Does the mantra “Buy Direct for Best Value” still hold true?
Derek Halden from Loop Connections hosted a workshop about how to make paying for transport more open at the TravelSpirit annual conference in London. The technology revolution offers huge potential for connected, flexible and better travel opportunities but global companies battle for power to carve out the monopolies through which the greatest future profits could be delivered. Which company will run the software for autonomous cars, or the ‘go to’ place to make new types transport purchase? (download presentation)
After housing, in developed countries, transport accounts for the largest element of spending in household budgets. There are very large potential prizes for the winners as new transport business models emerge. Technology enables transport services to be bought and sold in online marketplaces, just as already happens for retailing most other goods and services. Air services are a leading example of how transport retailing has become more integrated as it has moved to online accounts, bundling car hire and other offers with air tickets. Despite some transport being open for sale through these approaches, TravelSpirit has been looking at why other transport remain closed, including most bus and rail services. Integrated services providers such as restaurants, retailers or event providers cannot easily offer promotional free bus or rail travel until more open retailing is achieved.
At the recent workshop in London representatives from the bus and rail industry got together with policy makers, researchers and technologists to identify a roadmap towards more openness. How could bus and rail travel be sold alongside other transport, other services and retail purchases?
The workshop identified three main things:
- The message from transport operators to customers remains that the best value is from buying direct, when travelling on their services. What they don’t tell customers is whether another company could provide a better alternative, or even if the customer has made the best choice in their direct purchase. There is scope for third parties to help travellers get a better deal. Government has cast itself in a consumer champion role, but its initiatives to promote multi-operator ticketing and payment systems and information about prices (including rail ticket price anomalies on non regulated tickets), lack the flexibility that has enabled open user friendly systems in other sectors. For rail travel, many ticket prices are are regulated, so there are restrictions on how tickets can be retailed which also constrains openness. Travelspirit could take on a stronger role to highlight gaps in openness and score bus and rail operations according to their level of openness. The Travelspirit ‘openness index’ is one way to achieve this with specific scoring for the openness of payment systems.
- There is a need for an “open internet of mobility” where mobility services by bus, rail, taxi, parking, cycles, car hire and other travel can be traded under clear terms and conditions defining the rights of customers when purchasing through an intermediary. Transport legislation will need to be refreshed to clarify customer rights and responsibilities such as what happens if a service does not meet a defined level of performance. If a taxi is held up in road congestion, so a customer misses a train, losing out on a cheap rail ticket, then the rules need to be clear who pays the additional cost of putting things right. At present in the absence of clear rules the customer usually picks up the tab but other rules could make the roads authority accountable (for failing to keep the roads congestion free for the taxi), or the taxi operator (for failing to complete the journey as scheduled). The potential terms and conditions in the open internet of mobility require complex rules to be set up for each interaction between modes of travel and these rules are best built step by step.
- As the new systems offer more flexibility and choice the more open transport services such as taxi, car hire, bike hire, air services and parking will become relatively more competitive than the more closed bus and rail systems. The promotion of mobility accounts and mobility as a service (MaaS) could weaken bus and rail markets if action is not taken to open bus and rail payment systems. Progress to make bus and rail ticketing more open will enable connected mobility and MaaS providers to support rather than compete with bus and rail.
TravelSpirit’s survey of the industry identified that everyone wants a payment system that allows one purchase for all modes of transport. Online marketplaces like Ebay and Amazon have shown that purchasers can find better value when offered more choice, provided the sales are backed up with a clear customer service promise. It may be that if all customers were perfectly informed and all transport operators of equal quality then buying direct would offer better value, but these perfect conditions do not exist in the real world.
There is value to be added from packaging and bundling transport to help people lead more rewarding lives. The barriers to a more open marketplace for transport are less about technology than about the embedded business models for current transport operation. There were many companies like Loop Connections at the workshop looking to bundle and retail services in new ways. This is a potentially very large market, so collectively all of the companies do better if payment systems can become more open.
Based on the workshop discussions, TravelSpirit published this approach for a more open approach to payments. This will explain how the current components of existing payment systems such as those shown below can be used as the building blocks of the new open systems.
