University of Wollongong

IACT 304 Principal of eBusiness Autumn 2005

Business Plan “Electronic Payment System in Action”

Nurhazman Abdul Aziz (2666182) Chun Sing, Chan (2592472)

AHMED SHIHAM (2664872) David (

Contents

S/NO Topics Report By Page

01 Executive Summary Nurhazman Abdul Aziz

02 Background - The Business Nurhazman Abdul Aziz

03 The Motivation Shiham

04 The Idea Nurhazman Abdul Aziz

05 Choice of Technology David

06 Investment Chun Sing, Chan

07 Hurdles David

08 Results Nurhazman Abdul Aziz

09 Future Shiham

10 Financial Summary Chun Sing, Chan

11 Conclusion Nurhazman Abdul Aziz

12 Reference Nurhazman Abdul Aziz

Executive Summary This paper describes a consultancy business approach to consult a statutory board in the

State Ministry of Transport, New South Wales, called the Land Transport Authority. The

Land Transport Authority will act as a consultancy management in the public transport

routes, as well as to bring efficient and cost-effective land transportation to enhance our

economic competitiveness and quality of life. As the same time, this board would be

exploring and implementing new initiatives to make public transport more attractive.

Hence, one of the requirements in the tender is on the consultancy advice regarding easy

electronic payment system. The purpose of this report is also to give a short consultancy

idea for the introduction of an Electronic Payment Systems into the Land Transport

Authority’s project. Here, the report has clearly identifies the ideal Electronic Payment

Systems, as contactless smart card with the initial phase study on New South Wales’s

CityRail. Later on, expand towards the public buses and taxi.

The approach involves a study of a number of world class transportation systems and

their fair system, the technology itself and a financial effect. A similar approach too has

been conducted with the various clients which are going to be benefit from the systems,

especially CityRail. In detail, the background of the business will be introduces, with the

motivation behind play behind the idea is one of the key issues on the reasons for the

selection of the choice of technology. As a brief technical detail will be illustrated in this

report, with the potential investment that will be gains. In contrast, to the hurdles, that has

to be concern and overcome, to bring results to the idea. Furthermore, a short future will

be discuss if this Electronic Payment System would be taken place, with a concrete

financial summary to estimated the cos benefit of the systems.

Hence, this consultancy paper would give a good idea on choice of Electronic Payment

System would benefit the Land Transport Authority’s project.

Background “Tap and Go” Pte Ltd is a private consultant company for easy electronic payment

system and is formed on April 20, 2004. The core businesses are the sales, consultancy,

distribution and management of “Tap and Go” cards. They also include the clearing and

settlement of “Tap and Go” card transactions generated in transit and non-transit

(retail/merchant) applications. This industry has been a key strength for “Tap and Go” Pte

Ltd and also a key leader in the Asia Pacific market using this electronic payment system.

Lately, we have been approached by State Ministry of

Transport, New South Wales to undertake a

consultancy tender on one of their future plans. From

the overall picture, State Ministry of Transport has

decided the plan to integrate all the public transports in NSW to be under one statutory

board, called the Land Transport Authority. This board will act as a consultancy

management in the public transport routes, as well as to bring efficient and cost-effective

land transportation to enhance our economic competitiveness and quality of life. As the

same time, this board will always be exploring and implementing new initiatives to make

public transport more attractive. Hence, one of the requirements in the tender is on the

consultancy advice regarding easy electronic payment system.

Currently, we understand that there are a number of public

transport organisations in New South Wales. They range from taxi

services, public coaches and the main commuter provider, CityRail.

Some of these providers have implemented certain payment

systems in their services, while others are still lagging behind.

Commuters take advantage of the systems, especially in the public

rail sector. Complains and losses have been reported and made

directly to the State Ministry. In addition, these have slight

negative effects on the economic earnings. Therefore, the State

Ministry has decided to make prospective plans with Land Transport Authority in the

sector of public transport, especially on their fare system.

One of the potential sectors, which will benefits from the proposed plan will be New

South Wales’ CityRail. Currently, traveling on CityRail network is easy. It is just by

determining which CityRail station you will be starting and ending your journey, the time

of day, how often you'll be traveling since there is a range of tickets designed to suit your

needs. The tickets can be purchased either at the station ticket office or the available

ticket vending machine. Its tickets can be classified into day, commuter, leisure and

tickets that will get you to where you want to go. CityRail's extensive network is ideal for

both leisure travelers and commuters. The array of tickets also offers the convenience,

flexibility and great savings in terms of commuters’ cost. Special conditions apply to

those who wish to take bicycles on CityRail services. Hence, CityRail will be our first

phase in this consultancy report to undergo our electronic payment system.

Meanwhile, another range of

transportation services that the Land

Transport Authority’s plan wishes to

seek is the fare systems, which include

the public coaches and taxis. One of

them is Illawarra Service, which

specialised in the coach services in the region of Illawara, Wollongong Taxi Service as

well as a couple of taxis and coaches services in Sydney, such as Sydney Bus, Silvercab.

(Ministry of Transport, 2005) All of them are streamed with one common goal, that is, to

make their fares and administration systems to be more efficient for the sake of

commuters and enhance our economic competitiveness and quality of life.

Sdyney Bus Services

The Motivation

It has been few years that New South Wales’s Ministry of

Transport has been working and analyzing a way that they

can reduce the commuter’s queue to buy the ticket and

boarding to the train as well as exit. They have come to

know that “Tap and Go” Pte Ltd is leading company who has solution for such electronic

payment system. As electronic payment system has been one of the most widely used and

improved payment systems, even though it has been only few years since its birth. Its

ease of use, and high security features makes it unique and highly demanding for the

modern world.

Assume that a commuter wants to travel from Wollongong to

Lidcombe, but later he/she decided to go elsewhere, in the current

system, another ticket should be bought in order to proceed, but in the

new system, no matter where the traveler wants to go, the fare will be

deducted only on exit. There are several advantages over the current system. Even though

the new system’s initial cost is high, unlike current system it requires no further costs like

ticketing machines needing to replace ink and paper. The other benefit will be that the

new card systems are capable of topping up the money, since it uses a mechanism to store

money value inside it, so there is no need of buying a card every time that one needs to

travel. By all this, there won’t be any long queues at the ticket vending machines saving

the time of the commuters as well as the cost of running the vending machine or staffs to

sell the cards. Also this convenience will drive more people to enjoy the train service

making higher revenue for the CityRail. Since the smart card transactions are being

encrypted with high security encryption methods, it will be highly secure to use the cards.

A lost card will be blocked from the system banning the use of that card.

CityRail is celebrating its 150th years (1855 - 2005) of Rail service but still there aren’t

many changes in the way that they had been using the commuter’s entrance and exit to

the train. (CityRail, 2004) The card system that CityRail uses now is sometimes such a

disaster when there are whole lots of people to board on the train. The frustration of

people at the long queue for the entrance and exit makes us think an alternative way for

the entrance and exit to board the train. In other words the

card system that CityRail is using is not efficient and it

needs to be changed, contactless Multi-purpose Stored

Value (MPSV) card which is an ideal solution in their

electronic payment system. We have named this new card

system as “Tap and Go” card system. Topping up will be a

fast process.

Due to its endless use, the smart card can be implemented in many

areas even though its first target is CityRail. So it could be divided into

many phases where it can be implemented on success of previous

phase. So let the CityRail be the first phase. The second phase which

could be targeted is bus payment system; the same concept can be

used with minor alteration. Phase three could be taxi and it goes on.

To aware the commuters how to use smart card would be very easy since the only thing

that changes in smart is that it don’t need to be inserted into the system on the way in or

out when they travel.

A related solution used in Singapore

The Idea Tremendous advancement has been demonstrated in smart card technologies for the past

few years. Chips utilized today are more economical than just a few years ago because

technological innovations have resulted in chips that possess enhanced processing power

and those which have larger memory. The resulting scenario enables cost-effective smart

card solutions for a broader array of real world challenges. Smart cards today achieve

much more than their original application of replacing cash and coins.

Hence, in this part of State’s Ministry of Transport’s consultancy plan from, we are going

to introduce an existing technology, that is, contactless Multi-purpose Stored Value

(MPSV) card as an ideal solution in their electronic payment system. Technically, the

idea is an efficient one and easy to promote as this idea has been implemented

successfully in other parts of the world. For instance, in a report article by

electricnews.net, they have noted a number of places where this technology has been

launched with great success. (Buckley, 2002) Public transport systems in Seoul, Hong

Kong, Singapore and many Asian cities have electronic payment systems based on

contactless cards. Also, both the Paris Metro and London Transport have implemented

their own contactless card payment systems. In London, they are known as “Oyster” card

(Oyster, 2003), in Singapore as “Ez-link” Card (Ez-Link, 2004), while in Hong Kong as

“Octopus” (Octopus, 2004). Amazingly, they are all introduced to improve transportation

services. Therefore, in Australia, we are going to introduce “Tap & Go” card as part of

the new solution for electronic payment system for the plan.

In technical, this electronic payment system is also known as the

Enhanced Integrated Fare System. The contactless card or “Tap &

Go” will be introduced to relieve commuters of the need to

remember distance related transport fares payable, to reduce train

queues at the ticketing machine and bus boarding times at bus

stops. “Tap & Go” card is a compact card conforming to

ISO/IEC 7816 card dimensions, which is similar to a credit

C

Structure of

ontactless Card (Tap & Go)

card. The card surface is a tamper-proof IC chip and an antenna is built into the card. A

card reader will be also designed in order to read the data from the card. Both the card

and the reader communicate using radio wave via wireless communication. The sensing

distance between the card and the reader is up to 10cm. The card itself contains no

battery but operates from electromagnetic energy received from the reader. Encryption

techniques prevent eavesdropping and fraudulent use. Being contactless, transaction time

involving the use of the card is kept to a minimum (approximately 0.2 sec).

Commuters will able to purchase the card from the

CityRail’s station, with a certain value preloaded in the

cards. The minimum amount of value at the first point

of purchase will be $10. Commuters can later top up

their value of the card at the self-service kiosk.

Moreover, during the topping up of the card, the

commuters could have three different choices or methods in topping their cards to their

range of desired value at $10, $20, $50, or $100. The maximum amount of the card can

hold is up to $250.The three methods of topping up can be done at the kiosk by using

cash, EFPOS or direct debit from their bank account. Next, commuters will scan their

cards before they board the trains or the public bus and later scan again, when they alight

from the bus or the train. As for the taxi services, they can just scan their cards once they

reach their destination, paying off the taxi fare.

Topping Up Machine in Japan

Furthermore, the system is also environment-friendly since the card can be used over-

and-over virtually forever by rewriting the data. It also features ultimate user-ease since

there is no longer any need to retrieve and put away the card for every use. In future,

“Tap & Go” card will be a rational throughout for the daily life of the commuters, as the

system can be used in other daily applications, such as in the parking lots or gasoline

station, restaurants, schools and others.

The advantages of the using “Tap & Go” card can be classified under three sectors. These

have been studied and proven through the implementation of Octopus in Hong Kong for

their public transports. (Octopus, 2004) Below are the details of the advantages:

Enhanced Operations

• Secure, efficient, flexible and reliable means of revenue collection

• No long queues at the ticket vending machines.

• Shorter transaction time

• Reduced preventive and corrective maintenance activities

• Reduced faulty card handling

• Reduced cash handling

• Just board and scan procedure

Financial Growth

• Increased usage and revenue through enhanced user-friendliness of the system

• Improved revenue protection through greater security by minimizing fraud and

ability to block transactions after card loss

• Reduction of maintenance costs by as much as 40%

• Elimination of card recycling costs as “Tap & Go” can be recharged

• Economies of scale achieved by the sharing of a common system infrastructure by

all participating operators

Marketing Value

• Provision of a platform accommodating complex fare collection strategies such as

inter-modal discounts and different fares at different times of the day

• Provision of a platform for implementation of own or joint loyalty programmes

• Collection of data on customer profiles and behaviours for deeper market insights

and service improvements

• Enhanced corporate image and customer service

Choice of technology The choice of the technology we will use to implement the system would be the use of

contact less smart card technology similar to Hong-Kong’s octopus system or

Singapore’s ez-link technology. This technology has proven success in the

implementation of payment systems for the mass rapid transport systems and public

transport in many countries. Furthermore, these developing countries have even extended

this form of payment system to convenient stores, supermarkets and even petrol stations.

This technology is also relatively easy to implement on existing public transport

infrastructure and the low-cost of mass production of magnetic cards for each customers.

Reason for choice

The main reason behind choosing this technology is to provide five main benefits for

transport payment systems (Octopus, 2004). Hence, these are main benefits below:

• Fast and efficient - Consumers do not need to carry cash at all; neither do they

need to give exact tender fares nor do bus drivers need to spend time in giving out

changes back to customers who does not give exact fares. Each payment

transaction only takes 0.3 seconds.

• Reliability - Since this technology is contact less, there is no need for the card to

come into contact with any device, hence resulting in less wear and tear, therefore,

last longer and able to achieve higher stability.

• Multi-Purpose – This card may not only simply be a method of payment systems

for mass rapid transports systems, but could also be implemented in buses, or

even taxi, ferry and can even be extended to convenient stores. In the future, it can

even be used as a form of authentication and access control.

• Environmental Friendly – For each company that would stand the test of time,

for the products to be environmentally friendliness is a very important aspect,

polyethylene terephthalate (PET) is used in the fabrication of the card, this

material is environmentally friendly in the sense that it is reprogrammable and its

credit is reloadable therefore, minimizing the need of constant disposal.

• Security – For individuals who choose to top up their contactless smart card

automatically via registered bank accounts when their smart card reached zero

credit, when in the case of theft or lost of the card, they can report back via a

hotline within 6 hours and that card will be subjected to termination and a new

card will be issued to the individual and credit reloaded on the new card.

The Smart Card

The material that the cards is made up of is plastic or more

scientific, polyethylene terephthalate (PET), inside is

embedded a magnetic core where information is store, it

consist of simple digital data that represent the amount of

money in it. Below shows a picture of the actual card itself

and each card has a special ID unique to that card. (RFIDeas,

2005) The size of these cards is just about the size of a

standard credit card, it is thin and flexible enough to be carried in a wallet.

The Smart Card reader

There are many types of card readers; they are used in many applications for example, for

desktop applications where requires authentication to access resources, however, the one

which will be suitable for us will be card readers for doors and kiosks, below is a picture

of some card readers (RFIDeas, 2005):

These are some of the products offered by Proximity Company and these card readers

manipulates radio frequency (RFID) in the transmission of information. As to be more

specific on the reader that will be implemented, a picture of it shows below (RFIDeas,

2005):

These are some specification for the card reader:

• Dimensions 4.65� x 2.95� x 0.5� (11.8 x

7.5 x 1.2cm)

• Power requirements: 5 - 16 VDC

• Colors Black, *Gray, White, Beige

• Potted Reader suitable for indoor or

outdoor use.

• Pigtail (18 inches/45.7 cm)

With these specifications, since is compact and

requires only a fraction of voltage, it can be easily implemented in anywhere for example,

mass rapid transit gates, buses, or anything that requires quick payment transactions.

The Card and Reader

Contactless smart card systems are similar indeed to cards that requires contact, they both

stores information on a chip that is embedded into the smart card itself, however, unlike

contact smart cards, the power supplied to the card as well as the process of information

exchange between card and reader are achieved without the use of any contact, magnetic

and or electromagnetic fields are used to power the card to exchange data between reader

and card.

This is achieved by placing a small antenna which is altogether embedded within the

plastic body of the contactless smart card, once the card comes close enough with the

electromagnetic field generated by the reader, the chip that resides on the card would be

powered on by a small voltage and once when there is power on the card, a form of

wireless communication protocol is initiated, this wireless protocol is similar to that of

blue tooth technology or 803.11 series, however, much more simpler as it transfers a lot

more simpler type of data. After the protocol is established data will then be transferred

between card and the reader.

Here is a list of steps of events that will take place when the contactless card is brought

near a card reader:

• Energy or power, transfers to the contactless card and powers the integrated

circuit within (chip)

• Clocks the rate at which data transfers

• Data transfers to the contactless smart card

• Date transfers from the contactless smart card

The protocol that are used by these cards are described by the ISO/IEC 14443 standard

and has a frequency of 13.56 megahertz (MHz) and the reader with an electromagnetic

field of approximately 4 inches to 10 centimeters, most often depending on the voltage

given to the reader. The higher the voltage, the greater the range, the range is also

dependent on the antenna of the card.

Some questions were ask on security about the card, whether anyone with a reader can

access those cards, however, in order to access the data from the card, the application

need to know the secret keys on the card itself. If no secret key is found, the card’s

microcontroller will block any attempts to access the data on the card. (SmartCard

Alliance, 2004)

Customer’s operation

Basically, the usage of this system from the customer’s point of view is simple, at first, a

customer will need to be issued a card, the customer will not be asked to purchase the

card however, but the issuer will hold a certain amount of deposit from the customer, this

deposit can be refunded back to the customer whenever he or she is wants to give in the

card. Next, the customer will initial top up the card from either top-up machines (Add

Value Machine) or from transport operators in charge of topping up customer’s credit.

These top-up machines can be placed in noticeable areas of the train stations where there

is less people or in less congested areas, the operation of these machines will mainly be

similar to current ticket purchasing machines, basically, it will consist of a touch screen

panel that will be used to interact with the user, the user will be able to choose the

amount of money that needs to be toped up. Next the user will insert the note into a slot

similar to current machines, then when the machine verifies of the money inserted, the

user will then need to place the smartcard close to the reader in the machine, the machine

will then write the data on the card.

Here is a diagram of how it works:

Choose amount of money from touch screen

Insert the cash into the slot

Reader updates card data

Place card near reader

Here is a picture of a top up machine:

(From LUAS SMARTCARD, 2005)

There will be a minimum amount of money that is required for topping up as well as a

maximum amount of money that can be topped up. Once the smartcard is programmed

with data that contains the amount of money the customer has topped up, he or she will

then be able to use it on any card readers so as long as the reader’s key matches with the

card’s key, in other words, only with card readers of the company can read the cards

manufactured by them. Once the customer has money on the smartcard, he or she will

then be able to use the transport system, the customer will need to place his or her

contactless smart card in approximately 2 inches from the card reader, the card reader

then will power up the circuit within the card, and authenticate with the secret key, and

write data to the card, this data will consist of the source of which the customer enter the

transport system. Upon exiting the transport system, the same process is repeated and the

card reader will then be notified of where the initial source of the customer is, and check

it with current source, it will then deduct the money from the card according to

previously programmed data by the central database.

The Migration Path

Implementing this system on the current existing system will not be a task that is

achieved in a couple of months, but rather over a period of 3-4 years, firstly, contact less

smart card readers can be place in existing gates that lead to the trains, however, it can be

implemented with both systems of contactless smart card and the current paper magnetic

cards, therefore, this will give customers, technicians and personals in charge of

implementing this system, time to adapt to a new technology. Top-up machines can be

implemented in train stations however, with customers which are unsure of the operation

of the machine, can reach a teller in the station and have an operator top-up the card.

Advertisements can be made to educate customer on the usage of the system and inform

customers of the changes made.

In short, contactless smart card systems, will no doubt increase the speed in which

transactions are performed, as transactions are only at approximately 0.3s, this will

increased the efficiency, stability and speed of these transactions, moreover, it will

promote less fare evasion because this system would require gates installed at every

station and the system can be installed at every station at a reasonable price. In the future,

this system not only can be used in train stations, but it can be integrated with other

transport systems such as busses, taxis and ferries. It can further be integrated into stores

located within the train stations or even any stores that choose to implement this payment

system.

Investments For evaluation purposes, the following scenario was developed for CityRail (CityRail,

2002):

Fare Media: -“Tap & Go” replace tickets approximately 400,000 smart cards

required for CityRail customers’ cash is accepted on recharge machines

Fare Collection: - smart card reader on all stations

- recharge machines on all stations

- station data automatically upload to server

Fare Sales: - station services center sell smart cards and can recharge the smart

card

Investment Cost Estimates Station System Equipment

There are four things for each station need implements. First, if the station have existing

gates, it is easy for retrofit to a smart card compatible. If the

stations do not have gates, it is need to be adding some new

smart card compatible gates in the station. For instance, in

Singapore, smart cards readers are built into the gates.

Therefore, as the computer passes through the gate, they

will scaReaders are to be installed

on the gates n the card and proceed to train platform. (ez-link,

004)

2

Second, each station needs to replace ticket vending machines to a touch

screen recharge vending machine which is a faster, easy-to-use, user-

friendly, low-failures rates machine to recharge the smart card. This will

also reduce the queue process, when purchasing a ticket from the booth,

call “Add Value Machine”. Similar to Hong Kong Public Transport

System, the Add Value Machine is a Smart Card recharging terminal,

where the principal function(s) is to reduce time taken and make day to

day processes. (Australian Design Awards, 2005) Moreover, the Smart

Card and Add Value Machine ensures more people can travel easier, and

Add Value Machine had to be simple enough to allow patrons to

complete a transaction quickly and accurately due to the sheer volume of

people using the public transport system.

Add Value Machine

installed on

Third, each station will install a computer to handle the smart card transactions and

upload to the central server (Sony, 2005).

A Normal Transaction Flow

Fourth, each station will install the account balance checker

for the customer to check their smart card balances. The

last transaction details such as the date, mode of transport

and the fare deduction and remaining balance will be

displayed. (Chinetek, 2005)

Account Balance Checker

Central Computer Facility

“Tap & Go” system will need a main-frame server to handle all the customer’s smart card

transactions on the same time and store the transaction data in the database, therefore it

need a powerful, faster, security server in a security and safety place. On the other hands,

it also needs information technology experts to design and develop the software and

implement the hardware. (Octopuscards, 2004)

Global views of Network Architecture

Facility Modifications Screen of Station For most of the facility, such as power, network

cabling, ducting is needed to be modified and

upgraded to make the “Tap & Go” system more

efficiently. Because of the “Tap & Go” system will

have larger number of transactions data to be

transferred.

Others

For the efficiently and work properly, spare equipment is need to make the operating

keep continues, it is acceptable for allow 10 percent of the total equipment cost to buy the

spare equipment. On the other hand, it is recommended to allow the cost for the technical

support area such as staff training.

The following Table 6 summarise the capital investment cost estimate of installing a

“Tap & Go” system on all surface bus, and in all stations. Hardware and equipment unit

costs were based on prices provided by our system consultants, suppliers, and equipment

manufacturers.

Table 6

Capital Investment Cost – “Tap & Go” System for CityRail

(Order-of-Magnitude estimate in Australia Dollars)

Requirements Estimated Capital Cost Descriptions

Equipment

Station System Equipment $7 M

Retrofit existing gates Replace ticket vending machines Stations computers Install new account balances checker(Smart card readers)

Central Computer Facility $0.8 M Network computer hardware Proprietary software ( design and development)

Total Equipment Supply $7.8 M

Facility Modifications $2.2 M Station electrical and communications Modifications ( power, cabling, ducting)

Other $1.4 M Equipment spares, technical support

Subtotal $11.4 M

Standard Add-ons $2.6 M Marketing, staff training, contingency

TOTAL ESTIMATED COST $14 M

For the most of the dollars invested, approximately more than half of the estimated costs

which are seven million and eighty thousand Australian dollar are required for buying

station equipments such as gates, touch screen recharge vending machines, station

computers, account balances checker, center computer, etc). Second, there is three

million and sixty thousand Australian dollar for the facility modification process. It

included modified and upgraded power, network cabling, and ducting. Third, there is two

million and sixty thousand Australian dollar for the staff training.

Hurdles From the technology point of view, the implementation of contactless smart card system

would not be a problem, however, to actually integrate it with current system, poses a

great challenge, firstly, engineers, designers and analyst will need a certain amount of

time to actually understand the existing systems. This is because it is impossible to

actually start a system from scratch and remove the existing infrastructure. Another

challenge would be that during the course of migration, it will require a certain time

frame for adding the function of contactless smart card onto the gates, however, this is

going to heavily disrupt normal day operations, it would be a challenge to make a balance

of both. One solution is to actually, do virtual testing of the system in certain labs and

implement it in non-working hours.

Another challenge is that the writing of the software itself for the system, what

methodology to take during the course of software development and how to build the

software so as that it has new features of contactless smart card while still having the

functionality of the current existing system.

Lastly, implementing a massive system like this on a large scale will require a lot of

human power and field expertise in adopting this system, the question is, would it be

possible to find these resources locally or is it necessary to outsource it from overseas,

and if it is required, where is the best place to oursource a system like this. These are

some of the main questions needed to be addressed from the first step of migration. Once,

again, after implementation of the system, the marketing of the system implemented have

to go on a hard campaign. This is to educate the commuters on the procedure how to use

the cards. Therefore, the hurdles will not be only face by the developers and the

implementers, but also from the perspective of the commuters.

Results Using contactless smart cards does gained acceptance for use in physical access control

systems for the three main reasons presented here. (Hidcorp, 2005)

1. A contactless presentation of the card is much more user friendly and

convenient for physical access control.

2. Contactless smart cards and readers are much more durable in harsh, dirty, or

outdoor environments such as those typically found in access control

applications.

3. Contactless card transactions are designed to be faster than contact

transactions.

With contact smart cards, users (commuters) must properly orient the card to put the

contact in the correct position, find the opening in the reader, insert the card and leave it

there until the end of the transaction before removing it. Moreover, contact smart cards

were not optimized for fast transactions, but for very high-security applications like

financial services and debit card PIN protection. Since, contactless card were targeting

high-throughput applications like transit fare collection and ticketing, fast transactions

were mandatory while still maintaining high levels of security. For that reason, as

contactless technology developed it was optimized for fast reading and authentication, an

advantage in access control systems as well. (Hidcorp, 2005) In contrast to the current

CityRail’s ticket, contactless smart card would definitely replace the system with much

benefits and improvements.

Hence, this technology has proven the results of success in a number of national

transportation systems in the world. For instance, in Singapore, their transportation

system has integrated all their public transportation like the Mass Rapid Transit (MRT),

public buses and taxis using one common electronic payment fare system, which they call

ez-link. (ez-link, 2004) This system is being well adopted by their commuters traveling

all around the island, with worrying about the different fare, they have to pay. Moreover,

they are eligible to get discount, when they frequently travel using the public transport.

This scene does save. In Hong Kong too, the commuters there, have seen the same

benefits, just like in Singapore, when Octopus is being implemented. (Octopus, 2004)

In addition, this contactless smart card has a number of benefits, which have been

discussed in other parts of this report. This is also in terms of safety of the commuters,

and the operators of the public transports. They do not have to carry a large sum of

money when either they are traveling or on duties, as for the public transports operators.

Commuters also are able to move flexible and able to travel at a fast pace from one

transportation to another. As millions of commuters travel using the CityRail and public

buses in New South Wales, there will be an increase in the economic earnings for the

public transportation. Furthermore, contactless smart card are now extending beyond

public transport to carparks, fast food outlets, convenience stores, supermarkets, vending

machines, pay phones, leisure facilities and schools. What's more, it has been introduced

successfully in payment uses such as access control.

Future Until mid eighties, Smart Cards were still at the research and development level due to

many factors. Since then, the industry has been growing at tremendous rate is shipping

more than one billion (1,000,000,000) cards per year (since 1998). (SmartCard, 2005)

Today, there would be a population of more than 7 billion Smart Cards around the world.

As the population of the Smart Cards indicates increasing the public acceptance of this

unique innovative technology, and if CityRail adopts the proposed contact-less smart card

system, they would have tremendous benefits on long run. As there are many areas in

which it could be integrated to, like the buses, taxis, and shops in the train stations. It

could be encouraged to use public transport system and use this card more frequently

from traveling from city to city by train or inside the city by buses and give discount as

they travel more. Or even accumulate some points if they use this card to certain extent

and they can be given a special discount from shops where this card is accepted. Another

scenario would be that the travelers simply can buy the low priced items from Contact-

less Smart Card without having to use the ATM Cash Card or Credit card.

This technology is advancing day by day; even now also there are keychain (Figure-1)

which are used as multi purpose Smart Cards. (TechTrend, 2005) It may not take time to

manufacture accessories like watches, pendants, baggage tags which have built-in RFID

inside it, which in turn may bring luxurious way of life

where customers don’t have to carry any kind of cards to

travel. In the future, one traveler may pass through the gate

of CityRail by just waving his hand over the contact-less

Smart Card reader, who may happen to have a watch or

pendants which have built-in RFID. This brings ease of use

as well as overcomes some security issues like taking the

card from the wallet in a crowded area which may lead to

wallet theft.

Figure-1 keychain

Increasing the storage of the Smart Card will enhance the service as well as benefit to the

company and to the country as a whole, as it will be capable of storing data such as

biometrics information of the cards owner, personal medical history and cryptographic

keys for authentication, etc. In the event of an accident or a stroke to a person, his or her

Smart Card can be used to quickly identify what is the medical history of the particular

person.

Even the card readers are becoming more advanced, a contact-less Smart Card which is

kept inside person’s back pocket can be used to deduct his fare by just walking through

the gate without manually taking the wallet or card from it. The side-way card readers are

so sensitive it just reads even when the person does not stop for a scan. There are

contacts-less Smart Card payment systems in which they a person can linked their Bank

account to the Smart Card so that it will be topped-up when the amount of the card

becomes zero or set value or even topped up using top-up machine without having to

transferring money from his or her bank.

With all this promising advancement and innovative technologies CityRail’s future

prospects in the next three or four years look very exciting and great development. The

Integration and implementation with up-coming technologies would not be a problem

since the proposed system can easily adopt those. The company would fly to the top by

serving the public, utilizing the modern technologies available to date, boosting the

revenue of the company with satisfaction of all the customers without them being in long

queues.

Financial Summary (Over 2 Years) Based on our experiences, the followings summarise the capital expenditure, operational

expenditure and the revenue growth for first year and the second year in CityRail.

Capital Expenditure

In the first year, it will have a large number of implementation for the “Tap & Go”

system, such as “Tap & Go” system install on all surface bus, and in all CityRail stations.

It will have a larger number of the capital expenditure for buying the hardware and

equipment which is about fourteen million Australian dollars. All hardware and

equipment are installing on all surface bus and in all CityRail stations. It included station

equipments such as gates, touch screen recharge vending machines, station computers,

account balances checker, center computer, etc. The costs were based on prices provided

by our system consultants, suppliers, and equipment manufacturers

In the second year, most of the implementation for the “Tap & Go” system should be

finished. The capital expenditure will have a sharply decrease compare with the first year

which is about sixty thousand Australian dollars. But, it still has smaller number of

buying hardware or equipment and the facility modification. Because of the hardware or

equipment may damage, lost or out-of-order, etc. So it needs to keep ten percent of total

equipment or hardware for spare use.

The followings figure 10.1 is showing the different between first year and the second

year of the total capital expenditure:

Capital Expenditure Graph – Figure 10.1

0

5

10

15

First Year Second Year

Australian Dollar

( in Million)

Operational Expenditure

In the first year, the operational expenditure does not have many of changes, because of

most of the implementation have not been finished. Only administration, data

management and information technology maintenance and support will have a slight

increase. For the administration, it may need to rearrange and train the current staff or

add new staff for the smart card administration such as customer service, enquiries, lost,

damaged, stolen cards, claims, refunds, etc. Second, it should have some information

technology experts for computer back office support and database management such

security. Third, it also should have some information technology experts for maintenance

and support. The estimated cost show as the following table 10.2.:

Table 10.2

Operational Expenditure of “Tap & Go” for CityRail in the 1st Year

Potential Increase in AUD

Administration $0.4 M

Data Management $0.3 M

IT Maintenance & Support $0.3 M

Total $1 M

In the second year, most of the stations with “Tap & Go” system will become functional.

Therefore the weights of operational expenditure also have a big changed. For revenue

operations, the replacement of tickets with a smart card would have a relatively small

impact on the revenue operations work force. Cash would still be accepted, so there

would be no change in the daily process of recharge smart card. Second, the introduction

of a smart card system would result in marginal labour savings in station collectors. Third,

Material expenses for tickets would be eliminated, and this would result in an operating

cost saving of two million fifty thousand Australian dollars annually. Forth,

administration, data management and information technology maintenance and support

will increase to normal operational expenditure level. For the administration, it may need

more staff to rearrange position and keep training or add more new staff for the smart

card administration such as customer service, enquiries, lost, damaged, stolen cards,

claims, refunds, etc. Then it also need more information technology experts for computer

back office support and database management such security. Finally, it also needs more

information technology experts for maintenance and support. The following Table 10.3

summarise the potential operating cost on the CityRail.

Table 10.3

Operational Expenditure of “Tap & Go” for CityRail in the 2nd Year

Potential Savings $ Potential Increase $

Revenue Operations ($0.2 M)

Station Collectors ($3.0 M)

Fare Media Expenses

(production costs – tickets, tokens) ($2.5 M)

Administration $0.8 M

Data Management $0.6 M

Revenue Equipment &

Maintenance $0.5 M

IT Maintenance & Support $0.6 M

Sub-Total ($5.7 M) $2.5 M

Net Change ($3.2 M)

Revenue Growth

As the “Tap & Go” system has been implemented successfully, it brings high-efficient,

cost and performance effective, lower operational cost to CityRail. By the user-friendly

interface of the system, it is reasonable to forecast that the increased of usage and revenue.

And the “Tap & Go” system also minimizes the fraud and ability to block transactions

after loss card to improve the revenue stability. On the other hand the reduction of

maintenance costs also is an important fact to increase the revenue such as elimination of

card recycling and use economies of scale to produce smart card and sharing of a

common system infrastructure for all same facility. As all the benefits to improve the

revenue, it is reasonable to forecast that CityRail can increase their revenue for five

percent in the second year. The followings figure 10.4 is showing the different between

first year and the second year of the total revenue growth:

Revenue Growth Graph – Figure 10.4

9.6

9.7

9.8

9.9

10

10.1

10.2

10.3

10.4

First Year Second Year

Australian Dollar

(in Billions)

As the pervious experiences in Hong Kong, there are “8.8 million cards and 75 million

transactions a day in circulation for a population of 6.5 million”. (Card Technology, 2003)

It is a strong reason that we recommend CityRail to use “Tap and Go” system to replace

the ticket system. “Tap and Go” system can reduce the operational expenditure and

increase the revenue to make the business more profitable. For the higher rates of cost

and performance of “Tap and Go” system, fourteen million Australian dollars is worth to

invest for the business future.

Conclusion In this paper, we have described the consultancy research in the evaluation of choice of

technology which integrates ideas and motives to consult the Land Transport Authority’s

project, regarding a suitable electronic payment system. The approach leads to rich data

that can be collected and analyzed in an efficient manner, with the technical evidence and

support from other world class transportation system with their solutions towards the

transportation fare system.

In conclusion, we have also look into the investment, hurdles, results and future in the

choice of the technology, with a concrete financial summary. These would strongly

support with confidence in the idea and motivation for such consultancy business plan in

solving the electronic payment system for Land Transport Authority’s project’s tender.

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