Frost & Sullivan: Transit Smart Cards to Grow in Europe and Megacities

The increasing popularity of travelling has encouraged the large community of travelers to embrace technologies such as smart-card technology that will simplify their travel needs. This end-user readiness has resolved some of the industry's inertia in deploying new services based on smart-card technology. A promising cycle has emerged that will generate wider network externalities through the application of innovative practicalities to this community of transit users.

New analysis from Frost & Sullivan entitled “World Smart Cards in Transportation Market” anticipates that the transit application will witness 11 percent compound annual growth rate (CAGR) in smart-card shipment from 2009 to 2015. This growth will be driven by current smart card-based transit projects designed to extend the percentage of the world's population that is currently living in cities running smart card-based transit projects.

"It is no longer the domain of the traditional smart-card value chain as it interacts with transport authorities," said Yiru Zhong, Analyst from the Information & Communication Technologies group, Frost & Sullivan. "Technology and social factors make it essential that transit authorities deploy smart ticketing solutions as a result of connectivity and mobile devices."

Europe and megacities are hot spots for future smart card-based transit projects. The UN report on megacities states that city development requires transportation planning involving smart card-based transit payment solutions.

"The future of convergence lies in the union of form, function and connectivity, much like Hong Kong's experience," Zhong said. "Europe fulfils these three critical factors."

Furthermore, the use of smart cards has matured in Europe, setting the scene for more collaborative efforts with stakeholders in other industries. For instance, Europe is at a more advanced stage of NFC trials for m-payment purposes, including the use of NFC technology for mobile ticketing.

By recognizing the gaps, which have been left by disruptive new players such as telecoms or retailers, smart-card vendors can better act on an end- to-end vendor solution. They can fulfill the role of a system integrator, having understood the complexity of secure transactions, while operating within the context of the transportation and mobile sector.

"They should also be able to promote greater standardization, as already evidenced by the latest transit initiative from InsideContactless," Zhong said. "Finally, there are numerous opportunities for smart-card vendors to lead in enabling secure and robust payment systems."

Beyond the demand for smart cards and integrated chips, there remains the untapped demand for services and solutions to bridge the fragmented ecosystem. The emergence of payment for transportation has laid the groundwork for a wider adoption of smart cards with multiapplications. There have been several examples of contact and contactless transportation payment projects embarking in different parts of the world.

"Different payment platforms and methods have allowed different technology players in industries," Zhong said. "For instance, there are players, such as telecoms operators, and established payment infrastructure plans, as set up by banks which have their own payment methods."

Trends indicate that the number of people holding a transit smart card will rise. This, together with the increasing sophistication in uses of smart card, represents a step towards a connected or smart city. "The smart-card industry should exploit opportunities to enable this vision," said Yiru Zhong. "Initially, there will be a need to establish credibility in managing large-scale projects combining security, services and solutions."
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