How tech-enabled business model innovation can help to improve urban mobility
Like many places in India, Kochi was facing an issue with urban mobility. But smart technology and close collaboration between the public and private sector provided an answer
There are 1.21 billion people in India. About 377 million of them live in urban areas. And that figure is growing fast. By 2051, this figure will more than double, and a massive 750+ million Indians will be city dwellers.
To confront this looming demographic challenge, India is embarking on one of the most ambitious programs of urban infrastructure redevelopment anywhere in the world - the India Smart Cities Mission. The aim is to transform over a hundred Indian cities into sustainable, citizen-friendly spaces over the coming years.
One of the cities selected for the first round of developments is Kochi, located in the southern state of Kerala. Kochi is a city of 2.1 million people, and like so many places in India, it’s facing massive challenges in urban infrastructure as more and more people move in from rural areas. Across India, the country’s car commuter culture is reducing city travel speeds and creating bottlenecks, and so is the case with Kochi.
Sujith Nair, Director EY Advisory, Ernst & Young LLP, says, “Without better public transport, average travel speeds could be around walking pace by 2030. Metro railways are a great solution. They don’t take up much space; they’re low-emission and high-capacity.”
In Kochi, in order to meet the mobility needs of such a large urban population, the Central and State government, as a joint venture, has decided to roll out a city-wide metro system. By 2021, it’s predicted that the Kochi metro will be serving nearly 800,000 passengers daily.
While the metro is an important infrastructural development for Kochi, it will be an expensive undertaking for the government. However, by attracting private investors, through suitable incentives, to participate in a smart ticketing solution, Kochi has been able to reduce its own spending and set national standards for urban mobility transformation.
What if “smart cards got even smarter”?
“I knew, with close to a million passengers a day, there had to be something for investors,” says Sujith. “It got me thinking about what might happen if smart cards got smarter.”
What EY pioneered in the Indian transport system, along with the government, was a new smart card – a digital wallet that could be used not only across a wide range of public transport systems, from metro lines to buses, but also at retail outlets like shops and restaurants. This card is a contactless-EMV (Europay, Mastercard and Visa, i.e. the three companies who developed it). This is the technology used in most credit cards outside the US.
Innovation, however, just didn’t stop there. Private investors were attracted by an entirely new business model that the Kochi Metro System presented: access to a shared digital platform and a captive consumer-base.
“We approached a number of banks for investment and were blown away by their offers. While most offered capex and percentage of non-transit revenue, some banks even offered royalties, which we hadn’t expected,” says Sujith. “And it’s a great deal for the bank. Besides receiving a return on their investment, the banks get transaction fees from a huge commuter base and branding rights.”
“The government’s happy too, as it got to reduce its spending and is considering setting the national standards for smart cards based on the Kochi model,” says Sujith.
In effect, this model provides a win-win situation for all: government, investors and commuters.
Based on the success of the Kochi metro model, three other Indian cities – Hyderabad, Noida and Nagpur – are now attracting investments to develop a similar smart card system for their respective metro rails, with EY as the appointed advisor. Central government has taken the Kochi metro model as a reference and is encouraging upcoming metros to adopt a similar model for smart ticketing.
Global urbanization is on the rise, and cities across the world are all looking for more efficient and creative ways of dealing with the inevitable challenges of more people living and working in finite spaces. By combining public-sector development with private-sector incentives, the Kochi smart card shows how innovative new technology can provide solutions to some of society’s most pressing issues.
Collaboration between public bodies and private enterprise allows both to ask the bigger, better questions that unlock new solutions and build a better working world. EY’s 2016 Global Review highlights some of the better questions EY has recently been tackling with its clients: