50% of the global population lives in cities. It’s expected to increase to
70% over the next 20 odd years. In the face of growing population and legacy
infrastructure, public transportation is one of the key challenges faced by
cities. It is a critical issue that cities aspiring to be smart have to
address. It is related to economic growth, competitiveness, sustainability and
ensuring better lives for citizens.
As a global
payments platform, Mastercard is closely collaborating with governments around
the world to support them in their endeavor to create more efficient urban
transportation. OpenGov spoke to Carlos Menendez, President, Enterprise
Partnerships at Mastercard to learn more about these partnerships and the
Quick return on
investment through operational efficiencies
Around the world, there is a desire to make investments in
various projects to make cities smarter. But many governments face a shortage
Mr. Menendez said, “Over and over the projects that we have
seen approved are the ones that get a faster return.” Because election cycles play
a role in investment decisions.
Transit is one such area. Working
with cities like London, Mastercard estimated that anywhere from 12 to 14%
of revenue is spent on collecting fares in a city. By shifting to an open loop system,
enabled by a globally interoperable technology like that of Mastercard, the
cities can save significant amounts of money.
For example, London saved around 100 million Pounds annually
by moving from proprietary technology like Oyster to an open loop contactless
system, which accounts for nearly 50% of all pay as you go ridership in London
London was already using a cashless system. For more than a
decade, Transport for London (TfL)
has used Oyster, a pre-loaded contactless smartcard, as its ticketless payment
system for fares on bus, Tube, tram, DLR, London Overground, TfL Rail, Emirates
Air Line and most National Rail services in London. Doing so has eliminated the
need to use cash to pay for fares, helping to reduce long queues during peak
But Oyster has significant operating costs. Volumes of new
Oyster card issuance in excess of 500,000 cards per month resulted in a hefty
bill for purchasing, preparing and distributing new cards. There were
substantial costs as well to maintain top-up network, collect cash from
stations and commission for third parties to top up Oyster cards. Moreover, the
requirements for the Oyster system were finalised before the Internet went
mainstream. Hence, it did not have a straightforward way for customers to
manage products stored on Oyster cards online which had to be retrofitted into
In response to these issues, TfL launched the Future
Ticketing Programme in 2014, enabled by Mastercard’s contactless payment
technology. Commuters could use a contactless-enabled Mastercard® or Maestro®
card, or a NFC-enabled smart phone. In just over a year, the cost of collecting
fares dropped from about 14 percent of revenues to just below 9 percent.
It also brought another benefit. For the nearly 20 million
international individuals1 who visit London each year, as well as residents who
infrequently use the transit system, the Oyster card system could be
“Tourists who are figuring out the system are slowing down
the system. They don’t know where to buy a ticket, they don’t know where to
stand, where to go. The ease of going through the system with their existing
card from their home country leads to better journeys for tourists and also
improves the flow for the city itself, to the benefit of the locals,” Mr.
At the moment, Mastercard is working with over 100 cities
around the world on similar transit payment systems, including the Land
Transport Authority in Singapore.
Data insights for
better journeys and enhanced sustainability
After the data on the journeys starts getting digitised,
Mastercard has worked with cities like London and Chicago to improve the
journey itself. Anonymised payment data can be captured real-time. It can help
city transport authorities to optimise public transport planning and advise
commuters on most efficient routes at a particular time.
In a recent
trial in Chicago individuals signed up to receive texts when crowding is to
be expected on a particular line due to sporting events, and almost 20% of the
people shifted to alternate routes.
Mr. Menendez said, “So, you find that citizens themselves
are responsive and they appreciate the fact that they can get a better and
easier journey by getting better information. The whole digitisation of the
data underneath from using cards and phones facilitates that.”
Mastercard is also working with Transport for New South Wales to
understand the real-time flow of individuals through the transit system as they
go shopping, to restaurants or for enjoying nightlife. (Mastercard and
Transport for NSW introduced
contactless ticketing payment to Sydney Ferries wherein, commuters can use
their Mastercard contactless card or mobile wallets that have enabled
Mastercard cards to tap on.)
Harnessing data analytics and technology to help urban
planners would reduce emissions also, resulting in better air quality and associated health benefits.
Urban transportation is one of the key contributors to CO2
emissions globally. Mastercard entered into a partnership with the C40 Cities Climate Leadership Group (C40)
in 20156 to connect Chinese and global megacities in a ‘Mobility Management’
Mobility Management network spearheads the sharing and activation of best
practices to better integrate and optimise the various modes of public
transport. It supports city efforts to reduce Greenhouse Gas emissions by improving
integration across transit modes, making public transit more attractive and
easier to use, as well as reducing and re-distributing travel demand.
Working with cities on transport systems ties into Mastercard’s
financial inclusion commitment
to reach 500 million people previously excluded from financial services and
the formal economy by 2020.
It’s important that the smart city is for the benefit of
many, and not just a few. It's important to ensure that the people who would
benefit the most from time and money savings don’t get locked out.
“If you are working a day job or a week job, you will be
getting paid in that fashion. You don’t have the benefit of buying a monthly
pass or a weekly pass. You literally have to wait in line each time for your
one-time journey,” Mr. Menendez elaborated.
Mastercard works together with the government and banks to
get prepaid cards and debit cards into these individuals’ hands.
For instance, Bogota in Colombia has a bus rapid transit
system. There Mastercard worked
with the government and a bank to provide contactless debit cards to the people.
There are over 2 million people using that particular system in Bogota.
In Vietnam, Mastercard is working with a mobile operator to
give customers prepaid cards. Multiple functionalities were built into the
card. It can be used for topping up airtime, paying bills, paying for
Mr. Menendez said, “We recognise that cities are different
and that they need unique solutions.”
But at the end of the day, they share many of the
objectives. Creating a more efficient transport system, saving costs, improving
air quality, enabling seamless journeys for residents as well as tourists, and
ultimately about moving towards a healthier, better and safer life for citizens.
And this is where having technology that is scalable to
thousands of locations around the world can provide a leg up.