Revenue sharing in Multimodal transportation using Blockchain

blockchain

This Blockchain based system will use a crypto-currency inherent to the system. This will allow for real-time settlement of revenue among the operators

The transportation industry is changing at a rapid pace with new service models. Multimodal transport is one such example. With ever increasing customer demand for travelling from one place to another in quickest time possible and in a hassle free manner which involves multiple mode of transportation and complex routes, collaboration among different transport operators becomes necessary. It results in a multimodal transport system. In this mode, a passenger can use a single ticket to travel from one place to another using multiple mode of transportation such as Train or Buses.

The ticket in a multimodal transport system can be sold by any operator participating in the network. For example, a train operator can sell a ticket which involves travel by Bus as well. This gives rise to one major challenge in implementing a multimodal transport solution; Revenue sharing among different operators. Each user journey from one place to another can have multiple modes of transport. So, each operator catering to any part of the journey will have their own sets of responsibility. Accordingly, they will get their share from the overall revenue generated. But, this revenue sharing mechanism is complex.

First of all, there is need for lots of real-time data accessible to each partner operator and strict rules and regulations. Even though the system as a whole is presented to the end user, still the operators function independently. They have their own cost of operation, liabilities and support systems. For example, if a user misses a train, because the connecting bus was late, then who will bear the penalty?

Secondly, there is no existing system, which can be used for real-time settlement of revenue share among the participating operators. These settlements happen periodically. Also, the settlement can be significantly delayed if there are any disputes among the operators.

Thirdly, currency risk is a major deterrent to operate a multimodal transportation system involving cross-border integration. Cross-border integration also requires government interventions, which can make matter more complicated. Also, the need of third party for frequent settlements among operators can contribute towards significant rise in overall transaction cost.

To overcome all these issues, a Blockchain based Ticketing system can be implemented for a multimodal transport system. The use of Blockchain will provide a distributed immutable ledger to all parties, which will act as shared common database. With that information will be available to all parties in a real-time basis in a transparent manner. This will allow for fast validations. This Blockchain based system will use a crypto-currency inherent to the system. This will allow for real-time settlement of revenue among the operators. It also eliminates currency risk for cross-border integration and reliance on third party for settlements. Since the database is immutable and transparent, this will eliminate disputes among operators.

Now coming to the implementation part, let’s first have a look at the current systems. In current systems, tickets are either sold physically at stations, through online medium or through smart cards. Commuters have to pay for the ticket using physical currency or through online medium. This method of fare collection is expensive as it can account for 15-20% of total revenue. A Blockchain based ticketing system can be created using a public Blockchain like Ethereum. In this ticketing system, Ethereum inherent to the system will act as currency for transaction in the system. Mobile ticketing applications can be built over this, where user can buy Ethereum using fiat currency. Using Ethereum they can buy tickets. The Smartphone mobile application will hold the ticket for the user. Based on usage, the collaborating operators will get their share using Ethereum. This can be simplest for implementation. But, in this public Blockchain implementation, each transaction will involve some transaction fee for carrying out Proof of Work.

To overcome this, the operators can collaborate in a consortium Blockchain based ticketing system as well. In this method there will be more privacy and transaction fee can be eliminated. For a consortium Blockchain based ticketing system, custom token can be created which can be translated to either crypto or fiat currency. Mobile ticketing application can be built over this, which user can use to buy this token using fiat currency. These tokens can be used for buying tickets. With Payment Gateway integration and using ERC-20 token standard, it can be even made possible of buying tickets directly using fiat currency. For efficient Revenue sharing, there can be a hybrid design with actual revenue sharing happening over public Blockchain with Bitcoin or Ethereum or Ripple etc. (designed for B2B transactions),

Overall, a Blockchain based ticketing system for a multi-modal transportation system will provide a fast, reliable and transparent solution for both collaborating operators and commuters. This will help operators to bring down overall fare collection cost along with near real-time revenue sharing.

Authored by Himansu Sahu, Business Analyst, Digital Transformation Services, Sasken Technologies

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