Future contactless payment options for transport for London : demand, cost, equity, and fair policy implications

Abstract

This thesis assesses fare payment technologies for Transport for London in 2015. Based on a survey of technical literature, feasible payments technologies in 2015 include current smartcard technology, contactless bankcards and near-field communication (NFC) mobile phones. Five fare payment options based on these three technologies are proposed. Options 1-3 use contactless bankcards and NFC phones as the fare medium. Option 1 requires tap-in only and uses flat fares; it is a standard retail transaction. Option 2 is like Option 1 but adds a rebate program to approximate the effects of passes and transfer discounts. Option 3 requires users to tap-in and tap-out, and supports traditional transit fares. Option 4 continues the current use of a proprietary smartcard to implement traditional transit fare structures. Option 5 uses a vehicle-based smartcard reader that does not require barriers or fareboxes; it supports traditional transit fare structures and path- and service-based pricing. The five options are evaluated on four dimensions: cost, demand, equity, and fare policy. Options 1-3 have significantly lower costs due to the use of commercial payment media. Option 4's costs are similar to current costs.

(cont.) Option 5 is significantly more expensive and offers few benefits for London. To analyze demand, an incremental logit demand model was created. It shows that under conservative assumptions about passenger behavior, option 1 generates a moderate loss in revenue and ridership, while under more generous assumptions, a moderate gain occurs. Options 2 through 5 result in small changes in ridership or revenue. All five options maintain or potentially improve passenger equity, especially if passes requiring up-front payment are de-emphasized, allowing lower income travelers to obtain the best fares. Options 2 and 3 offer the greatest opportunity for customer service improvement and cost savings. Option 1 has a higher demand risk and decreased fare policy flexibility. Option 4 has limited potential for cost saving or revenue increase, and Option 5 is prohibitively expensive. Peak pricing is also investigated, and is shown to offer some benefits in creating available capacity.