“Toronto’s future will only be as good as its public transit system.”

- Christopher Hume

How it started

In Grade 9, we had a unique geography assignment. We were tasked with creating a solution to improve the quality of life in Toronto. The project in question was simple: “Pitch a product that will improve the quality of life for people.” I decided to focus on the TTC, Toronto’s transit system, because around this time, I watched Hasan Minhaj’s Patriot Act episode on the state of public transportation, and that inspired me to find a solution to the consequences of poor transit. 

In this episode, Hasan described how a poor transit infrastructure directly hindered a person's ability to get a better education, job prospects, and general necessities. In all cases, the underserved communities where transit lines aren't directly available were affected the most. My goal was to look at ways to improve and expand our transit infrastructure, allowing the TTC to be less reliant on government subsidiaries and offering better service in the process.

During my research, I stumbled upon Hong Kong’s MTR system, the world’s most profitable transit line. Their transit line was so efficient and streamlined, that it accounts for a large portion of Hong Kong’s government revenue rather than taking money through subsidiaries. I wanted to create an app prototype that brings aspects of Hong Kong’s MTR system to Toronto. This app would introduce a new way for us to implement aspects of Hong Kong's MTR system for the TTC but also aim to incentivize transit usage over cars among people that make trips less than one hour. This was the beginning of Transit+

The Problem

I chose this idea to work on because transit equity is a fundamental human right; statistics show that reliable public transit is closely tied to improved education and employment opportunities, so when I found out that Toronto and many other cities in Ontario suffer from "transit poverty," I wanted to explore solutions. Jeff Allen and Steven Farber of the University of Toronto wrote in a paper that, as more and more people are priced out of downtown areas, more households could be living in a transport-disadvantaged state.

As with most transit agencies, we're working hard to expand our infrastructure, but bureaucracy is a big obstacle. Our farebox recovery ratios don't cover operations costs, and we can't reach underserved communities without government subsidies that take too long to implement. How can Transit+ solve these problems?

The Current Situation

70% of commutes that are less than 1 hour are done using cars - Transit makes up only 9.5%. Cars are the dominant mode of transport in Toronto, and while the city can handle the 1.1 million cars that drive on it, it’s unsustainable from an environmental standpoint, but also for the city’s growing population.

This increase in car usage is justifiable for commuters because cars are inherently more comfortable, faster, and more personal. Making transit the better option would not only benefit the TTC but can also dramatically reduce the city’s CO2 emissions by a long shot. With Transit+, I wanted to focus on fixing one aspect of our transit that would eventually lead to a butterfly effect; one small change that leads to more considerable adjustments down the road.

Solution

This app is designed for commuters, who are quite likely to be flexible in their transportation options. In Toronto, 91% of car commutes take less than an hour, which can be achieved by public transit. This app aims to increase fare revenue by incentivizing these car drivers.

Here's how we're doing it: Transit+ has two aims: to draw in and persuade car drivers with a rewards-based scheme, and to provide a simplified mobile experience to all existing commuters by giving them a comprehensive overview of what the transit system has to offer. This streamlined method will ensure commuters get the information and service they need, and the transit system will benefit from increased revenue.

The Digital Card allows users to access their card digitally and use NFC directly from their phone to the Presto card readers. This helps enhance security, as your phone can turn NFC on and off, unlike regular Presto Cards, preventing any fraudulent transactions.

Digital Card

Commutes

The Commutes page helps you track your next bus, subway, or train for your regular routes. If you're headed somewhere new, you can quickly find the fastest way to get there.

To incentivize car drivers, we are implementing a rewards program within our app modelled after Starbucks'. Passengers will be able to enjoy free commutes and discounts at vendors operating within the Toronto Transit Commission and Metrolinx (TTC).

We wanted to implement aspects of the profitable Hong Kong MTR's business model. Their Octopus Card allows passengers to utilize any of their transportation facilities and buy from vendors within their transit stations. This model takes advantage of their land ownership to drive passengers to businesses while indirectly funding the transit infrastructure.

Expanding usage of the Presto Card and implementing a rewards program will allow the TTC and Metrolinx to increase revenue and reduce dependency on government subsidies.

The "new" Presto Card has prospects of succeeding, as no one is incentivizing car drivers to switch to transit-- they're only being marketed to. The rewards program is the key highlight, but the app also considers that a unified transit experience is necessary. Currently, we have to use multiple apps to get basic information on card balance, route preferences, and bus schedules, so having everything in one place is great for those who weren't using public transit before and provides an improved experience for those who rely on it.

Not only will the card handle transit transactions, but it can now be used for convenience stores, restaurants, and other commodities, much like the Octopus Card.

The Transit+ rewards program is designed to benefit everyday riders: they earn points with each use of the transit, which can be exchanged for free rides or purchase credits for vendors supported by TTC and Metrolinx.

This encourages car drivers to choose transit instead of their vehicles, and more importantly, generates revenue for the TTC to improve infrastructure.

To maximize the potential of Transit+, we plan to utilize the TTC's most valuable asset: its land. New developments along transit lines tend to increase the value of land, and with Toronto's growing population, this is an ideal opportunity for transit to earn a profit. For businesses, this provides a great way to attract customers for their products and services.

New developments can feature lots for vendors to lease, so the commission can benefit from its land ownership. This new revenue will allow the TTC to add retail to existing stations.

It's like an airport: you're there until you can embark on your next ride, but during that time, you can find food or shop in stores. By partnering with vendors, we can set up the Reward System to drive traffic to stations and the stores within them.

Rewards

Finances

Background Information

  • The current population of the Greater Toronto Hamilton Area in 2021 is 7,281,694 expected to grow to 8.6 million by 2031.

  • Metrolinx divided the population based on its travel behaviours into 6 distinct personas. Here they are:

    • The Frustrated Solution Seekers - account for 15% of the population; 42% of this demographic owns 2 cars and driving accounts for 76% of their share of trips. About 5% own a Metropass.

    • The Connected Optimizing Urbanites - accounts for 22% of the population; 27% of this demographic has a Metropass. 35% likely to prefer using a car for commutes; more likely to opt for public transit. 6.5 of their trips are commutes to work, and 3.8 are to see family and friends.

    • Time And Balance Seekers - account for 19% of the population; 67% of this demographic’s share of trips are done by car, 12% use Zipper, and 8% use rental cars, but they occasionally use the local bus.

    • Traditional Suburban Travellers - account for 15% of the population whereas cars account for 89% share of trips.

    • Satisfied Mautre Urbanites - account for 11% of the population; 50% share of trips are done by car, where 11% take the subway and 9% take the local bus.

    • Aspiring Young Travellers - accounts for 18% of the population; only 43% share of trips are done by car, and 34% rely mostly on the bus and subway.

  • Transit+ is targeted towards the Connected Optimizing Urbanites, the Satisfied Mature Urbanites, and the Aspiring Young Travellers. The Aspiring Young Travellers and Connected Optimizing Urbanites are the most tech-oriented group, and will likely yield the highest adoption rate of the app across the board. Transit+ is meant to be an updated version of the current Presto app, which has about a million downloads across Android and iOS. Presto itself has over 3.2 million users.

  • Assuming the effects of COVID are now negligible, here are the most recent ridership statistics for Metrolinx and the TTC from 2019.

  • The total annual ridership for the TTC is 950,000,000. For Metrolinx, it’s 76,000,000.

  • Feasibility based on COVID statistics, for the TTC, total ridership peaked at 385,010,000, and for Metrolinx, it was 15,600,000.

The Model

Target audience: The app is targeted towards the Connected Optimizing Urbanites, the Satisfied Mature Urbanites, and the Aspiring Young Travellers, which together make up 48% of the population of the Greater Toronto Hamilton Area (7,281,694 people).

  1. Adoption rate: Because these groups are the most tech-oriented and have the highest adoption rate of the app, conservatively, let's assume that 15% of these groups will adopt the app. This means that 7.2% of the total population (48% * 15%) will adopt the app, or 528,542 people.

  2. Calculate the cost of implementing the app: The development cost of the app will be $400-650K. Let's assume that it will cost an additional $100,000 per year for marketing, and customer support, and an additional 20% annually of initial development cost to account for ongoing maintenance. The total cost is $880K for the first year and $230K annually for the next year.

  3. Estimate the revenue from the app: Assume fare revenue per rider is $3 per trip. You also expect to receive $1 in advertising fees from participating merchants for every 10 trips taken using the app. Based on these assumptions, and the fact that 25% of app users increase their ridership by an additional ride bi-weekly, you can calculate the revenue from the app as follows:

  • Frequency of rides taken by app users: Assume that app users increase their ridership frequency by an additional ride bi-weekly or 26 additional rides per year.

  • Total ridership increase: 528,542 * 0.25 (132,136) total riders * 26 additional rides per year = 3,435,523 additional rides

  • Revenue from the app: 3,435,523 total rides * $3 fare revenue per ride + 3,435,523/10 trips * $1 advertising fee per trip = $10,650,121.30 total revenue

Compare the costs and benefits: Based on these calculations, the Transit+ app would generate $10,650,121.30 in annual revenue, which is more than the $880,000 cost of implementing the app for the first year. At a 25% adoption rate within the targeted demographic, the total additional revenue per year is $44,869,798.42.

Real World

Evaluation

According to a study conducted by San Jose University and the Mineta Transportation Institute, they analyzed the viability, effects, and outcomes of loyalty-based programs within the public transportation sector. Montreal’s STM Merci! the program "found that between 20% and 25% of STM Merci! participants increased their transit ridership over the system’s three-year operating period. STM was also interested in expanding ridership outside of the commute hours for non-work purposes. Analysis showed that 57% of STM Merci! participants used transit for non-work trip purposes, and 27% brought a friend with them to go to an event using transit, responding to an offer from STM Merci!. All told, STM estimated that they gained close to an additional $100 million over the first three years of the pilot test from new ridership.”

The participating merchants also signalled their approval of the system through the “$6 million they paid in advertising fees when they sent out offers to the program’s participants. Had the program continued beyond its three-year test period, the agency estimated they would have reached annual revenues of more than $6 million per year once the program reached maturity."

Potential Limitations

STM Merci! could only accommodate 75,000 participants, and knowing these 75,000 alone brought in an additional $100 million over the first three years, it’s likely the current model for Transit+ is conservative based on a couple of key factors:

  1. It doesn’t account for the other personas also participating in the program.

  2. The base fare price of $3 isn’t reflective of actual fare prices across the GTHA network (i.e, a GO Train fare is more expensive than a TTC bus fare).

  3. The advertising fee of $1 per 10 rides assumes every vendor partnered with Metrolinx and the loyalty program pays the same fee whereas, realistically, larger vendors would pay more.

  4. This model assumes only 26 additional rides would take place per year for each rider; STM Merci! saw 25% of participants increase their ridership by an unspecified amount; STM Merci! shows that on average, each participant would have spent an additional $444 every year; this current model of Transit+ assumes every participant only brings in $78 per year—a difference of 570%.