Are Smart Card Ticketing Systems Profitable? Evidence from the City of Trondheim

Electronic ticketing in public transportation based on smart cards is gaining momentum worldwide. It is widely recognized that a smart card system can deliver benefits to both passengers and operators, but due to its complexity, implementation can come at a considerable cost. Therefore, it is likely that a commercial appraisal from the perspective of the public transportation operator alone would reveal that costs are higher than benefits and, hence, economic non-viability. This paper presents the experiences of the Norwegian city of Trondheim, which recently implemented a fully-interoperable electronic smart card system. A social cost-benefit analysis of the scheme is presented, focusing on net overall benefits for the passengers, the bus company, the local transportation authority, and the rest of society. The main conclusion of the paper is that the smart card ticketing system in Trondheim delivers a positive net present value. The paper demonstrates that economic evaluation of smart card ticketing schemes using the principles of social cost-benefit analysis is desirable and possible. Because commercial non-viability may represent constraints to the implementation of such schemes, the findings presented in this paper provide valuable information to those currently working on smart card ticketing strategies.