Moving to cashless fare collection


Any modern public transport service should offer cashless or automatic fare collection (AFC), using a stored value card, a credit or debit card or a mobile phone to pay for the trip. This is a global trend and key to achieving a high-quality experience for the commuter — one that is as “seamless” as possible, even if the journey requires several transfers and several different transport modes.

AFC is already available in three Metro Manila urban rail lines — LRT1, LRT2 and MRT3. All accept a common fare card, also known as the “Beep” card. Cashless payment is also accepted on the BGC Bus in Bonifacio Global City, the Green Frog Bus in Makati and MyBus in Cebu, to name a few. All P2P and NAIA premium airport buses also have AFC.

The DOTr is correct in pushing for AFC as a feature of all public transport and in making AFC a key component of the Public Utility Vehicle (PUV) Modernization Program. For the passenger, a cashless system means greater safety and convenience. Quick boarding and alighting translates to faster travel for passengers and more round trips for each vehicle.

A fare card has the potential of being registered and assigned to a particular person so that discounts for students, senior citizens and persons with disabilities (PWDs) can be applied automatically at the time the fare is collected.

No need to fiddle around with a purse or wallet to pull out bills or coins; passengers will feel less vulnerable to thieves. No cashbox to rob, so the vehicle itself will be less of a target for criminals. Topping up of the card or phone can be handled at stations, convenience stores or through one’s smartphone—meaning fewer queues to purchase tickets or cards.

With advances in information technology, plus proper regulation, the Philippine fare collection system can “leapfrog” and achieve the integration and interoperability that one finds in many advanced economies. In South Korea, for example, a fare card purchased in one part of the country can be used on any transport system in any other part of the country, whether rail or bus.

In the Philippines, it would be ideal if a fare card purchased in Manila could be used in any transport system in Davao or Iloilo or Laoag. You should only have to carry one fare card in your wallet instead of several. This would provide maximum convenience not only for Filipinos, but also for millions of international visitors who come to the Philippines.

Transport operators will be able to dispense with the “dirty” task of counting small bills and coins and depositing the cash revenue at the end of each day. Under AFC, the collection is deposited electronically in specified bank accounts each day, with convenient monitoring by transport operators.

It will also be easier to keep track of revenue. For example, using their smartphones, a vehicle driver or any member of a transport cooperative will be able to know the amount collected by their vehicles in real time. It will be possible for all vehicles on a route to work as a team and to pool and share all the revenue on the route (this will eliminate the on-street competition that we observe among jeepneys and buses). There will also be less need for inspectors, conductors and guards; such staff can be re-trained and deployed in other crucial functions such as vehicle driving, customer service and safety.

With adoption of AFC, revenues are expected to increase due to the reduction of “leakages”. When transport operators handle large amounts of cash, some of the collection is inevitably lost due to pilferage and the loss can be significant. In South Korea, after the shift to automatic fare collection, revenues rose by 17%, indicating the magnitude of the leakages.

For the government, moving to a cashless payment system means that data can be collected and analyzed on where and how people travel daily. Appropriately anonymized, the travel data can be a rich resource for transport planners. This saves governments the time and cost of household surveys to collect information on where people travel every day. For a metropolis like Metro Manila, a decent household travel survey would cover 50,000 respondents or more and this could be avoided with reliance on AFC data.

For the financiers of transport vehicles, AFC offers a convenient and reliable channel for the collection of loan amortization payments. The loan payments can be remitted daily by the AFC provider to the bank account of the lender. AFC will therefore help to overcome the reluctance of lenders to deal with the transport sector that, traditionally, is considered a risky prospect.

With cashless fare collection, it becomes possible to achieve an integrated fare structure. A commuter transferring from one bus to another bus or transferring from one mode to another mode can be charged a single base fare for a journey involving one or more transfers and with the fare calculated on the basis of total distance traveled, regardless of the number of transfers.

Today, a commuter transferring, for example, from the LRT2 to the MRT3 has to pay two base fares. More transfers mean a more costly journey, which discourages many people from taking public transport. An integrated fare structure therefore has the potential of reducing travel costs and attracting people to shift from using cars and motorcycles.

The AFC industry is still at its infancy in the Philippines, so there is no better time than now to set in place the right regulatory framework and fare structure for an integrated and interoperable system. In the absence of policy and regulation for the AFC sector, there is the risk of proliferation of independent AFC providers that will operate as “islands” isolated from each other. A commuter will have to keep multiple payment cards in his/her wallet to navigate independent AFC systems, making travel by public transport more cumbersome.

Reliance on a single private sector AFC provider will also mean that the transport industry will be dealing with a monopoly that can dictate its service fees. This approach has its obvious perils.

Global best practice supports the development of “open payment” AFC systems (such as in Singapore, South
Korea, etc.) whereby multiple card issuers and multiple AFC service providers operate but where all AFC cards and devices are interoperable and integrated. Multiple AFC providers ensure competition and keep AFC service fees reasonable and market-based. How do we get there? Several parallel actions are needed:

First, the formulation of national technical standards and specifications for AFC fare media (cards and mobile phones) and for card readers/validators and other devices that will be required to support an integrated fare collection system.

Second, the adoption of industry business rules that will govern how the interoperability of the different fare media will be achieved and how clearing and settlement will take place among different AFC service providers.

The technical standards and business rules should follow from extensive consultations with the AFC industry, plus strong guidance from the government.

Third, the establishment of a national AFC industry regulator that will oversee compliance with the national standards and business rules. The regulator should be equipped with a technical unit that will test and certify AFC devices and fare media to ensure that these conform to national standards and specifications.

Fourth, the creation of a National Transit Data Center (NTDC), which will capture AFC electronic data and share relevant information with different AFC service providers so as to facilitate clearing and settlement. The NTDC will not be a financial clearing house; it will serve instead to capture and process data that supports clearing and settlement among the AFC service providers. The NTDC will also be responsible for extracting transport-related AFC data and sharing this with the DOTr, LTFRB, local government units, MMDA and other agencies for transport planning as well as for real time passenger information and bus operations management by transport firms.

When the right regulations are in place and once all AFC industry players are fully compliant, it will be possible to have a fully integrated and interoperable AFC system nationwide. It can become reality in a few years’ time with strong leadership. It can be one of the results delivered within this administration.

The Philippines has already achieved similar success. Look at the interoperability in ATM cards and ATMs. Even with many banks issuing their own cards and maintaining their own ATMs, any card issued by a Philippine bank can be read and processed in any of the ATM machines nationwide. This is the result of common technical standards and business rules plus an effective industry regulator. The same can be achieved for AFC or cashless fare collection.

Robert Y. Siy is a development economist, city and regional planner, and public transport advocate. He can be reached at on Twitter @RobertRsiy

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