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New payment systems

Get your ticket even more comfortably with embedded payment

09/2018 – A study by DB Systel investigates the "embedded payment" digital trend for relevance and urgency for Deutsche Bahn. How can payment processes be designed to be more customer-friendly?

Convenient rail travel. That’s what every rail customer wants. To arrive at the train station, get on the train or S-Bahn, sit down, ride, get off, done. It sounds simple, but at least for people who almost never or only rarely travel by rail, this means they have to overcome the high hurdle of payment. This process, which literally pays off most for Deutsche Bahn and the transport associations may prove difficult for many customers.

Sören Eversmeier, trend analyst, DB Systel
© DB Systel GmbH

This is not only down to the price and offering system, which is sometimes hard to understand, but also complicated payment processes. “We see a need for action particularly in terms of younger customer groups who have grown up with digital devices,” says Sören Eversmeier, trend analyst at DB Systel. He is the author of the “embedded payment” trend study.

The trend study, a spin-off of the Trendradar by DB Systel and CIO DB Group to be published in September 2018, describes and assesses technological updates, which may become important for Deutsche Bahn in the medium term, but may therefore be all the more lasting – these are characteristics which apply to embedded payment.

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Embedded payment is a revolutionary idea of payment. It’s fully automated and digitalised, meaning the actual payment process does not attract the consumer’s attention. The online shopping giant, Amazon, shows how this can be brought about in its 1,800-square-foot Amazon Go convenience store in Seattle. Shoppers simply use a code on their smartphone to identify themselves, sensors detect the goods in the shopping trolley and when they leave the shop payment is taken via their Amazon account. Queues for tills, cash, debit or credit card, entering your PIN – it’s all eliminated. The payment is therefore “embedded” into the actual shopping process and literally takes place in passing. Uber, the taxi company, is another example of embedded payment, where the app is used to order transport and, at the end of the journey, payment is automatically made without further intervention by the user.

Mobile and digital payment solutions on the rise worldwide

© DB Systel GmbH

Now, Deutsche Bahn is not a taxi company, nor is it a supermarket. However, the customer has long since grown accustomed to an ever more convenient purchase process when shopping in store, but above all on the internet or via mobile phone. Embedded payment is the consistent development of this trend. The customer can choose what they want and pay as they want – conveniently, quickly and securely. Multichannel platforms make this possible with a convenient user experience for many payment options. The customer also receives customised offers, deals or other services to choose from. An additional effect is the anonymised data of service use which, subject to the customer’s consent, can be used for the continuous improvement of offers and the development of new customer-focused services.

Rethinking the process

Thanks to the size and variety of its business units, Deutsche Bahn represents an almost ideal field of application for embedded payment. This new payment trend opens up an opportunity to improve the customer journey across all areas of the DB ecosystem (rail travel, shopping at the train station, on-demand fleet and mobility services such as Flinkster, Call-a-bike, ioki, etc.), to open up new customer groups, use business and savings potential and allow DB businesses more insights into the behaviour of its customers in general – of course, whilst carefully safeguarding data protection.

On the other hand, the study also points to today’s plethora of stand-alone solutions, which represents a challenge in the digital area of the DB ecosystem. “The expense, the costs and error rate do not make sense from a Group point of view,” says Christian Welt from the Digital Foresight team at DB Systel. “Furthermore, younger target groups in particular wonder why it isn’t as easy at Deutsche Bahn as it is at Amazon, where all services are available via one platform – the Amazon Cloud You register once and have every service at your disposal. By introducing the bahn.id project, in which every end customer will have a central access point for their data for all Deutsche Bahn applications, DB will set the course for tomorrow. We have to rethink our processes and focus on standardised interfaces (APIs). “DB had neglected to do so in the past, but this was understandable and due to the development over time. “The growth of digital devices and sales channels were added on to the existing systems. This addition and technical integration into existing systems made them available very quickly.”

Uniform pricing system for public transport

The trend study shows the value of scrutinising and redefining processes by way of a comparison with Switzerland.  Swiss Federal Railways (SBB) and Swiss South Eastern Railway (SOB) back efficient processes and high user comfort in the area of e-ticketing: by using a smartphone and app customers can plan their journey, check in at the start and check out at the end of their journey. The right price is automatically determined and paid via the stored payment method (so-called check-in/check-out systems). The Swiss see a uniform pricing system for all public transport systems as a key to success and the Federal Government has been promoting a similar approach for Germany.

Christian Welt, team Digital Foresight, DB Systel
© DB Systel GmbH

Sören Eversmeier and Christian Welt are convinced that the digital ecosystem of Deutsche Bahn could also be made much more efficient by introducing services for integrated payment solutions, based on overarching platforms and open interfaces. If things were to stay the way they are Deutsche Bahn might face a risk of losing access to customer data. “It is only a question of time before the providers of major IT platforms get heavily involved in the sales and payment process. That would leave us to provide the services but others would have the benefit of the mobility platform with its interface to the customers.”

Time is of the essence

How quickly does Deutsche Bahn have to react? “Generally, the Trendradar analyses developments that are going to become relevant in the next five to ten years,” said Sören Eversmeier. “But with embedded payment we have to set the course now.” There is a good chance for this to happen. DB already has a great deal of experience in smart ticketing thanks to Touch&Travel. This will help improve systems for check-in/check-out and in the future, also check-in/be-out systems, in which the smart app automatically detects the end of the journey. Furthermore, DB Sales already has a full-service payment service provider, BS PAYONE, and is developing new, overarching sales platforms.

Furthermore, several projects based on blockchain technology are currently being implemented as a basis for payment and revenue allocation. In 2017, Deutsche Bahn established ioki , an on-demand mobility platform for demand-responsive services and boasts a very versatile and well-used payment app included in the DB Navigator. These are just a few of the activities of DB shown in the trend study which have the potential for future fully integrated payment solutions.

There is therefore a fair amount of evidence that the customer will benefit from an improved customer journey in the not-too-distant future, together with very comfortable ordering and payment processes. “With APIs, i.e. the technical interfaces, Deutsche Bahn would be able to quickly remove the complexity. On the basis of a “Business Hub” platform solution, which we are developing as an IT service provider, a number of mobility service modules could be put together and be equipped with the right payment types,” said Sören Eversmeier.

This, in turn, would make Deutsche Bahn fit to compete with global providers of major IT platforms pressing on the market. If this opportunity is used, Deutsche Bahn would be able to better meet the biggest wish of its many millions of customers: to conveniently travel with DB.

The complete embedded payment trend study with comprehensive information on global payment trends, introductions to payment solutions along with some of DB’s activities and DB’s trend evaluation is available on DB Planet. From end of September, you will also be able to view the latest Trend.Radar by following this link.