INTELLIGENT PREPAID SYSTEMS: THE NEXT BORDER OF MOBILITY

BY
 
LEONARDO CORDEIRO
 
IVAN LIMA
 
Electronic ticket issuance systems were born as a necessity for the modernization of the advance sale of transport tickets to passengers, replacing the previous method of selling paper tickets, or on-board cash payments.
 
In practice, the paper ticket allowed the differentiation of the types of tickets, such as the transport voucher (in Brazil) and the school ticket. Paper tickets were distributed in advance to the passengers they used as the “currency” of transportation.
 
Due to the high cost of printing, storage and distribution of passes, in addition to being subject to fraud and the creation of a parallel market for the sale of tickets, the modernization of the system has become a necessity. At the beginning, the objective was clear: to transfer to the digital world the operation of commercialization, distribution, capture and processing of transactions that implied the use of the paper ticket.
 
At that time, the change (although significant) was only halfway. That is, it has moved from the physical world to a virtual world. The logic remained the same: the advanced acquisition of the right of use in a transport system.
 
Due to the high investments required to implement an electronic ticket issuance system, the obligation to implement, manage and operate these systems has been massively transferred to operators (dealers). However, the investment and the cost of the operation were not always properly captured in the cash flow of the concession, which caused imbalances due to low operator remuneration.
 
It is at this time, the implementation of the electronic ticket by the private operator - prepaid systems or automatic ticketing - have gained in efficiency, modernity and scope. A new market has been created, with the appearance of the main technology players focused on the issuance of electronic tickets, software and hardware factories, managers and system operators. Finally, a complete market focused on the technology of distribution, capture, processing and compensation of ticket systems was created.
 
The operational and control benefits of implementing a modern electronic ticket issuance system are evident, especially in reducing the cost of the transportation system and increasing efficiency. The user's adherence to electronic means of advance travel payment accelerates boarding, reduces costs with the collection of tickets (which makes the figure of the collector unnecessary), reduces fraud and generates important data that greatly helps in the management of the transport.
 
However, the legal and contractual arrangements did not follow the technological evolution, nor could they foresee the legal situations that arose from the implementation of such systems. After all, even after so many years of implementation and operation of these systems, the fundamental problems inherent in them have not yet been resolved, such as the legal treatment that should be given to the fluctuating balances of anticipated and unredeemed sales.
 
Over time, systems have gained complexity and both investment and operating costs have increased. From the cost, not insignificant, of issuing and printing plastic, forming credit sales and distribution networks and adopting anti-fraud systems, to the need to combine other means of capturing user information, such as the biometric recognition of users, in short, Everything that is developed for the benefit of the transport system must have a contractual regulation, both from the point of view of the concessionaire's obligations and its due remuneration for the investment made.
 
On the horizon of mobility, with the massive appearance of new technologies and, it is not too much to remember, new modes of transport, the issuance of electronic tickets must also undergo a true (r) evolution: just as transport contracts must become In mobility contracts, the issuance of tickets should be seen as a key mechanism to implement public mobility policies.
 
However, it is unimaginable that ticket sales systems will not expand, leaving the condition of arrangements compatible with a single transportation system and now serving as an integration instrument. Here, the term "integration" does not necessarily apply to the concept of fare integration, but it is operational, so that a single means of payment can be used in multiple transport systems. The economy of scale generated by the uniformity of ticket systems is the main attraction of the measure, but not the only one: this standardization will also allow the unification of the user database, which in turn can generate fantastic benefits in the Public policy management.
 
Then comes the regulatory-institutional challenge: after all, such a step will also require regulatory compatibility of various modes and transport systems, thus allowing several systems to "speak" and live in harmony. For this, a series of legal-institutional measures must be adopted, but, in our opinion, they must be aware that the action of the various granting powers involved should be limited to regulation and control, and not to interference in the System operation
 
In the end, in a highly technological environment, the greater the freedom of the private operator to exploit innovations for the benefit of the system, the faster the impact on the user's life will be. And with that, the greater the efficiency of the system. This efficiency will result in the expansion of mobility data collection: which is what matters most to the Government.
 
With access to mobility data captured by the ticket system, it will be possible, in addition to implementing improvements in the same system, to effectively extract a large amount of information that can become a guiding public policy. As they say in today's digital world: data is the new oil. Promoting the maximization of data collection is essential for this. And there is no greater incentive than to understand that the potential for negotiable data extraction can, and should, be exploited by the private company. And this will make it possible to maximize data capture and processing of mobility systems.
 
Objectively, a clear and transparent regulatory environment must be created that leaves no doubt so that investments in technology are effectively attractive. And if there is an underlying commercial value to exploit the data collected, the transfer of investment risk to the private agent is justified. Mutual interests can coincide properly: mobility data feed government intelligence, private investments that generate the data are financed through the commercial exploitation of that data. It is a fair arrangement.
 
To fully understand the importance of issuing electronic tickets in the collection and processing of mobility data, one must avoid the "pitfalls" of modernity. The admission of means of payment for transport outside the ticket issuance agreement (or the mobility's own payment system) does not benefit the logic of forming unified data banks, as this would allow systems that are not subject to Mobility regulation capture and process transactions. Freedom to the private sector is always welcome, but always within the legal contractual agreement of the public subsidy.
 
Therefore, what may seem attractive at the beginning can generate a real crisis in the future. Public interest data that can be collected in a ticketing system may be dispersed in several unregulated private entities when they could focus on the regulated environment of the concession agreement.
 
It is time, therefore, to modernize the legal-institutional arrangements for the means of payment of transport to ensure that mobility benefits to the maximum of the technological revolution that we are experiencing today.
 
Leonardo Cordeiro is a founding partner of Cordeiro, Lima and Advogados, Specialized in Tax Law in PUC-SP, has an LL.M in Corporate Law in Insper and a Master's in Commercial Law in FGV-SP - Brazil.
 
Ivan Lima is a founding partner of Cordeiro, Lima and Advogados, a Postgraduate in Civil Procedure from the PUC-SP and a Master's Degree in Public Law from the FGV-SP - Brazil.