Can MaaS find a business model that works?

Written By Lucile Ramackers

Everyone working in mobility talks about MaaS - Mobility-as-a-Service - even though what once seemed like the magical solution to all our (mobility) problems is now struggling to come true. Sure, there have been many interesting initiatives and new apps on the market, but did they find a sustainable way to make money and whose interest do they serve? Did those apps keep their promise of making mobility greener, smarter and less car-centric? Are those goals even reachable? Now that novelty has faded in a market that becomes more and more mature, let’s venture a few asumptions on the future of MaaS.

MaaS has indeed been on everyone’s mind for quite some time now. Yours truly did write an article almost 3 years ago on that very same subject: MaaS, as the integration of various forms of transport services accessible on demand with a single payment channel instead of multiple ticketing and payment operations, could change the way we move in helping to maximise the use of the existing transit system and connect it with every mobility option offered in the city. We are now in 2021 and can’t say we’re there yet - granted, 2020 has shaken the mobility business to the core in ways we couldn’t have foreseen…

What MaaS should be

In order to make mobility greener, we need to offer more alternatives to single-occupancy vehicles, and therefore provide a service with the convenience of a private vehicle without the hassle of ownership. But first, people need to realise that driving their car might not be their best option to go from point A to point B. A lot of people end up buying a car for a specific use, ie. driving to work or travelling with kids, and once they own a car that is always at their disposal, they tend to use it for every trip because it’s convenient and it feels free. Indeed, car drivers commonly assume that there is no cost involved in driving their car somewhere and they forget to factor in gas, parking, insurance and depreciation costs (and environmental cost should also be part of the equation). Actually, owning a car is a money pit - 5 000€ per year on average in France, or 10 to 12% of a household’s budget, while it is parked 95% of the time - and it costs society a lot more.

Indeed, a study published in 2019 compared the social cost of automobility, cycling and walking in the European Union, through a cost-benefit-analysis. Results suggest that each kilometer driven by car incurs an external cost of €0.11, while cycling and walking represent benefits of €0.18 and €0.37 per kilometer respectively. Extrapolated to the total number of passenger kilometers driven, cycled or walked in the European Union, the cost of automobility is about €500 billion per year. Due to positive health effects, cycling is an external benefit worth €24 billion per year and walking €66 billion per year.

A calculator implemented in Vancouver, BC, Canada, lead to a study that drew the same conclusions in 2015:

This is where MaaS has a role to play: we won’t convince people to leave their car just because it is better for society, but because it makes more sense for them on an individual level. And it does, because you can compare all your travel options, thanks to transport apps like Citymapper. I’m highlighting Citymapper here because I think it is still the best app designed for users, that provides the best travel information: indeed, they do work on their data and use human intelligence to correct it, so that their suggestions are more accurate and do take into account the reality of the city (e.g. connections that could make sense on paper but don’t because of long corridors, unrealistic travel times…). They have indeed helped me get a better sense of my own city, Paris, and I am a transport geek who has been working in mobility for over a decade, which is saying something… As a consequence, I ride my bike more often now because, most of the time, it is effectively my best travel option: quicker, nicer and cheaper.

In short, MaaS should help you make the best travel decision, based on your priorities and personal criteria. This is how we can willingly choose to leave the car in the garage.

What a successful MaaS isn’t

Let’s not forget that a MaaS solution is just a tool, that allows users to select their means of transportation and ideally purchase their ticket(s) through a single payment channel. It will obviously never replace an ambitious local transport policy (but could very well complement it) and should never be reduced to an enhanced ticketing app.

This is where some transit authorities still need to find their appropriate place: indeed, some of them, wanting to offer a dematerialised ticketing solution to their users in response to the Covid-19 pandemic, tasked their operator to develop it. This allowed them to deliver a quick answer to an urgent need, but it is actually a short-term solution creating a longer-term problem: as the frame is set by one operator, it becomes harder for other actors to integrate in their system afterwards.

Other authorities decided to undertake the development of their own solution, either working directly with a start-up like Trafi, or after a public bidding process. It is obviously a good option to guarantee that public interest is the priority, without promoting the most lucrative means of transportation on the platform. But it might not be the best way to boost innovation, because that is not the public sector’s strong suit - its purpose is on the contrary to make sure that the system remains stable and functional. As it will be held accountable if it doesn’t, it usually doesn’t react well to disruption. And there is definitively a scaling problem: which perimeter should be included in the platform? If it focuses on a dense city centre, it is able to provide a very detailed and curated overview of all the mobility options available and can therefore stimulate multimodality; but it leaves already underserved suburban or even rural areas out of the map. If the regional body takes the initiative, those less densely populated areas would be more integrated, but then the Region must coordinate with each city’s transportation agency to gather the data and make sure that everything can indeed be interoperable. This is obvioulsy complex, will still not solve the issue for border dwellers or visitors from other regions and might not be the best use of public ressources.

Indeed, my personal (and humble) opinion, is that public transit authorities should instead start by focusing on offering reliable and reusable open data - which is already quite a challenge and Transport for London’s strategy. That would make them the masters of the sandbox for everyone to experiment and develop new services, without actually having to build sand castles. This is how the user’s interest can best be served as it allows the public authority to encourage less lucrative but essential initiatives, that focus on solutions for people with limited mobility for instance.

What could a MaaS business model be?

We have now established that a positive MaaS solution would be a platform allowing their users to make the best travel decision based on their priorities and personal criteria, purchase their ticket(s) through a single payment channel, in an environment where the public transport authority makes sure the open data offered is reliable and reusable by everyone, so that all the players have an interest in working together. So where is the money in this model?

First, let’s go back to Citymapper, who has been struggling to find ways to make money from the beginning and has been quite creative in reinventing themselves in their London home. In May 2017, they launched their Smartbus (later named SmartRide and then Ride) based on their knowledge of the city, which allowed them to identify underserved routes. They thought they could improve the bus experience by combining the use of real-time data and agility to create a responsive bus. Unfortunately, this ambitious plan failed and they explained why on their Medium page (part 1, part 2, part 3, end of story).

Basically, they hit a brick wall when trying to get out of the digital world to shake the traditional transportation system. They ended up shutting down operations in July 2019, 2 years after they had started, to focus instead on their Pass, launched in February 2019 and a first step towards becoming a real MaaS platform, as it offers a subscription to all mobility: public transport, cycles and cabs. In order to attract users, they decided to subsidise their pass, sold £4.10 cheaper than TfL’s Oyster card. Clearly, this is not a sustainable strategy in the long-run, as they annonced in late September 2019 they had accumulated £22m in losses, nearly doubling their total loss since the start of 2019. On the upside, having more users now gives them leverage to negotiate with other actors…

Meanwhile, Lithuanian startup Trafi took a completely different path, having us wonder whether they finally found their model, strengthened by a successful Series B fundraising round in 2020 (undisclosed but estimated at about $14m). What is the difference between Trafi and Citymapper? In 2016, Trafi decided to pivot and move away from their former B2C (Business-to-Consumer) model. They have now developped a B2B (Business-to-Business) model instead, selling their white-label product to cities around the world that want to offer a MaaS platform to their users. Working in a growing number of cities (or even entire regions with the launch of yumuv last summer, connecting Switzerland’s Zurich, Bern and Basel) allows them to fine-tune and improve their algorithm, all the while being paid for their work, which is unbeatable business-wise.

So, has Trafi found the key to a successful MaaS solution? Well, in theory, both models - B2B and B2C - should work. Citymapper hasn’t cracked their own case yet, but they possess ways to monetise their data: they have a door-to-door view of commuter journeys and know their real origin and destination, because of geolocation and search, unlike traditional public transport authorities or transport operators (public and private, including Uber). Indeed, they have insights into what kind of people are travelling, where they hang out and how they cluster in transit systems. And these insights are highly valuable to a lot of actors:

  • cities and public bodies obviously, because they can better adapt their infrastructure and services to the real demand;

  • public transport operators, because they can have a better idea of ridership in their vehicles;

  • but also shops and restaurants, because they could know more about their customers and how they travelled to their premises (spoiler alert: they drive their car a lot less than retailers usually think!).

And which model should we promote? This is where it becomes a bit more philosophical… I would personally lean more toward the B2C model, i.e. Citymapper’s, because I think that in the long run, it is best if we let the user choose the app they want, rather than make them download one specific to every city. Tourists would never do it anyway, but it can become a hassle even for regular visitors as you lose the benefit of the first MaaS promise: one app for everything, with a single-payment channel. Also, I believe the public sector is not the best suited to design innovative features for passengers in a fast-paced environment, even with the help of the best startups, as it requires a decision-making process that is often conflicting with the way they operate.

And last, but definitely not least, Google announced just last week (they knew I was writing this article) that they would allow their users to pay for street parking and transit fares straight from Google Maps and through their Google Pay account. This is limited to the U.S. for the moment - starting with 400+ cities… - but it should “expand to 80 agencies globally on Android in the coming weeks”. Let’s not forget that Android has an 85% market share globally, i.e. Google Maps comes preloaded on 85% of phones… This is major news and will definitely shake up the current status quo: pure-player MaaS startups will need to quickly clarify their marketing strategy and public transport authorities should reflect on their relationship with Google. Indeed, it is unrealistic not to work with them, but governments and their public sector should definitely build a clear and transparent framework for everyone to contribute to the future of mobility. There is a business model for every player, big or small, let’s make sure it boosts greener, more inclusive and user-friendly options!


Sources :

Lucile Ramackers
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