Encompassing Payment for Heterogeneous Travelling

Design Implications for a Virtual Currency based Payment Mechanism for

Intermodal Public Transport

Markus C. Beutel and Karl-Heinz Krempels

RWTH Aachen University, Information Systems, Ahornstr. 55, 52074 Aachen, Germany

Keywords:

Virtual Currency, Mechanism, Incentive, Public Transport, Mobility.

Abstract:

As a result of a huge offering of different trafﬁc modes, peoples mobility behavior is more and more charac-

terized by multi- and intermodality. But this growing demand cannot be satisﬁed adequately yet. People have

to use numerous separated software platforms and payment schemes to get access to these modes. Whereas

some platforms already offer the access to few transport modes, an unconditional and comprehensive virtual

payment scheme for intermodal travelling is not fully developed yet.

This work examines existing virtual payment mechanisms and projects them onto the setting of the mobility

sector. First, mechanism design is determined by companies strategies, the competitive environment and the

access to the providing software platform. Basis is a scenario of an open software platform that provides

offerings of different independent market actors. Critical for developing a comprehensive mechanism is a

functional integration of (private) vehicle sharing, the consideration of speciﬁc product characteristics and

appropriate system restrictions.

1 INTRODUCTION

Innovations and technological development cause a

growing number of alternative trafﬁc modes. For

example, electriﬁcation changes the urban landscape

by impacting modes and infrastructure. Furthermore,

peoples mobility behavior changed signiﬁcantly over

the past decade. They consider and support alterna-

tive transport modes, like car or bike sharing (Rehrl

et al., 2007). People use these offerings and combine

them to heterogeneous travel chains. This issue is be-

coming more and more urgent in our society (Yogesh

Malhotra, 2000). But multi- and intermodal traveling

is still uncomfortable to realize, because of a huge

number of different software platforms, which pro-

vide access to these services.

Whereas intermodal traveling is a coherent activ-

ity for people, the software landscape to realize this

is partially divided. There are already some inten-

tions to consolidate the access to transport modes.

One the one hand, providers establish in-house plat-

forms, which offer access to their own product port-

folio. On the other hand, comprehensive access to

transport modes between different competitors is also

developing.

Table 1 shows some examples of software plat-

forms and their functionalities across the German mo-

bility sector. Common platforms, also called bro-

kers, integrate different mobility modes, combine and

present them concentrated. Across these platforms,

the range of functions varies signiﬁcantly. The frame

for all following examinations is an open software

platform, which integrates the offerings of indepen-

dent market actors. In the following descriptions,

”open” means the possibility to provide services on

a platform, without discrimination by any superior in-

stance.

Within this context, the payment via virtual cur-

rencies offers highly interesting possibilities. Cash

payment is increasingly substituted through virtual

currencies (Thomas Lammer, 2006). Electronic and

mobile payments are emerging. Forecasts show a

signiﬁcant rise in global mobile transactions volume

(Statista GmbH, 2013). Virtual currencies originally

are designed as loyalty programs to bound customers

to in-house services. A modiﬁed strategy is the co-

operation scheme, also deﬁned as coalition loyalty or

cross loyalty, which describes the facilitation of loy-

alty cards at multiple, possibly competing, retailers

(Buchinger et al., 2013b).

This work gives general design implications for

an e-payment scheme for traveling via multiple trans-

305

Beutel M. and Krempels K..

Encompassing Payment for Heterogeneous Travelling - Design Implications for a Virtual Currency based Payment Mechanism for Intermodal Public

Transport.

DOI: 10.5220/0004977203050310

In Proceedings of the 3rd International Conference on Smart Grids and Green IT Systems (SMARTGREENS-2014), pages 305-310

ISBN: 978-989-758-025-3

 2014 SCITEPRESS (Science and Technology Publications, Lda.)

Table 1: Broker Software Matrix.

Platform Moovel

(Daimler Mobility

Services)

DB Navigator

/ bahn.de

(Deutsche Bahn AG)

quixxit.de

(Deutsche Bahn

AG)

Region urban region offering national public transport offerings in Germany

Functionalities information, routing, naviga-

tion, ticketing

information, routing, naviga-

tion, assistance, ticketing

information, routing, naviga-

tion, assistance, ticketing

Modes local public transport, taxi, car

sharing, bike sharing

local public transport, taxi, car

sharing, bike sharing

local public transport, taxi,

car sharing, bike sharing (re-

duced functionalities concern-

ing ﬂight offerings, rental cars,

ferry boats, ...)

User interfaces web service, mobile application web service, mobile application web service, mobile application

port modes within one route. Therefore, the concep-

tual basis and the general requirements of the mobil-

ity sector are described in part two. The third part

discusses the applicability of existing virtual curren-

cies on intermodal urban public transport. Thereupon,

some recommendations are stated to develop a consti-

tutive framework of a virtual currency mechanism for

intermodal travelling.

2 CONCEPTUAL BASIS

To establish a basic understanding, Figure Figure 1

deﬁnes the general scope of the context. Furthermore

it pictures the relations between stated terms and def-

initions, used in the following.

Platform

Mechanism

Provider

Ticket Product

Portfolio

Customer Services

Virtual Currency

Figure 1: Conceptual Basis.

Transactions between customers and mobility ser-

vice providers are enabled via an open software plat-

form for multimodal transport services. A Virtual

Currency (VC) is a fundamental instrument of pay-

ment, on which the constitutive mechanism relies.

The virtual currency mechanism regulates the speciﬁc

way of cash ﬂows and transactions. Within this con-

text certain interdependencies determine the design of

each component. To develop a suitable and beneﬁ-

cial virtual currency based mechanism for intermodal

travelling, it is essential to consider these interdepen-

dencies, especially in the mobility sector.

Because shared based transport modes are a grow-

ing part of intermodal travelling, integrating them is

desirable, but challenging. Compared to traditional

modes, car or bike sharing is distributed in a different

way. The offerings vary signiﬁcantly in terms of ca-

pacity, characteristic, location and price. Therefore, it

highly depends on individual preferences. A virtual

currency based mechanism has to project these indi-

vidual preferences in an adequate way.

(Buchinger et al., 2013a) showed an inclusion of

vehicle sharing into a theoretical concept of a virtual

currency. It offers the possibility of a multimodal

portability towards other transport modes. Figure 1

shows the systematical virtual currency ﬂows under

consideration of vehicle sharing. All activities are

centralized in a personal digital wallet. This method

is already practiced in various virtual currency based

concepts, e.g. ClickandBuy

. Virtual currency funds

can be received by exchange for cash money or by

providing private vehicle capacities. Earned amounts

of private car sharing can directly be reused for trav-

ellings via other transport modes.

This primer is not solely sufﬁcient to develop a

practicable currency scheme. Currency and in addi-

tion mechanism design are not only determined by

transport mode speciﬁcations, but also by provider’s

product portfolio conditions. Within this work, prod-

ucts are deﬁned as tickets, which authorize customers

to use different services on certain prices. Obviously

in the mobility sector, product characteristics diverge

signiﬁcantly compared to other industries. The con-

sideration of this fact is a necessary enhancement of

existing concepts. For example, some tickets have a

time limited subscription towards the usage of special

transport modes. This attribute impacts virtual cur-

rency ﬂows substantially.

https://www.clickandbuy.com/DE de/home.html

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PERSONAL

DIGITAL WALLET

TRAIN

VEHICLE SHARING

BUS

CUSTOMER

CAPACITY

PROVISION

CAPACITY

UTILIZATION

...

Virtual Currency

Management

Virtual Currency flow

Cash flow

Legend

Figure 2: Multimodal Cash Flows.

3 VIRTUAL CURRENCY

MECHANISMS IN CONTEXT

OF INTERMODAL TRAVELING

There is a large variety of loyalty concepts on vir-

tual basis. (Buchinger et al., 2013b) examined vari-

ous virtual currency schemes in detail. This constitu-

tive work, investigates especially the applicability of

existing concepts, or components of them, to urban

public transport.

3.1 Miles and More

The Miles and More program rewards customers with

miles per ﬂight with the German airline Lufthansa.

Originally designed to raise customer loyalty towards

the German airline, the program became extended:

miles are now not only rewarded to customers, but

also sold to third parties, e.g. banks, retailers and ho-

tels. More concrete, the platform sells the ability to

reward miles to third parties. Those miles expire at

the end of a respective time period (Buchinger et al.,

2013b).

Synergy effects enhance also third party services

with additional value for the customer and for the

primer platform service. As a drawback, the system

favors a centralized service. Under certain circum-

stances cooperation between competitors is indeed

possible, however only by subordination to a general

instance and a favored service. Various mechanisms

have this feature in common, because of strategical

considerations by service providers. But this fact hin-

ders the nonrestrictive integration of private car shar-

ing and therefore it is not applicable to the reference

scenario. In contrast to this, the constraint of expos-

ing virtual currency funds is quite practicable in the

context of urban public transport. Intensifying the in-

centives of the mechanism is one possibility and also

feasible option.

3.2 Bahn.bonus

The bonus point system by the German mobility

provider Deutsche Bahn, bahn.bonus

, rewards cus-

tomers for travelling with different transport modes.

It refers to a multimodal offering, but is limited to in

house modes only. Bonus points can be reinvested

for travellings at discounted prices, or exchanged for

other products, e.g. suitcases. Furthermore the sys-

tem offers the possibility to classify customers into

http://www.bahn.de/p/view/bahncard/bahnbonus

/bahnbonus.shtml

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MechanismforIntermodalPublicTransport

307

levels. There is another sort of points, called status

points, which solely serve to upgrade a personal level.

This enables customers to get access to additional ser-

vices or other beneﬁts. In other words, a personal

bonus point deposit consists of two types of bonus

points with diverging functions.

3.3 Facebook Credits

Facebook Credits support loyalty towards other ser-

vice providers, but moreover create a source of rev-

enue from the platform’s customer basis. Third party

developers are able to provide services, e.g. gaming

applications, which can be used due to the platform.

Facebook credits serve the virtual currency mecha-

nism within this speciﬁc application. Facebook’s cur-

rency is automatically converted to the currency, used

in the application. This process is not recognized by

the application users (Buchinger et al., 2013b).

Although this system is originally not operating

in the mobility sector, its characteristics can ﬁt to

this area: the mechanism is suitable to consolidate

different services hosted by independent providers.

The key advantage is the function of keeping loyalty

towards individual third party providers sustainable.

Thereby the basic function of loyalty programs can

be maintained towards separated companies.

3.4 Auctions

The offerings of car sharing are characterized by a

large variety and complexity. People have individ-

ual and heterogeneous preferences which determine

their decisions. A functional virtual currency mecha-

nism has to be designed under consideration of these

circumstances. In this context, the fact of conﬂicting

preferences is critical. An auction seems to be adap-

tive to picture individual preferences and solve con-

ﬂicts connected to them.

(Krempels, 2009) investigates different options of

solving agent preference based conﬂicts. The stated

auctions, where a secret bidding round occurs and the

highest bid is the winning one, are called announce-

ments. These announcement auctions can be modeled

in different forms: ﬁrst, only the winner has to pay his

bid and all losing entities keep their amounts com-

pletely on their own. A second possibility is to dis-

tribute shares of the winning amount between all los-

ing entities. An increase of funds across the loosing

entities effects an improved preference conﬂict solv-

ing. In matters of this procedure, there a some possi-

ble variations stated. Simulation results showed that a

predeﬁned, time based decay of money added by auc-

tions, is the most promising solution to solve these

conﬂicts. Diverse constraints ensure the stability of

the overall system.

Despite these simulation results, such an e-

payment concept could be problematical in terms of

broad consumer acceptance. On the one hand, using

this auction system might be less intuitive for cus-

tomers. On the other hand, the system might be too

complex to manage. In fact a simpliﬁed auction sys-

tem should be considerated.

4 CONCLUSIONS AND FUTURE

WORK

Choosing the right design of a virtual currency based

payment mechanism overall depends on companies

strategies, the form of providing their services and the

competitive environment. The rate of discrimination

concerning a platform access determines these factors

in large part. Therefore the way of cooperation be-

tween companies to provide intermodal traveling is

essential. In this case, examinations focus on a sce-

nario, within an open software platform, which pro-

vides offerings of different entities without discrim-

ination. There are preliminary considerations about

establishing a virtual payment scheme in this spe-

ciﬁc context (Buchinger et al., 2013b). This work

advances these considerations by the following impli-

cations:

Product Portfolio Chracteristics

Central implication for designing a virtual currency

based mechanism for intermodal traveling is the con-

ceptual consideration of provider’s product portfo-

lio characteristics. Ticket products diverge signiﬁ-

cantly from products distributed in other industries.

Many ticket products allow transport mode utilization

through time limited subscriptions. An adequate vir-

tual currency mechanism has to feature these condi-

tions in a ﬂexible way. This characteristic also aggra-

vates the integration of vehicle sharing.

Vehicle Sharing Integration

The integration of a highly diverging modes is chal-

lenging but offers extensive value potentials. Com-

bining traditional modes with vehicle sharing means

to connect two different transaction methods alto-

gether via a virtual currency based mechanism. Fig-

ure 3 shows a conceptual mechanism integration.

Users’ personal digital wallet consists of two com-

ponents: The ﬁrst components allows the unlimited

participation on transport services in a certain time,

based on a subscription agreement. Within this part,

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PERSONAL DIGITAL WALLET

VEHICLE SHARING

Flexible Component

CUSTOMER

CAPACITY

PROVISION

CAPACITY

UTILIZATION

Virtual Currency

Management

Virtual Currency flow

Cash flow

Legend

Constant Subscribtion Component

BUS

UTILIZATION

TRAIN

UTILIZATION

...

Figure 3: Compined Digital Wallet Scheme.

no virtual cash ﬂows need to occur - depending on

the certain ticket conditions. The second component

includes a predeﬁned amount of virtual coins. These

coins can be earned for providing vehicle capacities

and are reusable for car sharing or other services.

This combination allows the ﬂexible integration of

(private) vehicle sharing. Furthermore this scheme al-

lows to model preferences via auctions. Compared to

traditional transport modes, vehicle sharing depends

substantial on speciﬁc vehicle attributes and individ-

ual customer preferences. An auction seems to be

adaptive to reﬂect individual preferences and solve

conﬂicts connected to them. In fact it could allo-

cate more efﬁciently with regard to these conditions.

Auctions can be constructed in diverse forms. These

forms feature different potential of preference conﬂict

solving, but consumer acceptance has to be consid-

ered in addition.

System Restrictions

This leads to another implication: an establishment

of mechanism restrictions. Virtual currency mech-

anism restrictions are already approved in other ar-

eas. For example expiring currencies are well adap-

tive to the mobility context. Thus incentives regu-

late customer behavior and foster the system balance.

Another adaptive restriction is a limitation of earned

amounts by providing capacities of vehicle sharing.

A concrete form is to avoid, that the earned currency

amounts exceeds a predeﬁned starting budget. This

prevents the systematic disadvantage of other trans-

port modes.

4.1 Future Work

This investigation is intended to form a conceptual ba-

sis for a virtual currency mechanism on an open soft-

ware platform for intermodal traveling. This mecha-

nism is going to be modeled and technologically real-

ized. Refering to this, there are already some reliable

technical solutions connected to this area. For exam-

ple concerning payment APIs or virtual currencies,

which have to be considered as well. Subsequently,

the procedures are going to be evaluated to examine

the basic contributions.

ACKNOWLEDGMENTS

This work was founded by German Federal Ministry

of Economics and Technology for project Mobility

Broker.

EncompassingPaymentforHeterogeneousTravelling-DesignImplicationsforaVirtualCurrencybasedPayment

MechanismforIntermodalPublicTransport

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