KMRL is delighted to announce that Axis Bank has agreed to invest the entire funds required for the Automatic Fare collection System (AFC) for Kochi Metro system including Phase two as a consequence of an International Competitive Bid. They will also pay an additional royalty of Rs.209 crore to KMRL over the next 10 years for the right to be KMRL’s partner in this endeavour. Moreover, the entire maintenance of the AFC system for 10 years will be undertaken by Axis Bank. The bank will issue co-branded debit cards to the users of the Kochi Metro system. In addition to this, 20% of Axis Bank’s gross revenues, from the utilization of this Debit Card outside KMRL’s ecosystem in various mercantile outlets and internet transactions, will also accrue to KMRL over the next 10 years. KMRL is pleased to announce that this is the first time such an innovate model is being launched anywhere in the world. This innovative business model, which KMRL has designed, is expected to change funding models for AFC systems in the metro industry globally.
The Automated Fare Collection (AFC) system is a critical core component of any Metro system, which includes complex hardware and software installed at entry points of Metro stations as well as the buses and boats. This system uses Radio Frequency Identification Devices (RFID) to collect fares from the users of the urban transportation systems. In such a system, the Metro ticket can be in the form of a co-branded Debit Card or a NFC enabled Smart-phone or a `patch’ on a mobile device or any other surface with NFC stickers or QR code, or even as a paper-coupon.
A significant part of the investment on the Systems side of the Kochi Metro Rail system is for the provision of such a comprehensive AFC.
The normal practice in metros worldwide is for the metro company to invest their own funds into the capital expenditure. However KMRL decided to go in for a completely different paradigm, where we had invited competitive bids from various Indian banks to invest the entire capital expenditure on the AFC system, in return for their right to use co-branded cards and co-branded software on our Metro system, which will function both as a Debit Card of the Bank as well as a ticket for entry into the Metro system.
This Bank investment model has great advantages for the citizens of Kochi because the common man who uses the Metro system will have the opportunity to obtain a co-branded Debit Card, which can not only be used for transportation requirements, but also for other mercantile and internet transactions. This Debit Card can be linked with any bank account of the user, in any Bank. KMRL is also planning a `click and collect’ system whereby the commuter on the Metro system will be able to order goods and services using this Debit Card which can be delivered at our Metro stations. The user of this Card will also have the satisfaction that 20% of the Bank’s share of the revenues from each and every transaction is being plowed back into the city by way of the Bank’s revenues to KMRL. KMRL is also planning to start a drive for including a variety of local and national goods and services that can be accessed using this KMRL-Axis Bank co-branded Debit Card. This is also for the first time that the AFC solution has been enabled on the `Cloud’ in line with KMRL’s IT philosophy of `open standards on the Cloud’. In addition to the co-branded Debit Card, the Bank will also develop a Mobile `App’, which can be used for ticketing as well as `e-commerce’.
The benefits to KMRL from this new model are obvious – huge savings in capital investment, additional royalty of Rs.209 crore that will be paid by Axis Bank, as well as 20% of the Bank’s revenues on each and every transaction over the next 10 years.
Axis Bank’s advantage in this model is that they will have a unique opportunity to populate their Card in the Metro ecosystem and in Kochi city, with a net addition of new clientele, as well as the `first mover’ advantage in this new endeavour, which can be replicated in other cities in India and abroad.
In other words, Axis Bank has invested in this vision of KMRL where the common Metro user will have a unique co-branded Card, which can be put to a variety of other uses apart from ticketing.
“This model of external investment in critical components of the Metro system is a `win-win’ proposition for all the three stakeholders i.e. the public of Kochi, the Metro Administration as well as the Bank. We are hopeful that this initiative will open out a completely new paradigm for funding metro systems all over the world”, said Elias George, MD, KMRL
This initiative is also unique in that it is for the first time that `open-loop’ smart cards are being introduced in the Metro system.MoUD has mandated all metros to have an integrated smart card system, which can be used in all transit. KMRL is the first metro in India to take a bold step in this direction. To achieve this goal, KMRL had appointed Ms. Ernest & Young as consultants for drawing the specification for an appropriate smart card system. KMRL’s system department subsequently came out with a new procurement model of AFC and it was added in their mandate afterwards .