Dave Lynch is group IT and procurement director at Go Ahead Group. He told James Dark his strategy for getting the most out of technology

When he started his career at Blackpool Transport, Dave Lynch was given a mission to “remove paper from the business, lad”. Thirty years on, and now technology and procurement director at Go Ahead, he expects 2013 will come to be seen as a landmark in the introduction of new ticketing systems. By the time he retires, he believes the substantial replacement of paper tickets with new payment technology will be well on the way to reality.

Flagship projects this year include extension of EMV contactless bankcard ticketing in London from buses to TfL’s entire network. It will incorporate a new back office processing capability that promises to enable new fares, highly targeted to customers’ needs, to be offered in the future (PT049). Outside the capital, FirstGroup intends to deliver EMV across its English bus operations.

Expansion of ITSO smart ticketing capabilities, meanwhile, will see the launch of the largest interoperable bus/rail smartcard scheme outside London, at Go Ahead’s operations around Brighton and mid-Sussex, with City Car Club also included. In addition, its Southern franchise will offer the first rail smartcard tickets into London from outside the TfL boundary (PT050), followed by rail’s first 3-4 day/week season tickets by early 2014.

The handful of other train operators with smartcard commitments will also begin considering how to extend smart ticketing from pilots into a mainstream payment option after London’s Oyster system becomes compatible with ITSO ticketing this spring. The remainder will be obliged to do so as franchises are relet.

In the bus business, the necessary foundation for expansion is largely established. All Go Ahead’s major subsidiaries have fitted ITSO smartcard technology over the past three years. Stagecoach is in a similar position and the other major players in the industry have committed to ITSO-compliant ticket machines across their fleets.

To date, Lynch characterises new payment technology as offering some additional convenience to passengers, mainly through discounted and easier purchases online, and tickets which are less likely to be damaged. However, with smartcard capability set to cover a substantial majority of UK bus operations and a growing number of rail routes, the industry is in a position to begin implementing new multi-operator ticketing schemes and significantly expand relatively low current smartcard use. Lynch says Go Ahead is the bus industry’s largest issuer of smart tickets outside TfL. However, the phased introduction of the technology means smart and mobile ticketing only accounts for 9% of its deregulated bus revenue, although that has grown rapidly from 3% a year ago.

Lynch acknowledges there may be pressure, and perhaps temptation, for some operators, to target radical step changes in the pace of transfer from paper and the types of fares offered. However, he is adamant that the dominant principle must be simplicity. This applies to the way smart ticketing is extended, how fare structures are revised, the machines staff use, the choices passengers are asked to make and industry systems.

“What I’m worried about with the ticketing boom is how to make it simple. It seems like a lot of people are shooting for the stars,” he says referring to suggestions that operators should be seeking to replicate TfL’s pay-as -you-go (PAYG) smart ticketing capability, blanket transfer all fares to smartcard or investigate the introduction of mobile phone-style tariffs for travel. “Every successful programme has multiple phases. How many walks of life have a silver bullet? Not many. So why should there be one in passenger transport?”

He is also wary of the possibility of making decisions based on fascination with technological advances. “We may think we have fantastic ideas as transport professionals, which customers think are rubbish,” he warns. As new payment choices proliferate with options to pay for travel through EMV, smartcards, and the evolution from current mobile technology to NFC, he says there will be a need to guard against placing excessive demands on users.

“Customers have to be able to understand what they are doing, and so do staff,” he says. “[Brighton & Hove MD] Roger French always tells me to spare a thought for the bus drivers in all this. They are the first line if someone has a problem with a smartcard or a phone. They have to be able to understand it. And what I’m not going to do is give customers 40,000 new ways to use a smartphone.”

This approach is apparent in the preparations for an EMV trial later this year. The Vix TP5700 ticket machines on Brighton & Hove’s buses are currently being adapted with a new unit which will enable EMV compatibility with smartcard readers. “Don’t come anywhere near me if you want to paint different readers blue and green for different cards,” Lynch bristles.

Certainly, Lynch says Go Ahead has learned from its introduction of its Key smartcard in Oxford in 2010. Over 40% of Oxford’s revenue is now accounted for by smart payment, partly due to a trailblazing interoperable smartcard scheme with Stagecoach, despite the product range being limited to period tickets and multi-trip carnets. One of the major lessons has been to focus on a readily understandable offer, based around the most popular tickets.

Lynch noted that initial take-up in Oxford was relatively slow, particularly compared to Brighton, where the launch involved a simple set of 3-4 high-sales-potential tickets for each market segment (students, adults etc). Since last April, 50,000 people in the city have become Key holders.

“So simplifying is the way we need to be thinking,” he says. “No one cares if they’ve got a Red Rover or Green Rover. They just want the best value fare.”

For Lynch, the experience in Oxford and Brighton proves a significant public appetite for smart ticketing without the need to instantly replicate a London Oyster-style experience complete with stored cash value to allow single and return trips to be made and PAYG capping.

Although Go Ahead is working on a possible PAYG trial, “you can tell from my body language it is not the first priority”, he says coming back to his initial point that technology programmes should focus on phased improvements rather than “holy grails”.

He acknowledges that in regional bus operations there are significant business obstacles to PAYG, given the need to tap in and out which could require buses to be converted to two-door, while the alternative of flat fares would limit commercial opportunity. But regardless of any business case issue, he is not convinced the public is necessarily ready for PAYG as an early experience of smart ticketing as it is introduced in new cities.

Initially he believes the focus should be on the customer benefits from transferring existing products to smartcard, some new developments such as rail flexi-seasons, and developing multi-operator schemes rather than attempting a ‘big bang’ transformation or “flogging technology”. Although he says “PAYG will come”, he points out it took TfL four years after introduction of Oyster to offer it.

In the rail industry, he highlights that more fundamental issues need to be prioritised to derive full value from new ticketing systems. He is bemused that the regulatory structure has made it more expensive for Go Ahead’s franchises to sell tickets over the web than via vending machines. On a broader level, Lynch points out that it costs over £1 to retail a rail ticket compared to “2% of that price, maybe less” to sell a bus ticket.

“The complexity of the Rail Settlement Plan and retailing regulations mean suppliers see the industry as expensive and difficult, so we have high barriers to entry for suppliers, a lot of complexity and high costs,” Lynch says.

To kick start the process of cost reduction that has been integral to the introduction of new retailing technology in other sectors, he suggests a rapid collective decision is needed to remove paper magnetic stripe ticketing, and replace it with new technologies which deliver the same network-wide interoperability benefits.

“I’m passionate about driving cost out, whereas with new rail ticketing we have added it in,” he says. “So my nervousness is about adding smartcard technology on top of current systems. It may be an aspiration that is 5-7 years away, but if we get rid of magnetics that gets rid of a lot of the cost of retailing. However, it has to be across the railway and driven by an offer which means the customer wants to do it.”

Similarly, he sees a need to overhaul the railway’s fare structure. Lynch points out there are 120 million fare options requiring an unwieldly process to update software in card readers when prices change which can involve transfer of a 1.2GB file.

Simplifying pricing, he argues, should be prioritised as a passenger benefit, not just to make it less complex to extend smart ticketing from season tickets to a broader range of fares. His preference is to introduce zonal fares for different urban areas with a separate system, possibly more closely linked to mileage, for long distance journeys between them. Lynch says complexity in the fare structure has been a material factor in preventing London Midland from considering extension of its smartcard trial in the West Midlands to include PAYG. Discussions are being held with Centro over introducing zonal fares in the next franchise term.

The issues in operating smartcard ticketing outside a greatly simplified fare structure which could limit revenue management strategies, have been highlighted by Mastercard and Visa which have been pushing the superior back office computer processing capability of EMV as a potential solution. Conversely, the Association of Train Operating Companies has been briefing on the future potential to offer back office processing as well as products stored on the card through smart ticketing systems. For Lynch, such debates are a sideline at present.

While concerned to ensure Go Ahead is in a position to take advantage of future developments, he points out EMV ticketing is in its infancy and unproven outside the simple flat fares environment in London. By contrast, he says ITSO smartcards have demonstrated capability to provide flexi-season tickets and flexible peak pricing through imprints on the card.

“I’m happy to use ITSO, EMV and mobile,” he says, “but my view is right now, and for the next three years, that ITSO smartcard will give you more than EMV.”

Lynch adds that other factors than technical capability also need to be taken into account before assuming any one technology will emerge as a clear winner. He points out that the industry is just starting to learn about customers’ payment preferences and surprising results are emerging. For example, Go Ahead’s customer analysis shows variations in demand for mobile ticketing which may see it being dropped in one area. He also points to a surprising proportion (33%) of Brighton students who would rather pay for transport with a smartcard than a phone.

“What they were saying was if they go out enjoying themselves at night, a phone is expensive to lose,” he explains. “But that won’t be the view everywhere and we are finding Brighton is not the same as Crawley or Oxford, which I’m sure supermarkets already know, and we will become more familiar with.

“So rather than say it always has to be mobile or smartcard or EMV, or you have to go for PAYG, my job is to develop a flexible set of tools for our companies to try. If they want to try them all: fine. If one works better in a particular market: fine. I’d rather be driven by customer feedback than technology.”

 

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