Digital payments in smart cities and regions
Payments processing is not just with COVID-19 becoming increasingly digital and we wonder what it needs to make digital payments happen in urban environments as well, not just for the sake of health safety but also for ease of use and the exploration of new business models arising with digital footprints being left in any interaction.
In this discussion, we consider the following aspects to be of key importance:
- Foundation and profile of the Smart City and Smart Region
- Digital City Services to cover (municipal) utility services
- Special governance with regard to data use, data protection, transparency and information
Foundation and Profile of the Smart City and Smart Region
In order to be fundamentally equipped to provide completely digitalized (municipal) utility services, a foundation must be established in each respective municipality, city or region based on a mixed structure of stakeholders. The following parties should be involved and their stakes be actively managed: public representatives (public administration), the municipal companies affected in each community and selected stakeholders from the private sector, who particularly benefit from a well working infrastructure and the comprehensive provision of utility services for the business operations in towns, cities, community and regions. This basis consists of:
- A master plan containing a specific digitalization and data strategy
- An open platform that manages all digital city services
- A comprehensive network and the provision of an appropriate system landscape including all of the relevant technological components (cloud infrastructure, sensor technology, IoT, data analytics etc.)
For the sake of simplicity, the term 'urban living environments' will be used throughout the rest of this blog post to refer to the individual aspects of a city, community or region. A master plan defines a vision for the urban living environment, taking into account different interests. Based on our experience, there is a correlation between the degree of digitalization in an urban living environment and the existence of a comprehensive master plan that also appears as a regular item on the political (administrative) and city planning agendas.
For example, a very advanced approach to defining paradigms for a leading role in the future provision of utility services can be derived (sell also: Digital urban ecosystem: from a silo-ed approach to a livable urban environment).
It should also be possible to derive guidelines for the creation of a platform and its technical implementation (networking and IT implementation) straight from the master plan. This includes payment models, which, however, must be based on the clear prioritization (in some areas a preference) of the affordability of the services for a wide demographic structure.
The platform for the urban living environment manages the provision of Digital City Services that should ideally cover all (municipal) utility services and is open and attractive enough to also be able to provide additional services normally located in the private sector.
The implementation of this type of platform requires the continuous technology diffusion and cross linkage of planned and future services envisaged for the platform in order to ensure the provision of utility services.
It helps to create a digital twin of the urban living environment on the base of thorough data collection when first attempting to develop a master plan. Selected simulations, among those also important for the configuration of digital city services, can be particularly efficient and, above all, instructive when supported by the digital representation.
Digital City Services to Cover Utility Services
Digital City Services should address the holistic needs of residents who may have several different roles (sometimes one person will simultaneously occupy several roles). For example:
- Resident in an accommodation unit
- Employee of a company
- Business owner / employer
The services used can be provided by public providers and municipal companies or representatives from the private sector located in the urban living environment.
The previously mentioned platform should be capable of providing Digital City Services representing essential municipal utility services, in particular:
- Health / wellness
- Culture / Leisure / Tourism
- Everyday life incl. Administration
Important key elements for the coverage and provision of municipal utility services on a Digital City Services platform include:
- Strict governance with regard to the use of data (related to both individuals and service usage) in the interests of residents
- Absence of discrimination based on age, level of education, country of origin…
- Openness and attractiveness for Maker Communities, which promote the vibrancy of the urban living environment by promoting resident involvement
- Openness and attractiveness for the private sector, which supplements public and municipal services through provision of its own offering, in order to stimulate demand for its own services and products
Special Governance with regard to Data Use and Use of Technology
The public administration takes on an important role with the aid of municipal companies in relation to the change management of service provision in the public and municipal sector. The public administration enjoys greater credibility than the private sector in terms of representing the public interest.
Cities and their municipal companies are credible to be the gatekeeper for governing the data protection and security of residents' data
In this respect, special attention should be given to the following areas:
- Strict procedures for data use (see above) – stringent concession regulations can strongly influence the representation of interests and yet enable the efficient relocation of service provision to the municipal or even the private industrial sector with a positive effect on tax revenue
- Transparency and information for residents - events and projects that promote public involvement can foster high acceptance, particularly when the economic advantages associated with the use of digital technologies that increase affordability or provide other apparent advantages for the public can be presented in detail. From the resident’s point of view, it is precisely these priorities that are an important factor in the creation of a master plan for an urban living environment.
- Commercialization of data and information – the continued commercial use of data and information created by the use of Digital City Services must not only take place transparently, but also adhere to a set of rules that are given high priority from the public’s perspective due to the improved added value of a particular service.
Definition of Payment Models for Digital City Services and their Effective Implementation through Payment Functions
The use of digital technologies and the resulting generation of data leads to the creation of a variety of commercialization opportunities and payment models. The term commercialization refers to the way a service is provided (access to and use of facilities or products at a defined level of quality and for a specific time period) and the consequent added value experienced by the consumer (here, the resident) with regard to the fulfillment of needs, safety measures, increasing well-being etc.
The payment model defines who pays for a service and, above all, how a service is paid for. There are three fundamental approaches: free-of-charge for the user; payment by a third party; direct payment models.
With regard to the pricing policy i.e. determining the amount of payment, there are ultimately a variety of approaches that can be adopted: subscriptions; monthly user fees; dynamic pricing; upselling; flat fees; pay-per-use etc.
Commercialization, payment models and pricing policies ultimately define the payment function, which in turn should allow payment by the following methods:
- Payment by currency (fiat money or crypto currency)
- Payment by data e.g. through ‘digital condensation trails‘ left behind as a result of service use
- Payment by user awareness in the form of advertisements or other informative content, which generates further usage in connection with the service provided
- Payment by transparency of the user’s experience resulting from surveys and feedback loops