Africa has been a hotspot for the rapid growth of micropayment services, mobile and smartphone-based transactions and the technical, sales and administrative platforms that support them. TheseAs a leader in payment innovation, Africa’s experience showcases how other parts of the world can leverage these digital technologies to leapfrog in their development.
To gain insights into the emerging fare payment landscape in public transport and identify lessons that may be relevant to African and other developing cities, the Africa Transport Policy Program (SSATP), with funding support from the Public-Private Infrastructure Advisory Facility (PPIAF), studied the fare collection systems used in Cape Town, Kigali, Lagos, Maputo and Nairobi, as well as in India (a case that embodies some significant innovations relevant to the African context). We analyzed the six case studies from the lens of three broad dimensions: (i) the technology related aspects of fare payment systems, (ii) organizational and institutional issues in the management of fare systems, and (iii) the mainstreaming of paratransit as a key part of the transport network.
Against this conceptual framework, the report concludes with five high-level sets of observations that consolidate some of the most important themes that emerged in the study. These are organized below as responses to the most pressing questions you will likely face and/or ask yourself.
1. So, are automated fare systems worth it?
The prevailing general assumption is that automated fare systems are superior to cash-based systems and that modernization is the solution. However, when introducing new automated fare systems, it is important to be clear about the envisaged costs and objectives. They can be expensive when all the various cost elements are accounted for, and the benefits may not always exceed the costs. Where margins are low, the additional cost of implementing an automated fare system may be challenging for a bus operator to bear. Arguably the most important benefit of automated fare systems is the data they generate, so long as it is actually used to optimize bus operations and improve bankability.
2. What are the most significant technological trends?
While fare payment in Africa remains largely cash based, electronic smartcard-based systems were introduced in Cape Town, Kigali, Lagos and Maputo. Despite repeated and thus far unsuccessful attempts to implement card-based systems, Nairobi managed to adopt mobile phone-based payments, driven in part by the popularity of M-Pesa. While many of the existing smartcard-based systems can be loaded using mobile money, such as M-Pesa or its equivalents, mobile data phones (or smartphones) offer much wider functionality, enabling direct communication with the user.
Using mobile phones for fare payment has the ability to bring new efficiencies to public transport across the full spectrum of services. Among mass transport services with fixed routes, such as rail services, its usefulness revolves mainly around improving transfers and journey planning. For more flexible and demand responsive services, mobile phones enable the development of new service offerings that can potentially respond to a passenger’s travel demand in real time.
Nevertheless, many users in Africa still do not have suitable phones or are not comfortable using them as a device for automated fare payment systems other than to make ordinary mobile money payments to conductors as a substitute for cash. Initiatives to introduce back office-centric, passenger account-based systems are not yet proven in the African environment.
3. Is implementing a new fare system primarily a technological challenge?
The implementation of new fare systems is much more than a technological challenge. Fare systems are a fundamental element in how transport operations work and affect incentive structures and power relations governing the delivery of public transport services. Some would argue that there is a need to broaden the concept of technology from just being digital tools and machines to ways of doing things, comprising business processes as well as institutional arrangements. Ultimately, the implementation of a fare system must align with how revenue risk is configured.
Those bearing the most risk have the greatest incentive to ensure that the system works successfully; this influences how control over a fare system needs to be structured. A fare system provided and operated by a specialist third-party provider is clearly an appropriate model under a variety of circumstances; however, this approach is still relatively new. One of the challenges is that while the tools and equipment may be standard, the context in which they must operate may vary substantially, requiring flexibility and adaptability on the part of the fare-payment-as-a-service (FPaaS) provider. At the same time, vehicle operators or transport authorities need to develop the skills to be able to manage such service providers and appropriately allocate responsibilities, risks and rewards.
Indeed, the prevailing risk is that initiatives to modernize fare systems fail to pay sufficient attention to these institutional dynamics. It is important to remember that fare systems are likely to add the most value when relationships are structured so that the interests of those designing and implementing the fare system are well aligned with improving the effectiveness of the transport business overall.
4. Can paratransit systems be improved by introducing automated fare systems?
Despite attempts to improve and formalize Africa’s paratransit sector through the introduction of electronic fare systems, these have largely failed. This is because improving the sector’s efficiency will require changing the business model to enable collective rather than individualized fleet management and respond to passenger demands with appropriate, data-driven service plans that maximize average load factors. As long as each minibus continues to earn revenue based on the number of passengers serviced, improving the paratransit system won’t be possible; fares need to be pooled to remove the perverse incentives that undermine collective efficiency.
Introducing automated fare systems can enable this fundamental shift by eliminating the practice of drivers collecting cash-based fare payments and ensuring transparency among all vehicle owners on the total revenues earned. But, they are likely to fail if not implemented as part of a wider strategy that addresses the power relations and incentive structures between drivers, operators, and passengers.
5. What role should government play in the automation of fare systems?
The appropriate role of government will vary in different contexts. Central governments often have the resources and the political power to initiate significant new programs, but may not be well placed to understand the complexities of running public transport and can easily be motivated by extraneous concerns. While exceptions are possible, national or central governments should play a broadly supportive role rather than get involved in system design and detail.
Having a single, city-level authority responsible for public transport with jurisdiction over the whole urban area is key for developing appropriate public sector strategies for automated fare systems — as indeed it is for managing urban public transport generally. The main challenge for such authorities lies in aligning the creativity and competitive drive of private interests with delivering city-wide public benefits based on multiple modes and focused strongly on the public transport user. Acting strategically will require significant skills, particularly for understanding: (i) how to regulate within an environment that does not usually adhere to regulations; (ii) how to apply limited resources in ways that bring substantial returns; and (iii) how to work with private sector operators — including the informal sector — in optimizing the public good.
Interested in learning more about fare collection systems and their implementation in developing? Check out our recently published report entitled “Innovation in Fare Collection Systems for Public Transport in African Cities.”