Mobility as a Service' (MaaS) encompasses initiatives aimed at facilitating seamless, integrated travel experiences by leveraging open data on transportation and infrastructure. According to the MaaS Alliance, it combines various transportation methods and services into a unified, accessible, and on-demand mobility solution. It is a set of techniques that encourage users to forget car usage. Success in MaaS requires a platform that offers immediate access to multiple transportation options through a single digital portal, enabling comprehensive coverage. Users should be able to organize and finance travel, including trains, buses, scooters, bikes, taxis, car rentals, and car-sharing, in bundled packages.

The ultimate goal of MaaS is to provide a cost-effective, efficient, and information-rich travel experience for all users, regardless of their economic background. Achieving this involves making the payment process for multi-modal journeys incredibly straightforward. For example, a trip involving a bus, train, and taxi ride should not require separate transactions for each segment, as this complexity could drive people back to using their personal vehicles.

However, creating a seamless payment experience necessitates navigating a complex network of agreements among various stakeholders involved in multi-modal transportation, which stands as a significant challenge to scaling MaaS solutions effectively.

In the realm of public mobility, there are four main payment models, ones more popular than others.

Prepayment System also called closed-loop

From the inception of public transportation systems, prepayment has been the standard method for accessing services like buses and trains, a practice familiar to nearly all. With the advent of the 1990s, smart cards started to replace traditional paper tickets, offering a more modern prepayment option. Users can preload these cards with a specific amount of money for future travel expenses or opt for a season ticket that provides unlimited access to the network for a set period.

This system is known as a "closed-loop" payment model because the funds loaded onto the cards can only be used within a specific transport ecosystem, making these solutions exclusive to their respective transit networks with limited interoperability.

The main advantage for users is the ease and familiarity of prepaying for transit, which minimizes the need for extensive public education on using the service. For transit operators, this model presents no credit risk, ensures immediate cash flow for services not yet provided, and helps in demand forecasting, especially useful during large events signaled by increased balance top-ups.

Furthermore, closed-loop systems facilitate the easy implementation of discounted fares for specific demographics such as seniors, students, and children, without excluding those without bank accounts.

The drawbacks primarily affect users, starting with the physical costs of producing the cards. The need to possess a tangible item for travel access—be it a ticket or a smart card—means that loss, theft, or damage can significantly impact mobility, disproportionately affecting those less financially able to replace such items.

Additionally, these systems often require users to physically top up their cards at designated locations, adding inconvenience. A significant user-side penalty comes from "breakage," where unused funds remain on cards, benefiting operators financially without increasing service demands. This aspect undermines the inclusive transportation goal of MaaS by potentially marginalizing lower-income users.

From the operator's perspective, the initial investment in creating a unique payment infrastructure is substantial, not only in financial terms but also considering the risk of technological obsolescence.

Pay-As-You-Go (PAYG) also called Open-Loop System

For a well-developed Mobility as a Service (MaaS) platform, accommodating all kinds of travel needs, from impromptu trips to daily commutes, is crucial. The PAYG model operates on this principle, charging travelers only for the trips they make by directly debiting their accounts. This model supports both fixed-fare services, such as buses, and variable pricing based on distance, like in subways or tubes, utilizing bank cards and smartphones equipped with Near Field Communication (NFC) for immediate transactions.

In this context, "open-loop" refers to payments made through contactless bank cards or digital wallets like Apple Pay, which are not restricted to a single service provider. Ideally, in a MaaS setup, open-loop payments would consolidate charges for all segments of a journey into one transaction, although practical examples of this are yet to be seen. It's conceivable that a MaaS platform could integrate open-loop payments into its app, allowing for either per-segment charges or a cumulative charge at the journey's end.

Open-loop payments are highly favored by users in regions where they've been introduced, offering a seamless experience akin to closed-loop systems but without the need for a preloaded travel card. The convenience of using existing contactless cards or smartphones for travel makes this model highly inclusive, eliminating barriers for occasional travelers or those cautious of upfront costs.

For service providers, the advantages include avoiding the costs associated with producing and managing their own payment cards and leveraging existing NFC technology for payment processing, thereby reducing overhead and benefiting from economies of scale.

On the other hand, the primary challenges of open-loop PAYG lie in the initial setup costs. Upgrading fare collection systems to accept open-loop payments demands significant investment in new hardware, telecommunications, and backend processing capabilities. This extensive overhaul can deter local funding bodies, especially when existing infrastructures are still operational.

Integrating open-loop payments in a true MaaS framework might introduce additional steps for users, such as app downloads and digital wallet setups, potentially complicating the user experience. Moreover, connecting all components in real-time to process payments efficiently and securely adds complexity and cost.

Transaction processing fees also present a financial burden for operators, as the small margins on PAYG fares mean these fees can consume a significant portion of revenue. Furthermore, applying concessionary fares to specific demographic groups is more challenging without the direct control offered by closed-loop systems.

Lastly, reliance on credit, debit, or prepaid cards can exclude the unbanked population, posing an accessibility challenge that would require solutions beyond the transportation sector, potentially involving financial institutions.

Subscription Model

This model predicts a monthly flat rate as the primary method of payment for accessing various transportation options, with charges applied through direct debits or auto-renewing payments from mobile wallets. This approach grants users unlimited access to different transport modes.

Subscriptions consolidate use of various transport services into one regular payment, offering users clarity on their travel expenses and potentially saving money compared to paying for each trip individually. This model aligns with consumer trends of subscribing to a wide range of services, from entertainment to software, suggesting a familiarity that could ease customer adoption. For public transport providers, transitioning to app-based subscriptions managed by third parties could significantly reduce the complexity and cost of ticket distribution, while also offering advantages in terms of cash flow and financial management due to the higher value transactions.

On the other hand, while subscriptions are popular for smaller, discretionary expenses, they might not be as readily accepted for larger, essential costs like comprehensive travel passes, which could exceed 150 euros/monthly. Such a high fixed cost may deter potential users, especially those with limited financial resources.

The shift towards remote work and the resulting changes in commuting patterns pose additional challenges for the subscription model. While it may offer savings for daily commuters, convincing occasional travelers of its value requires significant marketing efforts. Moreover, the move towards bundled subscriptions complicates demand forecasting for individual transport service providers within the MaaS ecosystem. To maintain competitive pricing for a combined service, MaaS platforms might need to negotiate lower per-journey rates with these providers, which could affect the overall feasibility of MaaS initiatives.

Post-Payment System

In the realm of public transportation, the model of billing customers after the fact, or account-based ticketing in arrears, is relatively rare but not entirely absent, especially in business-to-business (B2B) mobility scenarios. A common instance is corporate accounts with preferred taxi services, where employees use a specific code linked to the company's account for travel. The company then receives an itemized bill for these travels at the end of a billing cycle. This approach is not widely adopted among emerging MaaS offerings.

For users, the post-payment method could greatly reduce friction, allowing them to travel without immediate concern for costs, potentially encouraging more frequent use. This increased usage could benefit MaaS platforms and transportation providers financially by boosting travel volume.

However, the primary challenge with implementing a post-payment model in a mass-market MaaS context is the credit risk it poses to service operators, intensified by the behavioral incentives for users to travel more under such a system. Transportation agencies would need to verify the authenticity of payment methods at the start of each journey and ensure real-time transaction authorization to mitigate this risk. Additionally, agencies might face the task of pursuing overdue payments from users, a process known as transit debt recovery, which is crucial for maintaining the ability to offer future services. Given the slim profit margins from aggregated costs, even a small percentage of non-paying users could threaten the financial stability of the MaaS model.

Conclusion

In conclusion, Mobility as a Service (MaaS) stands as a transformative approach to urban mobility, aimed at integrating various modes of transportation into a seamless, efficient, and accessible system for all. By leveraging open data on transit and infrastructure, MaaS seeks to encourage users to move away from personal vehicle dependency towards a more sustainable, shared, and interconnected transportation network. The success of MaaS hinges on the development of a user-friendly platform that combines multiple transport options—ranging from trains and buses to scooters, taxis, and shared vehicles—into a single digital service, simplifying the planning, booking, and payment processes for diverse travel needs.

The exploration of different payment models—closed-loop prepayment, open-loop pay-as-you-go (PAYG), subscription, and post-payment—reveals varied approaches to facilitating user access to MaaS platforms. Each model carries its own set of advantages and challenges, from the familiarity and security of closed-loop systems to the flexibility and inclusivity of open-loop PAYG and subscription services, and finally, to the low upfront friction but higher credit risk associated with post-payment methods.

Ultimately, the evolution of MaaS will depend on finding a balance between these payment models, addressing the operational and financial risks they present, and ensuring they align with the diverse needs and preferences of users. As MaaS continues to develop, its potential to reshape urban mobility by offering more sustainable, efficient, and inclusive transport options is undeniable. However, achieving this vision will require overcoming significant challenges, including the integration of payment systems, managing credit risks, and ensuring equitable access for all users. The future of MaaS lies in its ability to adapt to these challenges, leveraging technology and innovative payment solutions to create a more connected and sustainable urban transportation ecosystem.



References

Telford-Reed, N., & Estep, B. (2023). Why payments are the key to moving MaaS forward. Endava. MAAS-Alliance. Retrieved from https://maas-alliance.eu/wp-content/uploads/2023/07/Payments-MaaS_whitepaper_2023.pdf