Mobile Options on the Rise as Proprietary Payment Systems May Be Too Restrictive for Today’s Transit Rider
Public transit agencies are finding that a key ally in their continued search for ways to make their services easier to consume is their customer’s cell phone. The global mobile ticketing market, including event ticketing, airline ticketing, transit ticketing, and theatre ticketing, according to analysts, is projected to grow at a compound annual growth rate (CAGR) of 20.09 percent between 2016 and 2020. The report, Global Mobile Ticketing Market 2016-2020, found that ticketing in the transportation sector, especially metro and bus ticketing, is increasingly being driven by mobile phones.
No small market of its own, for 2017, the number of smartphone users in the United States is estimated to reach 222.9 million, according to Statista, Inc., a leading statistics and research company. The United States is one of the leading countries in the world with respect to adoption of smartphone technology. While the number of smartphone users has for many years steadily and staggeringly climbed (in 2012 there were 122 million users in the U.S.), the number is predicted to continue to rise into the future albeit, at a slower pace as the market approaches maturity. There are a number of players in the smartphone space, but the clear market share capture belongs to Google Android and Apple’s iOS.
Last summer, John Rampton at TechCrunch, a technology industry news publication, reported that a recent study noted that 39 percent of all mobile users in the U.S. had made a mobile payment in 2015. This is up from 14 percent in 2014, and by Rampton’s estimations will be in the 70 percent range by 2017and 90 percent by 2020.
Because of this enormous growth (and potential growth) that mobile devices present, experts expect to see the mobile payments industry and startups in the space evolve to meet the growing demands of users.
All of this advancement and adoption of mobile technologies, coupled with user enthusiasm, is making it appealing for transit agencies to invest in open loop ticketing options built upon mobile ticketing. Basically, open loop systems are non-proprietary fare media that lets riders pay with “whatever is in their wallet” most often times being their mobile device. Many observers note that mobile ticketing contributes to improving the customer experience, while also reducing barriers for new passengers, both of which can help drive ridership.
Research has found that a primary appeal of mobile ticketing is for the occasional rider that may not carry cash, or visitors and those that take a bus or train only when heading to a special event. It may also benefit the rider that does not own a credit card and cannot use a ticket vending machine. The ease of using a mobile device that a rider already owns is beginning to outpace even the smart card (and its costly supporting infrastructure) that not so long ago seemed like a big step forward in people moving.
Launched at the end of 2015, San Francisco Municipal Transportation Agency (SFMTA) began an 18-month experiment in mobile ticketing that allows its estimated 700,000 daily riders to purchase, store and use tickets with iPhone and Android devices. Through either a credit card or PayPal account, users create a profile and can manage fares with a few taps.
“The Muni app solves a huge pain point customers have with using public transportation,” believes Anuj Nayar of PayPal. "We are in an age where we already use our phones for everything, so it’s a natural step to move toward a digital wallet for public transit payments and beyond.”
The MuniMobile app is free. After downloading the app, Muni riders create an account, choose the type of rider (regular adult, senior, disabled, youth or paratransit), and then choose a fare (bus or rail, cable car or passport). Then they go to checkout and pay using credit card, debit card or PayPal. The app deposits a ticket in the user’s account, where it’s intended to be used as a flash pass to be shown to fare inspectors, cable car conductors, or station agents, not tapped on the Clipper card reader.
“We have a great fare system in Clipper, and more than half of our riders use it,” said Ed Reiskin, MTA transportation director. “But that means nearly half of our people pay with cash. And that slows boarding.”
San Diego Metropolitan Transit System (MTS) launched a pilot of MTS mTicket, a mobile ticketing app, in September 2013. The app allowed commuters to use their smartphone (Android devices and iPhone) to purchase their day pass using credit or debit cards for travel on the San Diego Trolley to football stadiums during the games. MTS successfully promoted the mTicket to Comic-Con attendees in July and created a fun video to let convention-goers learn about the benefits of using mTicket over cash. Since the pilot program was implemented, total mobile ticketing transactions climbed sharply from 7,500 in 2013 to 18,600 in 2015.
Launching later this year, MTS and North County Transit District (NCTD) will jointly implement a new mobile ticketing application on a cost-sharing basis. The six-year agreement includes a three-year base period and three one-year options.
The Sacramento Regional Transit System (RT) launched a pilot for its citywide mobile app called RideSacRT. The app allowed passengers to pay fares, plan trips, and track the public transit system. The free mobile app was initially a six-month pilot program that offered the ability to purchase Basic and Discount single ride tickets or daily passes. Due to its popularity, the pilot program was extended through December 31, 2016. RT plans to transition RideSacRT to a permanent mobile app with additional features. During the pilot period, users had the ability to provide feedback to help create RT’s final mobile application.
In March 2016, the Southern California Regional Rail Authority (Metrolink) launched the first version of its mobile ticketing app, which will allow passengers to purchase tickets through smartphones, tablets and other mobile devices. The app is available on iOS and Android phones. The pilot began with only Inland Empire-Orange County Line passengers using the free app to purchase tickets and connect to local bus operators. This allowed Metrolink to test the app and make improvements before launching the app systemwide.
While gains in smartphone ownership will be slowing down, as the growth phase of mobile adoption moves deeper into a maturing market, now might be the best time to move to an open loop ticketing system. Juniper Research recently reported that they anticipate nearly 23 billion event and transport tickets to be purchased via mobile devices by 2020. The study also shows that metropolitan and bus ticketing was driven by mobile phone usage in nearly every market, suggesting that all travel marketers in major cities or hubs ought to roll out mobile-first offerings to travelers and commuters. Metro and bus ticketing’s low price, high frequency, and high volume of purchases lend themselves well to mobile tickets. The California transit agencies included above are simplifying the customer experience and experimenting with new fare technology that ultimately will offer better data to the agency and better purchasing options for the rider.