having been announced.
5. Arriva, First, Go Ahead, National Express and Stagecoach.
6. Data provided by TfL.
7. Data provided by TfL.
6 Contactless Transit UK Finance
• Multi-Mode Travel Products are Other developments
limited, which is likely to further impede
• The government-appointed Williams Rail
interoperability.
Review9 is investigating the most appropriate
• Closed Transit Infrastructure could limit organisational and commercial frameworks
innovation. An Office of Road and Rail to support the delivery of the government’s
(ORR) strategic consultation highlighted vision for the railway. The results of this
the closed nature of the reader/validator could help to support more open ticketing
estate, especially in and around London8. systems like contactless transit; for example,
It is believed that adoption of open and through simplifying fares, or through
common standards across the UK’s transit devolving power over commuter routes to
infrastructure would significantly aid regional/local authorities to allow for more
innovation. of a joined-up approach – similar to that
taken by Transport for London.
• At the same time, the Department for
Transport recently consulted on extending
the PAYG area around London10, which
could see Transport for London’s systems
supporting contactless payments on the
wider rail network.
8. https://orr.gov.uk/__data/assets/pdf_file/0020/40628/market-study-into-the-supply-of-ticket-machines-and-ticket-gates-2019-final-report.pdf
9. https://www.gov.uk/government/consultations/williams-rail-review
10. https://www.gov.uk/government/consultations/pay-as-you-go-on-rail
UK Finance Contactless Transit 7
B. BACKGROUND
UK Finance, with the support of the card payments and transit sectors,
commissioned this report to review the progress that has been made
against the original goals of the Contactless Transit project and to
identify any barriers and strategic issues that are facing the transit
industry in adopting the Framework further.
Card payments have been used for many years with a mixture of the regulated rail sector
in the transit industry to buy paper tickets, or working alongside the less regulated bus sector.
to top up smart ticket cards or devices. In 2007 As such, variations were required on the TfL
the UK card industry introduced contactless model which underpinned the development
payments to provide a fast and frictionless of a wider framework that would encourage
payment experience in retail, where up to adoption across the UK as well as internationally.
a certain value (currently £30)11 the normal A number of discussions took place between
cardholder verification method of entering a transit operators and individual card companies
PIN is not required. Contactless card payments and by the end of 2014 it became clear that it
are also ideal for certain transit environments would be helpful to have a central project to
where speed and convenience are key to a good allow the two industries to discuss the most
customer experience. suitable models for contactless transit.
In 2013, Transport for London (TfL) introduced Contactless Transit Framework
contactless card payments on its bus network as From 2015 – 2017, UK Finance’s predecessor,
a complementary alternative to its proprietary the UK Cards Association, ran the Contactless
Oyster card. This was followed by the rollout Transit Project (as part of a wider two-year
of contactless payments on the TfL tube, DLR programme to increase the use of contactless
and rail network12 in 2014. TfL’s objective in cards across the UK). The purpose of this project
introducing contactless was to provide more was to create a national Contactless Transit
convenience to customers using Pay-As-You-Go Framework. This was designed to help transit
(avoiding the need to top up Oyster cards), and operators consider whether to implement
to cut their own operating costs in producing EMV Contactless and support the delivery of
and maintaining Oyster cards. a consistent and good customer experience
for journeys made across the UK where a
The success of the TfL initiative led to interest contactless card13 has been used during that
from other UK transit operators in implementing journey. The project was jointly funded by the
contactless payments alongside smart ticketing cards industry, transit industry and government.
and cash payments. However, the situation The Framework won the Cards and Payments
outside of London is more complex as transit Awards for the Best Industry Innovation in 2017.
businesses are independently run organisations,
11. The cardholder verification limit has been increased over time to accommodate spending patterns on contactless cards, and was raised from £20 to £30 from 1 September 2015.
12. London over-ground and National Rail Services within the TfL Travelcard zones
13. Multiple EMV Contactless form factors exist such as mobile and wearable devices8 Contactless Transit UK Finance
The Framework includes three Contactless will travel without funds in their account.
Transit Models: To address this, the Framework includes an
agreement that issuers will pay the first £10
• Model 1, Single Pay-As-You-Go: A model
of any such debt14.
where the contactless card or device is used
at the start of the journey with a known fare;
• Model 3, Pre-purchase: A model where a
primarily for buses and trams.
contactless card or device is associated with
a pre-purchased ticket and then used to
• Model 2, Aggregated Pay-As-You-Go: A
access the travel.
model where the contactless card or device
is used multiple times for travel, and the
fare is aggregated at the end of the day or
journey leg; for multi-mode operators. This
was the model already being used by TfL,
but with some adaptations. A key part of this
model is that card issuers share the liability
with transit operators. Due to delayed
settlement, there is a risk that a customer
Single Pay-As-You-Go model Aggregated Pay-As-You-Go Pre-purchase Model
mode model
• Replaces cash • Replaces cash
• Replaces paper tickets • Card permits travel
• Fare charged at start of each journey • Can combine several journeys into one charge
• Fare charged at point • Can include seasonal
of purchase tickets
• Charge typically collected at the end of each day
• Fare capping possible
Suited to low/medium value single Suited to low/medium value single Suited to higher value services
operator services (e.g. bus) operator services (e.g. bus) (e.g. long distance travel)
1. Customer uses their contactless card or device to 1. Customer makes multi-leg journey or multiple journeys 1. Customer purchases their ticket online and associates
make a single journey. Touch in only. using their contactless card or device. Touch in and touch it with their contactless card or device.
out.
Ticket purchase
2. Customer can view their journey on their bank
2. End of day processing settles statement.
customer’s daily charge. Bank statement
2. Customer can view charge on their bank statement
3. Customer can view charge on their bank statement.
Bank statement
Bank statement 3. Customer uses their contactless card as their ticket
to travel.
FIGURE 1. CONTACTLESS TRANSIT MODELS
14. This liability sharing agreement was already in place with TfL, but the amount was previously £6.UK Finance Contactless Transit 9
Original goals i. Nationwide coverage
The goals of the original project team for the The original goal of the project was to see the
use of EMV Contactless cards on transit in the expansion, outside of London, of Model 1 and
UK by 2025 were: 2 propositions across both bus and rail. It was
expected that by 2019/20 the national coverage
i. To see a nationwide coverage of contactless
would be concentrated within a small number
across all transit modes
of contactless ‘islands’ within cities and larger
towns.
ii. To create a compelling customer
experience, similar to TfL’s, that would be
The following geographic roadmap, showing
easy to understand for customers and offer
how the rollout was predicted to spread to full
‘best’ fare options through fare aggregation
UK-wide adoption, was produced early on in the
iii. To see rapid customer adoption levels that life of the project.
tracked the adoption rates seen at TfL
iv. To see a strong business case developing for
the use of contactless in transit
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Minimal viable proposition for launch First wide scale EMV for
Transit launches outside Locations are indicative only:
• Single journey (fare values up to (£30)
London
• Single operator
• Single mode
• Full fare paying individual adult
• No concessions or First Class travel support
Model
1
Model
EMV Contactless is an
2
option for (70 per cent)
of all transit journeys in
Widespread (30 per cent the UK
PUK wide Back-Office ‘Broker’ of all journeys) linked
launched Possible to offer: regional transit schemes
Possible to offer Model 2:
Model
PAYG Aggregated on Bus Regional Pre-Purchased Big 5 bus operators full
Possible to offer Model 1: travel (season, carnets & nationwide contactless
3
PAYG Regional - Bus and
PAYG Single Journeys Light Rail concessions) support
PAYG Regional
EMV CONTACTLESS LIVE
EMV CONTACTLESS PILOT
Development & Pilots* Standalone Regional Linked Regional Full UK Roll-Out
*Outside of TfL
FIGURE 2. FORECASTED NATIONAL CEMV ROLL-OUT (PUBLISHED: 2015)10 Contactless Transit UK Finance
ii. Compelling customer experience • Secure and transparent payments, which can
A survey conducted by Transport Focus in 2016 be seen on the customer’s bank statement or
asked what people thought of being able to app.
use contactless for public transport. The survey
found that 61 per cent of customers were very • Usability on different form factors, including
interested, or interested, in a contactless transit card, mobile and wearables.
proposition15.
• Ability to travel on different operators using
the same device, and without needing to
The benefits noted at that time were:
register.
• Fast and easy payment for passengers,
eliminating the need to queue for a paper • 45 per cent of passengers would feel more
ticket or to ‘top-up’ smart tickets. These positively towards public transport operators
benefits had already been demonstrated if contactless was introduced.
through the TfL rollout. The Transport
Focus survey found that of customers using
contactless payments in general retail, 84 per
Figure 3 cent cited ‘speed’ and 79 per cent cited ‘ease’
as reasons for use.
EASY /
CONVENIENT QUICKER / SAVES TIME
“It’s so fast and easy, and I love the way “Very appropriate for public transport.
it caps automatically. I use it loads when It would speed things up.”
I visit London and it’s just so convenient, “It would make life so much
Male, 25-39, West Midlands
everywhere should be like this.” easier! No need to top up
Female, 25-39, North West online or go to the top up
machine. With Oyster cards
you can’t know how much
“If my train is coming in it will credit you have in your
make my ticket purchase quicker, account so it can be
and I can catch my train.” inconvenient.”
“It is so easy to use and removes the Female, 40-54, South West Male, 16-24, South East
difficulty of lots of bags and no spare
hands to search for change etc. ‘Tap and
Go’ as my husband has christened it!”
Female, 55-74, North East REMOVES THE NEED
TO CARRY CASH
“My local bus service takes cash but
“I think it’s an easier way to pay for “Not having to worry about
not notes. The ticket price for a
transport, without the risk of losing paper having enough cash on you.”
return is three pound something. It’s
tickets, or buying the wrong tickets.” Female, 55-74, South West
hard to find the change sometimes.”
Female, 16-24, East of England Male, 55-74, South East
FIGURE 3. TRANSPORT FOCUS CUSTOMER RESEARCH 2016
15. See Transport Focus survey results https://www.transportfocus.org.uk/research-publications/publications/paying-for-public-transport-with-contactless/UK Finance Contactless Transit 11
In addition, the expectations for the
development of the models always had a multi-
mode, multi-operator 2025 end game in mind.
CARD
It was also felt that developing and agreeing a INDUSTRY
common customer experience would reduce BENEFITS
customer confusion and increase trust and
adoption. i. Increased transaction volumes
ii. Halo effect and increasing utility of
Finally, it was always envisaged that operators card
would strive to launch ‘best’ fare offers with iii. Prepare customers for contactless
fares being aggregated and capped on a daily or payments using mobile devices
weekly basis. vi. Retain ‘cards’ as central to emerging
payments
iii. Rapid customer adoption
Together with the rapid uptake of the use of
cEMV seen on TfL and an expected greater
availability of, and familiarity with, contactless
payment cards, it was envisaged that similar TRANSIT
adoption rates to TfL could be achieved for new INDUSTRY
contactless transit deployments. As a result, a
benchmark for adoption was set at 15 per cent
BENEFITS
of journeys being made using contactless cards
within one year of the proposition being made
i. Increased journey volumes (from
simplified ticket purchasing) leading
available to customers.
to revenue increases
iv. Strong business case ii. Increased range of payment options
It was also seen as essential that the business
case for both the payments and transit
iii. Increase speed of customer
throughput
industries stacked up. This aspect of the original
goals of the programme will also be considered vi. Increased customer satisfaction
within this review. The key business case drivers
that were established at the beginning of the v. Operational cost savings from
project were: speed and reduction in ticket
management
FIGURE 4. INDUSTRY BENEFITS12 Contactless Transit UK Finance
Benchmarking
Taking each aspect of the original goals of the
project, we set the following benchmarks to
determine how well contactless adoption across
the different transit modes and regions has
taken place.
TARGET
OUTCOMES
Goal Benchmark by 2019/20
National coverage London, Newcastle, Manchester, Oxford and a number of other large towns
and cities across the UK.
Compelling customer Model 2 with aggregated fares and capping on bus and rail.
experience
Rapid adoption 15 per cent of journeys being cEMV, within one year of launch, of a contactless
proposition being rolled out.
Strong business case At least two of the five business case drivers are being met.
FIGURE 5. TARGET OUTCOMES FOR 2019/20UK Finance Contactless Transit 13
C. BUS INDUSTRY
Since 2017, substantial progress has been made in the rollout of EMV
contactless across the bus industry. 100 per cent of the major bus
operator fleet is contactless enabled, with average adoption rates
currently at 25 per cent and expected to grow.
Customer reports on social media have been
Contactless
favourable and bus drivers are the strongest ‘Big Five’ Bus
Fleet size enabled % Enabled
advocates, with improved boarding times and Operators
fleet size
reduced cash handling allowing them to run to
Stagecoach* 7,500 7,500 100%
time more easily. There have been some initial
Arriva UK 5,065 5,065 100%
challenges in implementing the Contactless
Transit Models, but these are now largely First Bus 5,800 5,800 100%
resolved and concerns around bad debt levels16 Go-Ahead” 4,900 4,900 100%
have proven unfounded. National 1,600 1,600 100%
Express
Total 24,845 24,765 100%
Progress
Contactless enablement
Contactless enablement of the majority of the FIGURE 6. CONTACTLESS ENABLED BUS FLEET
UK’s bus fleet has been completed by Q2 2019.
* Excludes London and Megabus
This result has been achieved through a focus on
“ Includes London
cEMV by the ‘Big 5’ bus operators over the past
two to three years. Some smaller operators have
Strong adoption and usage
also adopted a contactless solution.
The average contactless adoption rates across
the bus industry outside London are around
There is a mix of Model 1 (single PAYG) systems
25 per cent, but there are significant variations
(the customer taps in once at the beginning
based on geographical and demographic factors.
of the journey and that fare is settled with the
Adoption is considerably higher in the South
issuer); and Model 2 (aggregated PAYG) systems
East, in some areas as high as 50 per cent, but
(the customer typically taps in at the beginning
lowest in the North West where adoption rates
of the journey and taps out at the end, allowing
are closer to 12 per cent.
for multiple journey fares to be aggregated and
settled with the issuer).
The strongest advocate for contactless has been
the driver community, which appreciates the
quicker boarding times and reduction in cash
handling. In one case, an enthusiastic bus driver
managed to encourage a 100 per cent usage of
contactless on one particular day. It was noted
that boarding times at the start were not much
quicker as people got used to how the process
16. As contactless transit payments have delayed settlement with the card issuer, there was a concern from transit operators that they would see high levels of unpaid or ‘bad’ debt. In
practice, this has been under one per cent.14 Contactless Transit UK Finance
worked, but that, as time goes on, boarding • Other benefits include a reduction in
times are improving. Students are typically seen operating ticket vending machines or running
as the early adopters of the contactless. The other processes required to issue customers
growth and adoption rates are seen as positive with a travel token (such as paper or an ITSO
by the bus industry. card). There is also a perceived operational
downside of having the customer convert
Improved customer experience ‘their money’ into ‘transit money’ and then
Although there has been no recent formal having to store this money. Contactless
customer research of the bus implementations, payment cards overcome all of these
there have been high levels of customer challenges.
engagement on operator social media sites
that support the assertion that the contactless • Some operators are beginning to look at
‘ticketing’ initiative has been well received. how the new metrics generated by cEMV
Customers claim to be more confident in using ticket sales can be used to enable better
public transport when they do not have to fare modeling, route loading and capacity
worry about having the exact cash for a fare, planning.
particularly on non-regular routes.
• Although there were initial concerns about
‘bad debt’, these have been addressed
A recent report by Transport Focus17 on
through ‘deny list’ management – where a
bus travel for young people found that ‘the
cardholder’s card is prevented from travelling
overriding view was that contactless is the
again until they have cleared the debt. Bad
way forward and should be offered via card or
debt levels for Model 2 solutions have been
phone’. It concluded that the industry would be
reported as typically being half of those seen
better to focus on contactless rather than local
on Model 1 solutions.
smart cards. It also concluded that contactless
ticketing should be multi-operator and multi-
• Some operators have detected intentional
modal.
fraud, although the incidences of this are low
and not deemed to be of material concern.
There was initial concern from bus operators
that they were seeing a high level of transactions • There were initial concerns about the
declined by card issuers, leading to a bad potential for higher transactional costs
customer experience. However, this has been compared to other payment methods.
effectively addressed and is no longer a problem However, with the structure of the Model
of significant concern. Decline rates are typically 2 commercial framework, operators are no
under one per cent which is lower than seen in longer reporting this area as a major concern.
other sectors, such as retail.
• The incremental costs for smaller operators
Positive business case can potentially be more material, though
The business case for bus operators is reported alternative commercial models on offer from
as being positive: suppliers, and government support in some
• Key benefits are driver efficiencies on timing areas, are going some way to mitigate.
and reduced risks of cash handling for drivers
and other staff.
17. https://www.transportfocus.org.uk/research-publications/publications/making-bus-a-better-choice-for-young-people/UK Finance Contactless Transit 15
Challenges Meanwhile bus operators on a Model 1 (single
Model modifications PAYG) solution have added in some of the
Three of the five bus operators (Arriva, First and Model 2 features such as deny list management
Go-Ahead) have selected a Model 2 (aggregated and other, card scheme specific, risk mitigation
PAYG) solution, although they have only just processes. These implementations are known as
begun to deploy some of the key features, such ‘Model 1 Plus’.
as fare capping. These initial implementations are
known as ‘Model 2 Minus’. The implementation This approach has the advantage of providing
of the second reader on the bus to support tap- the operator with improved bad debt levels but
on and tap-off is expected later in 2019 by most does not offer the issuer liability cover for the
of the operators18. This addition will enable them first journey, as available through Model 2. The
to offer the full Model 2 proposition, including business case to move to Model 2 appears to
back office fare processing, and is expected to be positive and as such it is predicted that the
speed up boarding times. five largest bus operators will eventually operate
with a Model 2 scheme.
Multiple operators sharing the same routes and
a mixture of models in the market have led to A mixture of full and partial models is expected
interoperability challenges in some areas. This to lead to inconsistencies in the customer
situation has been partly overcome through the journey that will cause customer confusion,
implementation of ‘driver intervention’ to sell and potential unwanted maximum fare charges,
a physical ticket to customers, even in cases leading to increased customer complaints.
where the operator is running a Model 2 back- The diagrams below show how these Model
office solution. The physical ticket that is issued modifications fit between Models 1 and 2, and
can then be used on other buses operating how they work in practice.
Model 1 only propositions.
Model 1
Model 1 ‘Plus’ Model 2
Single PAYG Aggregated
Model 2 PAYG
‘Minus’
FIGURE 7. MODEL DELINEATION 2019
Driver Intervention on Model 2
18. For example, Transdev, support by TfN funding, have started to pilot this.16 Contactless Transit UK Finance
ENTRY EXIT
ENTRY EXIT
Bus company ‘A’. Customer boards bus and Customer alights from
Touch in only with touches in. Tells driver the bus with no further
driver intervention where they are travelling action required.
Bus company ‘A’. Customer
to, boardscreates
who manually bus and Customer alights from
Touch in only with touches in.
an exit record Tells driver the record
Exit bus with no further
is Stated
driver intervention where they are travelling action required.
to, who manually creates
an exit record Exit record is Stated
ENTRY EXIT
ENTRY EXIT
Bus company ‘B’. Customer boards bus and Customer touches out at
Touch in and touches in. exit reader and alights
touch out from bus
Bus company ‘B’. Customer boards bus and Customer touches out at
Touch in and touches in. exit reader and alights
Exit record is Actual
touch out from bus
FIGURE 8. TAP-ON / TAP-OFF
Exit record is Actual
It should be noted that each of the card Implementation
schemes (e.g. Visa, Mastercard and Amex) has Some of the earlier reports on the challenges
their own flexible rules, operational guidelines of getting new contactless devices approved
and commercial frameworks to support the have since improved and the installation and
customer proposition models outlined above. implementation of hardware and systems
It is apparent that not all operators are making has been relatively trouble-free. The good
the most of what these frameworks have to relationships that have been developed among
offer, though this may be simply the result the supplier community have helped to ensure
of the significant progress in the substantive better system design and deployment than
areas having been achieved in a relatively short would have otherwise occurred in a traditional
timeframe. Transit operators should contact multi-vendor procurement.
the card schemes directly to understand the
relationship between the three Contactless
Transit customer proposition level models
outlined above and the individual card scheme
rules and procedures.UK Finance Contactless Transit 17
International cards Future development
Significant improvements have been made in Regional adoption and uptake
the way that international cards are accepted Adoption of contactless in rural areas is around
and processed since 2016. This has led to TfL, one half of the levels seen in and around
for example, reporting that customers from 140 towns and cities. The view expressed by some
different countries have used their contactless operators is that this is to be expected and
cards to travel on London transport. that over time, with improved confidence
and greater penetration of contactless cards,
There are ‘swap out’19 programmes in place for the adoption levels will increase. One region
the remaining small minority of international going against this trend is Cornwall, which is
cards that currently are not accepted, to bring experiencing high levels of contactless usage on
them up to the global standard. buses, according to one industry official.
The adoption of the global EMV standards, It is too early to establish the extent to
underpinned by global card scheme processing which contactless has stemmed some of the
arrangements, also means that customers with passenger journey losses. For most operators
UK issued contactless payment cards can use though, passenger journey numbers were not
the ever-increasing number of international the primary driver for the implementation of a
contactless transit schemes while travelling contactless solution.
abroad.
Interoperability
BUS STATISTICS Some bus operators are starting to consider to
what extent interoperability can incrementally
drive up passenger journeys and, with it, an
increase in revenue. Early stage interoperability
could be enabled between some of the
Average adoption Average ticket value operators, especially those that share the
same or compatible technology providers. It
12% to 50% £3.62 is envisaged that interoperability, with fare
aggregation and other benefits such as capping,
may lead to some short to medium-term
competitive advantage.
19. It is estimated that around 50 per cent of US based contactless cards currently do not support the Offline Data Authentication capability that is required for UK transit contactless
implementations. However, US card acceptance still remains one of the highest for international card usage on TfL.18 Contactless Transit UK Finance
Benchmarking
As can be seen by comparing the original
goals set out by the project there has been
exceptional progress in the bus sector, especially
with regard to national rollout.
BUS
PERFORMANCE
Goal Benchmark by 2019/20 Rating Comments
National coverage London, Newcastle, Excellent Exceeded the targets announced by the
Manchester, Oxford and a ***** bus industry in 2017 and established at
number of other large towns the outset of the Contactless Transit
and cities across the UK. project.
100 per cent of the major bus operator
buses and an estimated 72 per cent
of all UK wide buses are now able to
accept contactless ‘tickets’.
Compelling customer Model 2 with aggregated Good Model 2 adopted by 3/5 operators.
experience fares and capping on bus and *** Aggregated fares and capping in
rail. planning but not yet delivered.
Rapid adoption 15 per cent of journeys being Excellent Achieving a ranges of adoption rates of
cEMV, within one year of ***** between 12 per cent and 50 per cent
launch, of a contactless with the average being 25 per cent
proposition being rolled out. across the UK.
Strong business case At least two of the five Good Buses have delivered an increase in
business case drivers are *** the range of payment options and are
being met. reported as seeing some operational
cost savings from speed and reduction
in ticket and cash management.
FIGURE 9. BUS PERFORMANCE AGAINST GOALSUK Finance Contactless Transit 19
D. RAIL INDUSTRY
Progress cent of journeys being made in this way.21 Out of
To date, contactless transit has not seen much the two, contactless is the customer’s preferred
traction in the rail industry. While Transport for option.22
London (TfL)’s geographical reach continues to
grow, allowing customers to use contactless for In early 2019, the DfT consulted on extending
rail journeys within a wider perimeter around the PAYG network beyond the current TfL
London, there has not been an implementation boundaries.23 The consultation does not, at this
outside of London so far. However, contactless stage, seek to determine which technology
is frequently used as a payment channel to should be used. It is assumed that there will
purchase rail tickets20 so converting these be an extension to the TfL boundaries around
customers to the Contactless Transit models London. This is significant as over 60 per cent of
would seem a natural evolution. all journeys start, end or go through London.
There are some unique challenges in rail; for Smart ticketing initiatives
example, the complex fare structures are There continues to be government attention
not straightforward to encompass within the on rail ticketing, driven in no small part by the
contactless transit models, and concessionary public statements by the Transport Secretary
fares would require some form of verification. that every rail passenger should have the option
Moreover, the typically higher fares mean rail of travelling without a paper (magstripe) ticket.24
operators are not as comfortable with a PAYG
system, preferring a pre-purchase model. UK The Department for Transport (DfT) has
Finance is continuing work with the payments coordinated a major drive towards smart
and transit industries to develop Model 3, ticketing in recent years, by combining and
which could allow both for pre-purchasing and coordinating initiatives led by the Rail Delivery
concessionary fares. Group (RDG) and Transport for the North
(TfN), together with an additional £80 million
The Department for Transport (DfT) has investment in smart card infrastructure.
invested significantly in smart ticketing over the
last few years, and some of this infrastructure DfT met the target of achieving 90 per cent of
is expected to be able to be used to facilitate all journeys supported by at least one smart
contactless transit as well. ticket option by December 2018 (70 per cent
of all relevant product flow combinations are
Contactless around London enabled for barcode), and the programme
Some commuter lines in and out of London is seen as enabling the take up of ITSO for
are already seeing extensive use of Oyster and regular commuters. The focus is now on driving
contactless with, in some cases, up to 76 per customer uptake.
20. UK Finance Payments Report 2018: 383 million contactless payments were made for travel on public transport, including payments for tickets on train, bus and tube.
21. Statistics provided by TfL.
22. According to TfL.
23. https://www.gov.uk/government/news/passenger-views-sought-on-bid-to-extend-pay-as-you-go-on-rail-network
24. https://www.bbc.co.uk/news/uk-politics-4147547820 Contactless Transit UK Finance
However, smart ticketing and barcode solutions The DfT’s PAYG consultation considers that fare
are not accepted by all rail operators, making structures will need reforming to enable any
interoperability a challenge. Barcodes, for meaningful PAYG offering across rail in the South
example, cannot be used across London. Due East.
to a belief that contactless would not meet the
required end of 2018 delivery timescales, the Franchise structure
smart ticketing initiative did not support the The structure of the UK’s rail franchise system
major use case of PAYG or EMV Contactless. is also believed to make the adoption of new
technologies more challenging. The current
Challenges franchise approach is typically based on a
Complexity of fares and concessionary fares seven-year contract, and requires significant
TfL’s system includes zonal fares, and its back investments by Train Operating Companies
office has to manage some complex fares. (TOCs) at the start of their franchise, followed
However, it is still only being used for full adult by the uncertainty of having a future income
fares. It has been noted by TfL and many others towards the end of the franchise period. An
in the industry that having a stable fares base additional challenge for TOCs is that they need
and overall regulatory powers were critical to to decide what might be relevant innovation,
the success of TfL. It is worth noting that Oyster many years (over ten years in the case of C2C)
PAYG on National Rail took considerably longer in advance of them requiring, or being able, to
to achieve, as it sits outside of TfL’s powers. DfT deploy them.
is also consulting on simplifying rail fares across
the UK.25 In recognition of these challenges a review
into franchising is being led by independent
Simple matching of a card’s identity can chair Keith Williams, the former chairman and
enable the use of contactless for travel that chief executive of British Airways. Aspects of
includes concessionary and discounted fares. the review that may have an impact on EMV
However, transit operators will need to agree an Contactless are in the areas of:
approach to revenue inspection and cardholder • Commercial models for the provision of
verification (e.g. a 16-25 rail card) and then build rail services prioritising the interests of
supporting processes if this capability is to be passengers and taxpayers.
deployed. The lack of appetite to make progress
on alternative fare options is believed to be • A system that is financially sustainable and
compounded by the weak business case for able to address long-term cost pressures.
these lower-value travel use cases. A solution for
advance purchases, reserved seats and first class • A rail sector with the agility to respond to
options, has been sought but still seems some future challenges and opportunities.
way off.
Model 3 (for pre-paid journeys) offers a
potential approach to deliver this proposition.
Conceptually, digital wallets for pre-paid
journeys using a cEMV based token remains a
viable proposition.
25. http://www.bbc.co.uk/news/business-47258909UK Finance Contactless Transit 21
Future look
Increasing contactless limits for transit Payments and transit industry consideration
TfL is currently planning the extension of on how to extend the £30 limit will become
contactless ticketing to support the Elizabeth key to the delivery of the Crossrail extension
Line (Crossrail) extension. The Elizabeth Line will and to avoiding potential customer confusion.
stretch more than 60 miles from Reading and Incoming European regulation26 places a cap
Heathrow in the west through central tunnels on contactless transactions but provides an
across to Shenfield and Abbey Wood in the east exemption from authentication for contactless
and is expected to serve around 200 million transit journeys. This means that unlike retail
people each year. The new line is currently contactless transactions there is no regulatory
due to open in late 2020 or early 2021. Fares constraint to a higher limit, although of course
for these longer journeys could be higher than any increase in limits would have potential
current Zones 1-6 travel and some of the latest implications for existing liability models.
estimates indicate that fares could reach up to
£40 each way.
The use of a contactless card for transit, in
reality, is not a standard contactless payment
from a technical or scheme rules perspective.
However, there may be an expectation when
customers use their card for transit by tapping it
on a reader that the existing £30 limit applies.
26. Under the Payment Services Directive 2, the European Banking Authority was required to develop Regulatory Technical Standards on Strong Customer Authentication (SCA). For the
majority of electronic payments, customers will be required to provide two factors of authentication at point of payment. Contactless payments under €50 are exempt, as are all
contactless transit payments.22 Contactless Transit UK Finance
Strategic development Furthermore, there is an increased interest in
There still remains a strong belief that cEMV how open APIs (similar to that delivered in the
has a role to play in PAYG journeys, with other finance sector through Open Banking and in
technologies being better suited to longer the airline sector through the New Distribution
timespan (e.g. annual) season tickets. RDG is Capability), can aid competition and innovation
working on a National Rail ticketing strategy in the transit sector. Consideration is also
and has agreed to some high-level principles being given to the implications of moving rail
for PAYG journeys. They are also undertaking ticketing into the cloud and how to achieve
feasibility work on a centralised back office that interoperability as this is done.
will support multiple tokens, including EMV.
Identity based
Seasons - Card as ticketing
Authority to Travel
Oyster Seasons - Smartcard
Transition from time based to
usage based commuter products?
Seasons - Paper
On-board
PAYG - stored value PAYG - bank card /
Oyster mobile
Identity / location
based ticketing
Ticket Office / TVM Transition from paper to smart to bank card
Identity based
ticketing
Ticket on
departure Mobile / Bank card as
(paper) authority to travel
Mobile / Barcode
2018 - 2019
Source RDG 2016 (redrawn)
Illustrative - NOT TO SCALE
FIGURE 10. TRANSIT TICKETING ROADMAPUK Finance Contactless Transit 23
Benchmarking
As can be seen by comparing the original goals
set out by the project, there has been limited
progress on the rollout of cEMV for rail. The
‘direction of travel’ is however looking more
promising than it has in recent years, with a new
focus from the government becoming more
evident.
RAIL
PERFORMANCE
Goal Benchmark by 2019/20 Rating Comments
National coverage London, Newcastle, Slow TfL still dominates and is doing well.
Manchester, Oxford and a * There are some signs of interest being
number of other large towns shown however, such as through the
and cities across the UK. issuance of the DfT’s PAYG extension
consultation.
Compelling customer Model 2 with aggregated n/a No other rail operators outside of TfL
experience fares and capping on bus and - are yet to deploy a contactless solution.
rail. See TfGM’s regional light rail update
that follows.
Rapid adoption 15 per cent of journeys being n/a Adoption on TfL continues to increase
cEMV, within one year of - however no other rail operators have
launch, of a contactless yet deployed a contactless solution.
proposition being rolled out.
Strong business case At least two of the five n/a As above.
business case drivers are -
being met.
FIGURE 11. RAIL PERFORMANCE AGAINST GOALS24 Contactless Transit UK Finance
E. REGIONAL
Progress To address this concern, and with support
With the trend in devolution to regional from TfN, Transport Scotland and Transport
authorities and the government’s granting of for Wales, the DfT has commissioned research
greater local powers, regional activity in transit looking at how public transport ticketing
ticketing has been increasing. Transport for schemes can be better joined up.27 This research
the North has a planned phased approach will look at existing and medium-term landscape
to implementing smart ticketing, including of public transport smart ticketing schemes
contactless transit across the North. Midlands within England; and explore how the growing
Connect is also developing plans for its region. number of regional and local smart ticketing
schemes can offer the potential for a consistent
At the same time, individual cities are starting to customer experience through contactless
launch their own implementations. A barrierless payments (cEMV), in particular including
Model 2 (PAYG) solution for Metrolink trams interoperability.28
in Manchester is expected to be launched in
summer 2019. This is the first light rail roll-out i. Transport for London
outside of London. Birmingham transit operators Transport for London, as highlighted throughout
are keen to leverage contactless transit for this report, continues to experience growth
international tourists coming to the 2022 in contactless transit. Customer experience
Commonwealth Games. improvements have been made, especially
around how TfL’s deny lists are handled.
This organic development of regional and city
contactless transit schemes in the UK could
lead to travel interoperability issues in the
future if not carefully managed. Moreover,
the Department for Transport (DfT) only has
authority in England, meaning that Welsh and
Scottish transit schemes sit outside of its
strategic influence.
27. https://www.digitalmarketplace.service.gov.uk/digital-outcomes-and-specialists/opportunities/9692
28. For example, looking at potential system architecture options, recommendations on how multi-modal, multi-operator, multi-scheme public transport account-based ticketing (based
on contactless EMV payments (open and closed loop), transport-specific smart cards or other validation approaches) could be rolled-out nationally across England (or excluding, but
interoperable with TfL’s scheme in London) in a coordinated and coherent fashion. This could include the general commercial arrangements that would need to be in place for each
option to be viable (including what bodies / organisations would need to be involved).UK Finance Contactless Transit 25
Transport for London Data
Total cEMV journeys cEMV journeys
89.4m as % of PAYG
+20.8m (year on year) 54.2%
+7.0% (year on year)
Rail cEMV journeys cEMV journeys as
56.8m % of PAYG - Rail
+13.8m (year on year) 56.0%
+6.8% (year on year)
Bus/tram cEMV journeys cEMV journeys as %
32.6m of PAYG - Bus/tram
+6.9m (year on year) 51.3%
+7.0% (year on year)
These figures are for the period 3.3.19 to 31.3.19
Contactless Uptake on TfL
2,000,000
1,500,000
1,000,000 Oyster Total (000)
cEMV Total (000)
500,000
0
2014/15 2015/16 2016/17 2017/18 2018/19
FIGURE 12. TFL CONTACTLESS UPTAKE
Traditional season tickets have been in decline as working patterns change and contactless, presumably with daily and
weekly capping, has become better understood. As a result, people within the rail sector believe that we need to be
thinking differently about how we define ‘season’ products in the future.26 Contactless Transit UK Finance
Transport for London Data
Contactless market is coming from all other products
60.0%
Season ticket
50.0% market has
declined
by 1/3
40.0% Combined
PAYG market
has nearly
doubled
30.0%
Journeys requiring
a ticket to be
20.0% bought every day
have fallen from
37% to 8%
10.0%
Printed Tickets
Oyster PAYG
0.0% Contactless
1 3 5 7 9 11 13 2 4 6 8 10 12 1 3 5 7 9 11 13 2 4 6 8 10 12 1 3 5 7 9 11 13 2 4 Season Tickets
2013/14 2014/15 2015/16 2016/17 2017/18 2018/19
FIGURE 13. TFL CONTACTLESS JOURNEYS
ii. Transport for the North (TfN) There are three concurrent phases of delivery
TfN has aspirations for joined-up public for TfN planned over the next four years:
transport journeys across the North, and
contactless is a key part of this discussion. Phase 1: The delivery of early benefits focused
on rail, including the introduction of smart
TfN is a conglomeration of 19 transport and integrated travel to customers offering
authorities and is now a Sub-national Transit multi-operator support with complex capping.
Body (STB) which has the potential to use its This involves working with train companies
devolved power for rail services from 2024. TfN and the DfT to issue smartcard products,
has access to a budget of £150 million based on complementing the availability of barcode
meeting certain government set criteria. TfN has ticketing for other journeys. This first phase
established Heads of Agreement with Transit has been part of the DfT’s STNR national
Operators to arrive at an agreed commercial programme to roll out smart, ITSO based,
model and proposition, and is also working ticketing on all rail travel.
together with Network Rail, Highways England
and HS2. Phase 2: The continued delivery of smart and
integrated travel benefits, including enhanced
real-time customer information such as
disruption messaging, and open data sources.UK Finance Contactless Transit 27
Phase 3: This phase is expected to deliver EMV to meet the needs of the Midlands. It is through
tokens and weekly capping. TfN will facilitate this work that Midlands Connect considered the
the sharing of knowledge between operators option of a “broker model”.
and transport authorities and identify new
opportunities for collaboration. In autumn 2018 Midlands Connect sought
This phase also includes the implementation of £20 million from the government for the
the “ABBOT” – a back office to enable customers development and delivery of an ABT solution
to use contactless bank cards to obtain a ‘Fair that encompasses both ITSO and cEMV
Price Promise’ when they travel on multiple technology. Funding was not awarded, as
modes of transport across the north. ABBOT significant central funding was already being
will collate and read customer data to facilitate provided for Transport for the North’s solution
the capping of multi-modal, multi-operator which provides similar passenger outcomes. The
journeys. This will ensure that customers pay DfT’s decision to fully support TfN’s approach
the best possible price for their travel on public will mean that other adjacent regions will be
transport. required to integrate with TfN to avoid the
creation of ‘islands’ of ticketing solutions across
iii. Transport for Greater Manchester (TfGM) the different regions.
TfGM is considered to be a part of the Transport
for the North initiative, although the relationship Since the decision by the DfT, Midlands Connect
is not clearly defined. TfGM is launching has been actively engaging with TfN to see how
contactless payments on its barrierless, light rail the Midlands requirements for a cEMV solution
system – Metrolink – in summer 2019. This will can be integrated within their programme.
be the first Model 2 (aggregated PAYG system)
on light rail outside of London. v. Transport Scotland
Transport Scotland (TS) operates a rail franchise
iv. Midlands Connect and deregulated bus sector model. Ferries, for
Midlands Connect (MC) is the Sub-national historic reasons, are a mix of regulated and
Transport Body for the Midlands. MC is solely unregulated approaches. The TS focus to date
funded by government and constitutes a has been on implementing ITSO and are helping
partnership of national and local bodies, to fund the roll-out of contactless readers
including 23 local authorities, local enterprise for the smaller bus companies. TS is making a
partnerships, chambers of commerce and two commitment to an Account Based Ticketing
international airports. trial and is maintaining a watching brief on
contactless.
Midlands Connect is planning on implementing
a contactless payments solution for transit vi. Transport for Wales
available by the start of the Commonwealth Transport for Wales has recently issued a 15-year
Games that are being hosted in Birmingham in franchise to Transport for Wales Rail Services.
2022. Retail enhancements are part of the franchise
arrangements and, as such, smart ticketing is
During 2018 Midlands Connect worked closely being rolled out across Wales and the Borders.
with Transport for West Midlands (TfWM), Validators on the South Wales Metro will enable
Nottingham City Council (NCC) and the Robin PAYG flexible ticketing. Elsewhere, customers
Hood Area Operators group to develop an will be able to use mobile tickets to ensure they
Account Based Ticketing (ABT) solution proposal always pay the lowest fare.You can also read
