More than half the world's population lives in cities. And by the year 2050, that figure is expected to be closer to 70 percent.
So, it stands to reason that giving city planners smart ways to use new technologies will only make living, working and visiting these urban hubs more desirable.
But it will take more than just great technology to turn an urban hub into a "Smart City." Will Judge, MasterCard’s Head of Urban Mobility – and former Transit of London Executive — told Karen Webster recently that it's about making it as easy to pay for a slice of pizza or buying a new pair of shoes as it is to pay for a ride on the Tube in London.
Judge brings a unique perspective to the conversation. As an executive with the Transport of London, he was on the ground floor of the project that brought tap and go payments to the Tube. Now on the other side of the table and talking to many city planners in cities across the world, Judge can appreciate the impact that technology can deliver to a fundamental part of everyday life in London. But there's also no one-size-fits all solution, he noted.
Every consumer, region of the world and specific city are infinitely different — making it a little more complicated to determine how to match the best solution to a specific population. Judge says that turning contactless mobile ticketing into a broader mobile payments experience is simple. Just give consumers a single account with digital credentials that add value to the series of very simple but crucial everyday activities that they encounter throughout the day. And, he offers a few use cases to prove it.
"The one thing I've learned from moving from Transport to London to MasterCard is that every payments market is different. The consumers are different, the economics are slightly different. Everybody has a slightly different starting point. And cities are different, too," Judge said.
That’s not the only difference. Mobile and contactless ticketing and mobile and contactless payments are a little like apples and asparagus – both edible foods that are good for you, but often eaten at different times of the day and with different parts of a meal. There may be a few creative chefs who see the potential, but the market, overall, has yet to hop on that bandwagon.
"There's a lot of differences between contactless ticketing and contactless payments. The whole set of foundation for contactless payments was centered around a retail transaction so the price is known – not the case in ticketing which depends on how long the journey is," Judge explained. "At the point of sale, the cashier will be doing things like putting goods in a bag so there's enough time for a couple seconds to pass if an online authorization or online authentication is required. You have a totally different situation when it comes to ticketing.”
Use Case 101
It’s a problem that Judge said that MasterCard tackled when it adapted the Oyster card for Transit of London. He says that MasterCard would “unpack the components of a contactless transaction” and then reengineer the transaction flow in order to create an experience that could support what busy commuters need with trying to hop their train – an authorization delivered in less 500 milliseconds.
"The whole basic premise of a contactless payments transaction is there is a single tap. So all three of those tasks have to be done differently in the transport context: buying a ticket when the price is known, authenticating the consumer and authorizing the transaction - and making it happen in an instant. It was really the work that was done with MasterCard that figured out how to tackle those three things," Judge said.
MasterCard was able to save the London Transit Authority 6 percent on transactional costs – which at a rate of 80 million journeys per week is material.
Contactless Ticketing Vs. Payments
London’s contactless transit solution, Judge noted, is becoming more and more popular. About a third of all paid journeys – 8 million of the 25 million to 30 million a week – are now contactless. Every month there are 350,000 more journeys taken than the last month, and every week 30,000 more customers, Judge says, sign up.
"It seems to be spreading through word of mouth. The word is getting around and more and more people are switching. It's quite a fascinating trend," Judge said.
Although it seems as though contactless is catching on with consumers, Webster asks Judge if he feels the same case can play out with getting consumers to make contactless payments using their phones. That, Judge says, all boils down to the use cases and how many applications can be bridged together.
"Where we are with contactless NFC on mobile matches the card use case in experience and value proposition. But I think what will happen is that over time transit providers like TFL and those in other cities will add a whole bunch of other services around the mobile NFC transaction for transit,” Judge said, which includes linking mapping and travel notification apps, etc. "At the moment, these apps are quite siloed ... and digital wallet providers are built around payments. I think the opportunity for the transit providers is to start knitting those sources together into an integrated experience."
Looking ahead, Webster asks how MasterCard is thinking about ways to leverage their Transit bona fides into other use cases, in order to make this broader transportation ecosystem or cities in ecosystems smarter and contactless.
"I certainly don't think the London implication is the end of the journey. One of the observations about the wider economy is that the balance between proximity and remote transactions because of how the use of mobile is shifting," Judge said. "I think the really skilled agencies are going to be the ones who see it isn't just about payments and mobile. It's about bringing payments and journey information and options together for each customer in a single account with payments that can span the different use cases, but with a common credential."
And, in payments innovation, we know it’s about both the destination and the journey.