Managing Director & Partner
Urban transport is about to move in a radically new direction. On-demand and shared mobility services are already offering people greater choice about how they travel. The rise of travel apps has made software companies key players in urban transport ecosystems. In tandem, private investment in new mobility operators, including those that offer ride-hailing and free-floating services, is accelerating—witness SoftBank’s $1.5 billion investment in Grab and Honda’s $2.8 billion partnership with General Motors’ Cruise—reaching record highs over the past 12 months.
Despite this flood of money into single-modal offerings, digital intermodal platforms that help users coordinate travel across multiple modes are likely to be the next game-changers in urban transport. (See Exhibit 1.) By linking different mobility options together via a single customer interface, these platforms provide a personalized, optimized service while capturing valuable information about users’ travel choices. And though still at an early stage, they will eventually overtake today’s hot investments. Such platforms will also enable the shift from personal vehicle ownership to mobility as a service.
Realizing these benefits will demand the cooperation of all players in the mobility ecosystem, including city mobility planners, mass transit operators, and software companies. Several types of players are competing to become the future leaders in this new field, and it’s not clear yet which will come out on top. Our experience in the sector suggests that it takes multiple factors to win. Organizations that excel at all of them will move much closer to monetizing their platforms and establishing market dominance in the long term.
User rates for urban mobility platforms linking different types of transport are still low compared with single-mode mobility apps such as Uber and mytaxi, but that could change rapidly. A variety of organizations are actively developing these platforms. They include software company Transit in the US, London-based startup Citymapper, ReachNow (a joint venture of Daimler and BMW), and Deutsche Bahn’s Mobimeo platform—and these are just the tip of the iceberg. Having disrupted traditional cab services over the past decade, Uber and rival ride-sharing company Lyft are now expanding into new forms of transport, a significant first step in developing an urban mobility platform.
Public- and private-sector organizations are realizing that owning the interface between users and other members of the urban mobility ecosystem will be the key to creating future value. Platform providers will have greater access to customers and their data and will benefit from stronger brands than those of other stakeholders. As the market evolves, we expect regional urban mobility platforms to emerge. Other mobility providers will join in order to keep their offerings relevant and gain access to the customers afforded by these platforms.
The data generated by users and aggregated by urban mobility platforms will enable cities and other stakeholders to improve demand forecasting, combine innovative technologies (such as bike and scooter sharing) with existing transport systems, and provide an ever more seamless consumer experience. More information about the travel patterns of individuals and vehicles will allow cities to manage traffic flows better, lower emissions, forecast infrastructure needs accurately, and plan transport-related construction and maintenance work so that they minimize disruption. Logistics companies will be able to provide last-mile fulfillment services more effectively—by delivering during off-peak hours, for example.
In order for these scenarios to be actualized, multiple transport operators will need to migrate to urban mobility platforms. We expect successful and sustainable platforms to perform at least five functions, which will allow them to gain widespread acceptance among both users and operators.
Platform providers will have to overcome five key challenges if they are to achieve these functionalities. (See Exhibit 2.)
When it comes to approaches that rely on the public sector, generating worthwhile revenues from a white-label urban mobility platform (developed by a private company and bearing the city’s brand) through a license fee arrangement could be hampered by a shortage of city funds; it might also hinder platform providers from establishing a strong market position at the required speed. But reliance on value-adding services—analyzing users’ travel information for public entities seeking to improve their transport policies or infrastructure planning, for example—would require platform providers to build data analytics capabilities. This strategy could also be derailed by data privacy issues.
We believe that successful urban mobility platforms will meet these challenges and thrive by executing on the following five fronts. (See Exhibit 3.)
It’s hard to make money today in urban mobility platforms. The Holy Grail—a successful common approach to monetization—has yet to emerge. Some providers, such as Whim, are experimenting with a subscription-based model, enabling city dwellers to pay in advance for different types of transport. Others are integrating advertisements with the user interface, even though this risks compromising the user experience. Still others are actively exploring how to license platforms as a white-label software product or to monetize the potentially valuable data that they generate.
Many players are willing to put monetization on hold for now as they focus on strengthening their core offerings. New mobility operators, such as ride-sharing firms, are spending on better functionality for their apps—a first step in the creation of a platform—to attract more customers to their main business. Meanwhile, legacy providers, such as mass transit operators, are also investing in functionality to protect their existing customer interfaces and ensure that they remain relevant for end users. Both groups provide opportunities for software companies that can provide this functionality.
Over time, a sustainable platform model will emerge, driven by an organization able to forge the necessary partnerships between different players and meet the needs of both the private and public sectors. Fully integrated platforms will have additional functionalities, including the distribution of subsidies and discounts that incentivize travel via environmentally friendly transport options or at off-peak hours. By performing this function for the public sector, platform providers will achieve real success and economic sustainability.
Different players are likely to dominate the development of urban mobility platforms in different regions. In some locations, cities and public authorities will take the lead; in others, private operators will win the race for market dominance. (In a subsequent article, we will examine the different ways in which urban mobility platforms are likely to develop in China, Europe, and the US and which types of organization are likely to succeed.)
By meeting the requirements of end users, city authorities, and public and private transport providers, urban mobility platforms will be at the center of urban transport systems. But coming out on top won’t be easy. To flourish, platforms must offer comprehensive and integrated functionality, particularly in payment and ticketing systems. They also need to act impartially with all stakeholders. In this way, they can ensure that their offerings benefit end users while also providing advantages for other players in the mobility ecosystem—including cities, which are set to play a far bigger role in shaping urban transport. The organizations that achieve these and the goals above, ahead of the competition, will be well-placed to emerge as winners.
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