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M-ticketing in public transport: no-frills SMS gaining a foothold
Michele Mackenzie
M-ticketing in public transport: no-frills SMS gaining a foothold
Ovum attended mBlox's m-ticketing seminar, held on 9 March. The event was attended by more than 100 representatives from transport operators, mobile network operators, and technology suppliers. The debate has often focused on delivery and redemption of the mobile ticket through sophisticated technologies such as barcodes and near-field communication (NFC). Neither of these technologies is supported on mass-market handsets; indeed, NFC is not even available on most smartphones. But pioneers of m-ticketing services, no longer prepared to wait for the phones and business models to materialize, have focused on the lowest common denominator - SMS.
What's driving m-ticketing for mass transit?
Transport operators are increasingly looking at how they might embrace new technologies in order to both improve their customer focus and drive down their costs. In terms of the former, there is a growing awareness that decreasing queuing times to buy tickets and speed up boarding is not only beneficial to the customer, but also to the operator, which needs to meet its timetable obligations and reduce its infrastructure costs. Customers are demanding more choice in terms of how they purchase their ticket and how it is physically delivered to them. From the operator's viewpoint, they are seeking ways to reduce their costs. Margins are often slim in public transport, and e-ticket options can reduce costs by up to 50% compared with paper tickets according to commentators at the event. Mobile ticketing is therefore a prime candidate to address both issues. But there are many substitutes to m-ticketing and SMS
There are of course a number of very worthy substitutes to mobile ticketing for public transport, including smart cards and bank cards. The smart card is already proven in a number of markets including the Easycard in Taiwan and the Oyster card in London. EMV standard contactless bank cards are also an option, and this is the approach that will be used in the next phase of the Oyster service in London. But the ubiquity of the mobile phone and SMS keeps mobile in the running as a contender, and participants at the seminar were keen to illustrate how they were making it work. Although the examples presented focused on developed markets, the potential for emerging markets is huge. Demand for public transport is growing faster than the infrastructure that supports the service, and SMS-based m-ticketing could address this dilemma. SMS: the lowest common denominator for m-ticketing
Both SJ AB, the state-owned Swedish rail company, and Arriva buses in the UK have rolled out SMS ticketing using mBlox's enabling services. SJ AB opted for SMS text-based ticketing because it is more ubiquitous than MMS and WAP, having reached 90% penetration in Sweden. Barcodes are not so widely supported by handsets in the market, so SMS text seemed the obvious choice. Inspectors on the train use a mobile handheld computer to read the SMS ticket, but these devices do not add significantly to the cost. With such a clear business case, the company invested Skr8 million ($1.1 million) to enable m-ticketing, and m-tickets already account for around 15% of ticket sales. Arriva rolled out SMS ticketing in 4Q09. In the three months since launch, 10,000 users signed up and 70,000 journeys were undertaken using m-ticketing. While this still represents less than 1% of total journeys, Arriva is optimistic that this figure will increase rapidly. Its strategy is both to increase customer satisfaction and also to educate its customers about the benefits of m-ticketing. This paves the way for more sophisticated technologies such as smart cards and NFC. Arriva's investment has been low: its scanning device is the bus driver! The missing piece of the puzzle
While SMS m-ticketing may seem clunky and less sophisticated than some of the competing technologies, it has the advantage of being understood by the mass market, supported on most handsets and available now. Most rollouts are in the early phase, but initial results are encouraging. The piece of the puzzle that is still missing is that of ticket payment over mobile. Technically, of course, it has been possible to offer mobile payment for some time, but operators are still typically demanding 20-25% of the transaction revenue. This share, which is often deemed unsustainable even for mobile content, is not at all realistic for low-margin public transport. A change of mindset is required to make mobile payments work for public transport ticketing.
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