Ending Cash Fares On The Buses: Does Daniels Dream of Electric Beeps?

No comments

In the world of London transport, there are few topics as emotive as fares and ticketing. From price, through the location of sale, to the method by which payments are made, ticketing is a subject that always provokes considerable debate. Debate that, arguably more than for any other topic, is subject to the dangers of a good anecdote. When TfL announced last month that they would begin consulting on the removal of cash fares from London buses it thus raised more than a few eyebrows. It’s certainly a bold proposal – but where has it come from, and why now?

The birth of an idea

It is hard to understand TfL’s thinking on taking buses cashless without understanding the wider debate on the future of ticketing technology within which it sits.

It is no secret that TfL have long regarded a shift to Contactless Payment Cards (CPCs) as their preferred means of ticketing within London as a whole. The Oyster card system surprised almost everyone – TfL included – with the scale of its success, but as we highlighted back in 2011, that success has seen the system pushed to its limit. In part this is because its ubiquity and acceptance (you will struggle to find a Londoner who hasn’t, at least once, tried to Oyster into their own house) has resulted in expansion well beyond its original scope – first onto buses and then onto national rail. It is also, however, because with Oyster TfL carry the burden of being a technological early adopter. Smartcards were still in their relative infancy when Oyster was created and there was no real working standard within the UK rail industry on which to draw at the time. To put it bluntly, with Oyster TfL effectively had to wing it.

As we wrote back in 2011, this has left TfL in something of a quandary. They have the most successful transport smart card system in the world, but it is a system that is increasingly hard to maintain:

[I]ts greatest strength – its simplicity – is becoming increasingly difficult to maintain. As anyone involved in a technical field will explain (often with a slightly pained expression), there is normally an inverse relationship between how simple a technical solution appears on the surface and how complex it is behind the scenes.

To a user, an Oyster journey across bus and Tube is now just a series of beeps, but behind the scenes it is a computational nightmare of timed journeys, interchanges and possible routes. This is further complicated by the presence of Out of Station Interchanges (valid changes that can be made between technically unconnected stations) and Autocorrects (auto-crediting back for incomplete journeys made to destinations where the gates were open such as stations for the Notting Hill Carnival).

Almost since Oyster itself was introduced, this is a problem of which TfL have been aware and which they have been working to solve. This quest for a solution ultimately resolved itself into the Future Ticketing project, which is now well underway.

Oysters are not the only sea-fruit

Within the context of Future Ticketing – and within the context here of the cashless debate on buses – it is important not to confuse the method for the objective. The original objective of the Oyster project was not to introduce a smartcard, it was to introduce a system that:

  1. Would be simple to use
  2. Would always find its users the cheapest fare.

In effect, the goal was to take the travelcard system that London’s transport authorities (and the original Greater London Council) had pioneered to its next logical step. It was about simpler transport, not technology. A smartcard was simply the best means of delivering those goals at the time, with the downsides of having to develop a proprietary smartcard solution (due to the immaturity of the market) outweighed by the potential benefits.

It is an easy mistake to think that TfL’s goals with Future Ticketing are to find a like-for-like replacement for Oyster. In fact, they remain the same as they were when Oyster was first commissioned – it is still simpler transport, not technology, that ultimately matters.

In this context, it is easy to see why TfL have become so enamoured with CPCs. As early as 2007 TfL had begun to explore the potential for skipping the smartcard entirely and moving transactions to the existing plastic within a passenger’s pocket. This resulted in a partnership with Barclaycard that saw Oyster chips embedded in credit cards.


The Barclaycard One Pulse

From TfL’s perspective moving the transaction off of a separate chip to piggyback onto the card’s embedded functionality was – and is – the next logical step. Indeed had the technology to do so been available at the time Oyster was created this is almost certainly the path down which London’s electronic ticketing would already have progressed. Pushing the transaction back onto a user’s existing card meets all the objectives but has the added benefits of removing what has become an enormous cost overhead – the maintenance of an entire proprietary payment processing and card management solution. Why maintain your own separate system when the banking system will carry the cost of maintaining one for you?

Taking CPC to the buses

A long term shift to CPCs became an established principle within the Future Ticketing project in 2010, and buses were always going to form a key part of of the rollout and testing process. Although CPC is arguably a maturer technology now than smartcards were when Oyster was adopted (at least within the context of small-scale transactions), TfL is still pushing the technology well beyond anything that the marketplace has already seen.

In this environment, pioneering such a system on the Tube was never going to be an option. With its furiously complex fares system, diverse arrangement of interchanges and fuzzy boundaries with national rail, the Underground is not a network on which any sensible systems engineer would look to trial a new technology.

The bus network, by contrast, is an almost perfect testbed. It is a closed environment over which, albeit through contracts with individual bus companies, TfL has complete control. With a single fare option for travelcard-less travellers (one ticket = one journey).

In 2011 it was thus confirmed that limited trials of the technology would be undertaken on buses in 2012. Indeed it was boldly proclaimed that CPCs would be usable across the whole network by the time of the Olympics. In fact this would turn out to be an overly optimistic target, and early trials highlighted a number of problems. Some of these were technical – such as the need for card readers to avoid double-billing travellers when both an Oyster and CPC were present. More crucially some related to questions of payment processing and risk that, thanks to the immature nature of CPC as a technology, the industry had yet to fully address, but which TfL’s large-scale implementation of the technology soon pushed firmly to the fore.

CPC transactions, for example, are by their nature PIN-less. They are currently capped at £20 to limit the potential for fraud. This in itself was not an issue for TfL, but as an additional security feature certain CPC transactions, or sequences of transactions, will result in a user occasionally being prompted to enter a PIN. For the banking industry this had seemed a perfectly reasonable feature – as CPC transactions were anticipated to make use of terminals (handheld or otherwise) where a keypad was already in place. For TfL, however, this was a severe problem – and it became clear that either an exemption from this security feature would have to be introduced, with an agreement over who would carry the resulting change in risk, or readers across the entire bus fleet would have to be upgraded significantly ahead of schedule.

The buses go contactless

At the end of 2012 CPC transactions finally made their debut, swiftly passing from initial trial to full acceptance across the entire bus network. Whilst some reports of double-charging still occasionally surface (which TfL strenuously deny), this rollout has clearly largely been a success. A success that in March, the TfL Annual Report was keen to boast about:

Since December, passengers have been able to use contactless payment cards (CPCs)for bus journeys. Fares are charged at the Oyster tariff rather than the full cash amount. Currently, there is no daily price cap but by the end of 2013, the scheme will be available on the Tube, DLR, London Overground and trams with daily and weekly price capping.

Meeting the needs of the modern traveller

There are still large numbers of people who try to board TfL transport without change or enough credit on their Oyster card, so paying with a credit, debit or similar payment card will make life simpler.

As with an Oyster card, no tickets are issued, and two or more people travelling together must use a separate card for payment. If an inspector asks to see a ticket, then he or she must be shown the contactless card that was used for payment.

Passengers can still check their journey details online and see where they have been and how much it cost them. TfL will never have access to their credit or bank account details.

TfL is the first major urban transport provider in the world to accept this method of payment.

In a sidebar, that annual report also highlighted a couple of key figures related to the rollout:

  • Every day, around 85,000 bus journeys are paid for using cash – and costing the passenger £1 per journey more than if they used an Oyster or paid by CPC
  • About 500 people each day try to pay their fare with a high denomination note for which the bus driver does not have change
  • A total of 36,000 people per day board a bus and find they have insufficient credit on their Oyster card
  • Around 25 million bus journeys will be made by the end of 2013 using a CPC

With hindsight the presence of these figures within the report provided a clue as to what was coming next. That we missed it can largely be attributed to the fact that it was not a stated part of the Future Ticketing project (at least not at this stage), just an unexpected opportunity – On the buses, TfL believed that the numbers now supported dropping the cash fare completely.

Dropping the cash fare

As we mentioned at the head of this article, TfL’s announcement that they would consult on dropping cash fares completely in 2014 raised a considerable number of eyebrows. To some, the ability simply to board a London bus and pay by cash is an unquestionable element of the ticketing system. Without a cash fare, how will tourists (both domestic and foreign) use the network? What about Londoners who still talk about using the cash fare? What about Night Bus travellers or older travellers less comfortable with technology?

On the surface at least all of these questions seem to have considerable validity. Transport planning, however, is about data not anecdote. So just how do people pay for bus transport in London?

Surprisingly, this is actually a harder question to answer than we initially suspected.

Getting down to numbers

That a significant number of bus travellers – perhaps even the majority – receive free transport is an accepted political truth, certainly within the Capital. The press releases and documentation released by TfL alongside the current cashless consultation were also keen to stress the low level of cash usage on the bus network:

Who pays cash?
Currently there are around 60,000 cash journeys made on TfL bus services each day, or around 1% of all journeys.

A full breakdown of bus travellers and how they paid, however, is something that does not appear to have graced the public domain until now – something we’d initially expected would already feature somewhere either in existing TfL or GLA documents or the London Data Store. In fact this does not appear to be the case. We thus asked TfL to provide us with the relevant data, which is broken down visually below:


Breakdown of bus journeys by payment type, 2012/13. Data: TfL

The results are interesting. In 2012/2013 approximately 33% of all bus journeys were made by those with free travel gained through senior citizen or child cards. 22% were paid for by a PAYG payment of some kind (in truth the vast majority of these will be Oyster PAYG, as CPC rollout only began late in the financial year). The majority of journeys were made by users holding a season card of some kind (43%). Cash is only used, as suggested by TfL elsewhere, for only 1% of journeys (as, interestingly, are day travelcards).

As a side note, eagle-eyed readers may well already have spotted that we now have two numbers which claim to represent the number of cash journeys each day – 85,000 in the Annual Report, 60,000 in the consultation documentation. In the context of the 6.5m bus journeys made each day across the bus network that discrepancy isn’t huge and TfL, when queried, explained that the 60,000 figure is based on current usage, which takes into account the increase in CPC based travel since that previous figure was compiled. This, they indicate, now stands at 23,000 journeys a day. The discrepancy does highlight, however, that it is important to remember that even statistics are not entirely immune to spin. It certainly means that the percentages above should be treated as rounded down.

Despite this, the breakdown does seem to emphatically demonstrate TfL’s point – when it comes to pure numbers, the case for continuing to accept cash payments is indeed rather weak.

Are you part of the one percent?

Numbers aside, however, what journeys make up that one percent? Anecdotal evidence would seem to suggest that older travellers would be most affected. In fact when questioned, TfL, indicated that the majority of cash journeys are undertaken by people within the 16 – 34 age group.

When taken in conjunction with the figure of 36,000 users who pay cash because they have insufficient Oyster credit (as mentioned in the Annual Report), this actually makes a considerable amount of sense. It also explains TfL’s push to add functionality to Oyster that would allow the card holder to make one extra journey, even if that drives the card temporarily into debit. This is something that Leon Daniels, Managing Director of Surface Transport, has stressed in various news sources is considered key to any cashless transition. Card holders at the younger end of that age group are arguably the least likely to have access to a bank card with CPC functionality, due to restrictions on bank account type and credit. That extra Oyster journey is key to making the switch more painless for them.

Getting geographic

Another key consideration is, of course, geography. Just what impact does the location of a bus route currently have on the percentage of cash journeys made?

It would be tempting to think that two particular areas, geographically speaking, would see a significant variance in cash fare usage should such variance exist.

The first of these is routes which cross the GLA boundary. Such journeys naturally take bus users away from locations where Oyster cards can easily be topped up, and would also seem likely to attract users who do not already own an Oyster card or equivalent paper ticket. TfL, however, have indicated that although cash usage here increases slightly, it remains low at around the 2% mark. It would be interesting to see which of London’s bus routes has the highest cash usage, but ultimately it is again difficult to argue against the numbers.

The second area where one would perhaps expect to see significant variance, should it exist, is within Central London itself. Routes that run through tourist hotspots such as Oxford Street are likely to attract a significant percentage of any tourist traffic to be found on the bus network. Surprisingly, however, here TfL indicate that there is less variance than one might expect. Although cash fares through the centre run marginally higher than the average, it is still around the 1% mark. This they account to the fact that approximately 76% of overseas tourists now pick up an Oyster Card upon, or shortly after, arrival. It is also, however, likely a fact that for the majority of tourists a bus journey is very rarely the first journey within the capital that they are likely to take, and thus an Oyster card or travelcard (day or otherwise) has likely already been acquired.

Mitigating the transition

Whilst the data seems to backs up TfL’s argument that a switch away from cash is a viable prospect, this does not mean that there would not need to be changes to mitigate the effects.

Most importantly, going cashless will mean an increased risk of people in vulnerable situations being unable to travel. This is particularly pertinent to travel at night, and when asked TfL confirmed that cash usage increases to 2% of all fares on Night Buses.

As with the figure for cash fares across the GLA boundary, this is perhaps less of a variation than many would have suspected. The fact remains, however, that for a individual stranded alone at night statics are less important than safety, and thus the success of a switch to cashless travel will arguably stand or fall on how well TfL addresses this issue. TfL point to the fact that they already have policies in place which allow for vulnerable travellers to board buses for free, and indicate that all drivers will receive refresher training should the switch to cashless be made. Despite this, such a change will clearly put greater pressure on both drivers and the policies related to vulnerable travel than they have been under before.

Indeed whilst broadly speaking the proposal has received a degree of support from within the London Assembly some of that comes with clear caveats, as Caroline Pidgeon explains:

Any removal of cash bus fares is only acceptable if combined with some minimum guarantees. These guarantees include firstly the protection of vulnerable people, especially at night; secondly Oyster cards allowing an extra journey when there is insufficient credit on an Oyster card to allow people to get home, and thirdly the availability of shops where Oyster cards can be topped up being at least maintained, if not extended.

Ms Pidgeon’s comments highlight one other area in which TfL may neeed to improve if they are too fully satisfy the needs of the passenger – increasing the availability of Oyster points beyond the current network of shops and stations. At the moment, TfL believe this is adequate:

We have a network of around 4,000 Oyster Ticket Stops where customers can buy tickets and top up their Oyster card balance. The location of the outlets are strategically spread across London and close to bus stops and there are no current plans to increase the number. To make it even easier, customers are also able to top up their Oyster card online, either manually or using Auto Top Up, and take further advantage of the benefits of having an online account.

Should the switch to cashless highlight or exacerbate particular gaps in their strategic spread, however, then this may be something they find themselves under pressure to address.

A question of timing

Ultimately, even if the case for making the switch to cashless is compelling, there still remains one question left to be answered – why do it now?

TfL have been keen to suggest that there are financial benefits to making the switch:

Should the decision be made to go cashless, savings of up to £24m per annum by 2019/20 will be expected due to reductions in the cost of operation and increased operational flexibility. These savings will be reinvested into the network for the benefit of everyone.

£24m per annum is not an insignficant figure, but it is worth noting carefully the wording above – that figure will not be fully realised until 2019/20.

This is due to the way in which those savings are likely to be made. True, a certain amount of savings will be made almost straight away, as the cost of handling money and processing payments on London’s buses already costs more than that it actually earns. Much of that initial saving, however, will likely be offset by a small drop in fare revenue (CPC fares are cheaper, as they are pegged to Oyster) and a need – albeit likely temporary – to suitably advertise the change and allow more people to travel without paying in the short term as the change irons out.

The real benefit, however, will come from future contracts with operators, and with many of these due for review and renewal in the next five years this goes a long way to explaining why its is important to set this change in motion now. The removal of cash-handling from operator requirements simplifies those upcoming contracts greatly. It also opens up the opportunity to move to simpler ticket machines and readers on buses in future.

Snipping the long tail

In truth, though, there is also likely another reason for finally making the complete switch to cashless bus fares in 2014.

In the introduction of any new technology or process, there comes a point when all the users who are likely to shift voluntarily have done so already. A point where whatever benefits or incentives are in place to do so – be they special offers, ease of use or price-point – have already had as much of an effect as they are ever likely to have. At that point, all you can do is make the final change and take the pain.

With cash payments on buses now hovering around one percent, and 38% of Londoners now having a CPC in their pocket (a figure up 8% alone since April this year), TfL have clearly decided that the beginning of 2014 will mark the point at which the above is true for bus fares – although they are likely too polite to ever say it.

On a logical and practical level, if it is accepted that there is no underlying obligation to take cash payments indefinitely on public transport, then it’s quite tricky really to argue that they’re wrong.

Written by John Bull
John Bull is the Editor of London Reconnections. A transport journalist and historian, his writing often focuses on the political or strategic challenges facing London's transport network and beyond.