AFCS in the Philippines - Why no progress?
The Jeepney and city bus modernization program has been in place for many years. This program also included a mandate for automated fare collection. And still, there has been no progress. Automated fare collection in most mass transit systems in the Philippines is non-existent.
In this article, I will tease out some of the reasons for this state of affairs. I will focus on Jeepneys and city buses.
The light rail systems in Manila and the planned subway or long distance train lines have very different problems, which I might look at in a future post.
Is the current system good enough?
I believe that the existing fare collection is actually not so bad. It is difficult to see where a traditional AFCS might improve the situation for drivers or passengers. A new approach will be necessary and any system with any hope of success will have to address the following beneficial features of the current system.
The human touch
Cash-based fare collection has a human touch that automated fare collection does not offer. Passengers can discuss the fare and the route with the driver or the conductor, instead of cursing an unfeeling machine.
This human touch also enables a trust-based charity for people who do not have enough money. It is up to the driver or conductor whether they want to ignore passengers who do not pay or take a longer trip than what they paid for.
In my view, this is better than the rampant fare dodging in the major cities of Europe. There only criminals get free rides while honest people, who may need it more, have to pay or need to go through a lengthy approval process.
Instant "settlement"
The fare intake is available to the driver immediately. This is important because in many cases, the money is needed on the same day for buying fuel, food and other daily necessities. Most AFCS systems have a settlement delay and access to the revenue intake often incurs additional fees and involves extra steps to get it .
Low tech, high availability
Cash payment does not require any electronic devices. Many drivers and conductors may have personal phones that could be utilized, but those phones are often low-end models that do not have the processing power, storage capacity or NFC functionality to be useful.
There is no need for a network connection, which is relevant because mobile coverage in rural areas can be patchy. Mobile contracts necessary for a reliable connection are also too expensive and would need to be kept up to date, i.e. have to be post-paid contracts or pre-paid contracts with enough load.
Every year without fail, the Philippines is haunted by storms and floods that interrupt power supply and communication networks. Even without Taifuns, brown-outs are common. A cash-based ACFS is completely unaffected by such calamities.
No data, no Problem
Cash collection is anonymous. I understand that privacy is not a great concern for most people who may not care at all or trust in the law. Nevertheless, I believe that no amount of privacy legislation nor the growing number of information security programs can change the fact that once the data is there, it will eventually be compromised or abused by the government.
Currently, no data is collected that would allow anybody, especially the government, to "optimize" public transport. It may sound odd to list it here as a benefit, but if you look at it from the perspective of existing operators, especially the small ones, you realize that they will not have an interest for the government to meddle in their livelihood in favor of big companies.
In the current system, there is no easy way to audit the revenue of operators. Again, look at this from the perspective of the operator and not of the tax collector!
It’s complicated
The ownership structure of public transport operators has grown over many decades into a complicated network of formal and informal relationships. Automated fare collection would have to disentangle this network, which is both difficult and sometimes undesirable.
It is no secret that there are many operators who have no license or not the right license for their business. Any attempt to bring all these operators into the official system or force them to form cooperatives to reduce fragmentation would meet with the resistance of the drivers who are well organized in driver and operator associations. I have heard Jeepney drivers settling a dispute over the use of a parking lot by pointing out that if they cannot get it from the current mayor, they will simply elect another one. Many attempts to force the adoption of the Jeepney modernization program have met with the same attitude.
There are also operational concerns. For instance, a bus that today is assigned to a certain operator and route might be borrowed by another operator for a completely different route the next day. The configuration of the bus validator and the settlement will be a veritable nightmare for any AFCS provider.
Finally, there is the boundary system. Drivers pay the owner of the Jeepney, or the holder of the LTFRB license, a certain amount per day and keep the rest of the money for themselves. This system is deeply entrenched and easy to understand, but could not survive the introduction of an AFCS.
Cash is "free"
As far as the operators are concerned, cash is free while an AFCS costs money. The profit margin in public transport business is already tiny. For many years, ticket prices have not gone up in line with inflation. Any additional cost will kill the business case for smaller operators. Low profitability also means that fees paid to AFCS operators are small. There is not enough money available for investment in preventive maintenance, a load network, card distribution and product development.
Many Jeepneys are operated by the driver/owner or a small cooperative. The overhead of working with AFCS providers for just one or a small number of vehicles would be cost-prohibitive (and not very lucrative for the AFCS provider either).
Dedicated stored value cards are not the solution
Previous attempts of introducing automated fare collection have focused on traditional stored value contactless cards. This worked for many other countries until account-based ticketing came along. Even today, mass transit systems in developed countries use special purpose contactless cards for passengers who do not have or do not want to use a general purpose payment card. Also, in most cases, the functionality of discount cards, tourist cards or transit passes cannot easily be replicated with account based ticketing systems.
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In the Philippines, on the other hand, pretty much everything is missing that would make stored value transit cards work:
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No load infrastructure
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No card distribution network
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No chips/cards that are cheap enough for mass deployment
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No interoperability standard for validators and cards
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No common backend interoperability standard
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No validator terminals that are cheap and reliable enough for local conditions
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Why would anybody want automated fare collection anyway?
In the case of larger operators, the owners have little control over the cash intake. Owners complain about “shrinkage”, referring to drivers and conductors keeping part of the fare intake for themselves. There are elaborate schemes of trying to resolve the problem, but I do not think they have been successful. Owners have told me that they lose as much as 30%.
While it is easy to argue that AFCS could reduce “shrinkage” and therefore resolve the problem, as long as there are conductors, an automated fare collection system cannot solve the problem either.
Over time, the conductor’s salary and the “shrinkage” together have reached a certain equilibrium. If “shrinkage” is reduced to zero, the operators would have to pay more to the conductors or use an AFCS system that does not require conductors.
Many bigger operators maintain a convoluted system of revenue reconciliation and money counting. The perspective of these operators on cash being “free” is different from the perspective of drivers, for example. The introduction of an AFCS would reduce cost and greatly improve their fare collection operation.
Of all the participants in public transport, the government has the most interest in promoting automated fare collection. The collected data would improve tax collection and public transport planning. I have my doubts, however, that government transport planning can improve upon the flexibility of many small operators who know the local conditions and traffic patterns better than anybody else.
Contactless ticketing and payment systems could reduce the number of hotspots where viruses may be transferred between humans. It is true that dirty banknotes and coins would no longer wander through many hands with the driver or conductor as the common transfer point. But Jeepneys are packed with people who sit close to each other, which will allow viruses to spread with or without cash handling.
The modernization of the Jeepney fleet would require bank financing, but banks are reluctant to provide capital because collecting loan payments is too difficult. An AFCS would provide the bank with the necessary data to decide whether there is sufficient revenue to justify a loan and collection of loan payments could be done even before the fare intake is paid to the operator. On this point, the interest of an operator may be sufficiently aligned with that of the bank to provide the motivation to maintain a working AFCS.
Drivers and conductors are like "microentrepreneurs". With the boundary system, they assume many of the operational and financial risks of operating a Jeepney. An AFCS brings changes to the entire business model and might turn drivers into employees with fixed salaries, benefits and so forth. It is not clear, however, whether drivers would be better off than they are today. Furthermore, there is the problem of conductors losing their jobs.