Smart cities: Tackling the urbanisation challenge

As the world’s population continues to grow, its cities are being confronted with a unique set of challenges.

Data from the World Bank, United Nations and other entities shows 80 per cent of the world’s global gross domestic product is generated in cities, which are today home to more than 50 per cent of the global population and consume 75 per cent of energy produced.

Urbanisation too has its own champions.Edward Glaeser notes in his 2011 book Triumph of the City how on average, as the share of a country’s population that is urban rises by 10 per cent, the country’s per capita output increases by 30 per cent. While per capita income is almost four times higher in those countries where the majority of people live in cities than those where the majority is in rural areas.

The incentives for moving to the big city are clear and people are taking notice.

Every month the world’s urban population grows by six million people and is expected to grow from 54 per cent to 70 per cent of the overall populace within a generation. But how do cities cope with this influx?

In many respects, ‘smart city’, has become the new buzz word in urban development – representing technologies ranging from smart traffic lights to improve vehicle flow to automated transport, efficient power generation, digitised government services and readily available parking, weather and air pollution information.

Authorities across the world are embracing the term, with investment in smart city initiatives across the Middle East and Africa alone expected to reach $1.26bn this year, according to IDC.

At the recent World Cities Summit in Singapore, which saw the participation of leaders from 128 cities, these technologies and more were on display, with the host displaying technologies ranging from vertical farming to smart swimming pools with sensors to detect those in difficulty.

But despite these unveilings and billions of dollars in investment, US payment firm Mastercard’s executive vice president for enterprise partners, Hany Fam, said most cities have a long way to go to tackle the challenges rapid urbanisation will bring.

“There really isn’t a single city in the world with a comprehensive plan to deal with its rate of growth in a holistic manner,” he argued.

“The challenge we see with many cities today is they start to tackle a problem as though it’s the first time it’s ever been thought about.”

Public private partnerships

For stakeholders in the private sector, smart city projects represent the opportunity to collaborate with the government to improve the lives of residents and solve current and future challenges.

But many suggest the slow turning wheels of the public sector in some cities are proving an unnecessary hurdle in driving projects forward.

As David Wallerstein, chief exploration officer at Chinese technology giant Tencent noted, the company would often turn down start-ups approaching it for investment if their projects involved working with city authorities.

“We need these solutions but cities are still stuck in the old way of doing things,” he said, remarking how some authorities still take years to make a decision.

“What I see happening is innovators are discouraged.

“It is often really hard to find anyone to engage with on any [city] issues, knowing what the unmet needs are.”

For city authorities, meanwhile, budgets remain a challenge.

Dr Goh Eng Lim, vice president and SGI chief technology officer at Hewlett Packard Enterprise, said the firm’s conversations surrounding smart city technology projects often look into where savings can be made to free up funds.

“One low hanging fruit is converting street lamps to LED [bulbs] to lower operating costs,” he said. “And the energy savings can be used for electric vehicles instead of having to build more power plants.”

Other examples include route optimisation for mail delivery, waste management and parking efficiency.

“All these savings can then be redirected to start public service things a smart city can enable,” Lim added.

Meanwhile, for public sector departments often contending with tight purse strings the issue can then become budget cuts as savings mean less money to spend the next year.

“It’s much easier to build shiny new objects than to improve the efficiency of things that already exist,” said Mastercard’s Fam. However, this is not always the case argued Nasima Razmyar, deputy mayor of Finland’s capital Helsinki.

The city, which was ranked fifth globally for smart city governance in a July study of 50 urban centres by Singapore consultancy Eden Strategy Institute, puts part of its success down to setting up an open data platform similar to that planned in Dubai.

City authorities say the platform has resulted in budget savings of 1 to 2 per cent “with increased transparency and accountability pushing civil servants to be stricter in public procurement,  according to Eden.

Deputy mayor Razmyar said the availability of public data has allowed the private sector to step in by creating apps for public services like bike stops, thus allowing the public sector to focus on the bigger picture like a wider project in the Kalasatama neighbourhood to save residents an hour a day through efficiency of services.

Authorities also host workshops with different groups of companies and residents to find out their needs and benefit from their ideas to improve the running of the city.

“It’s also about mind-set and saving money and how we create and make already existing infrastructure better,” she said, citing examples of smart locks that provide better access to public spaces.

Tourism challenges

Beyond specific challenges relating to services for residents of cities, another area that is often overlooked is tourism.

For cities that attract millions of tourists each year like Dubai, which welcomed 15.8 million in 2017 and is aiming for 20 million by 2020, it is of increasing importance to consider the experience of visitors as well as residents.

According to Poh Chi Chuan, director of digital transformation at Singapore Tourism Board, projects that improve the lives of tourists and residents are not mutually exclusive, while the use of technology could help avoid some of the frustration expressed by residents of tourist cities seen over the last year.

“Recently we have seen, at least in Barcelona, where the residents are pushing back and there is a scenario that you hope you don’t have to face,” he said.

“Earlier Venice was also going through such a challenge where tourism has basically taken over the city. So I think one of the important things we are trying to introduce back in our market here is about authentic tourism.”

He suggested that if cities are not careful with their plans to attract tourists then it can compromise the very product they are trying to sell to visitors. “We have no choice but to be selective and I think data allows us to do that.”

The Singapore Tourism Analytics Network (STAN) is designed to deliver a seamless tourism experience by enabling authorities to anticipate dips and surges in demand.

Data on the platform, which keeps track of visitor arrivals, the modes of travel they take, the attractions they visit and how they spend their money, will eventually be available to third parties.

“We hope that it will help us sharpen our delivery and our experiences and insight and go and do our marketing and hopefully that will help our industry,” said Chuan.

“We are trying to take the guess work out of business. There is no need to guess, the detail it gives you, the insights of what the consumer wants.”

Using the system, Singapore – ranked second behind London in the Eden Strategy Institute study – hopes to experiment with different tourism and marketing products, scaling up those that prove successful.

“We hope now our business is sharper,” Chuan explained.

Is cashless the answer?

As the population of cities across the world continues to grow, some stakeholders suggest the elimination of cash will be the only viable means to carry out transactions.

Sarah Quinlan, SVP of market insights at Mastercard, says the reliance on physical notes and coins costs countries about 1.5 per cent of gross domestic product over time by slowing down the “velocity” of money.

She believes no city can truly be considered smart until residents and visitors are able to make key transactions via cards and other electronic means.

“I don’t know if you have to be completely cashless [to be a smart city] but let’s just say you have to be 70 per cent or more,” Quinlan argued. “You have to have the basics of everyday life for me to consider [you] a smart city.”

One of the key areas Mastercard has been focussing on in its discussions with more than 100 city authorities around the world has been the use of contactless credit cards for ticketing on public transport systems to increase usage.

This includes enabling contactless cards on current systems previously reliant on cash like New York and encouraging cities with closed transport card systems, like Dubai, Hong Kong and Singapore, to enable ticketing with any contactless credit card.

Fam says Mastercard’s work with Transport for London to enable contactless payments on the London Underground from September 2014 had immediate consequences for the city, which previously introduced the Oyster Card payment system in 2003.

In particular it has helped facilitate less frequent travellers like the 19 million tourists London receives each year and is projected to cut the cost of collecting fares from 14 per cent of revenue pre-2010 to 6 per cent, according to a Mastercard case study.

Fam added that the technology, which is now being trialled in Singapore, can also help address one of the key challenges facing cities – air pollution. World Health Organisation figures indicate road transport accounts for 30 per cent of particulate emissions in European cities – a percentage that is likely higher in other regions.

But despite the benefits of cashless technology, including efficiency and security advantages, there has been push back in some of the markets where it has been most heavily adopted due to concerns some members of the population are being left behind.

In Sweden, where central bank data indicates around 25 per cent of people use cash at least once a week and notes are coins are used for just 15 per cent of retail transactions, the National Pensioners’ Organisation is lobbying the government to make sure cashless transactions are not the only option.

“As long as there is the right to use cash in Sweden, we think people should have the option to use it and be able to put money in the bank,” organisation spokesperson Ola Nilsson told the BBC for an April report. “We’re not against the cashless society, we just want to stop it from going too fast.”

Quinlan says the shift to cashless in the Nordic country was “a bit too abrupt” for older people” especially those over 70, who have lived a lifetime using cash.

“There should have been the ability for a bit more [of a] transition rather than immediately ‘it’s cashless or else’,” she said.

“The government in partnership with us and the merchants and banks could have done a better job of physically going and taking someone through a cashless transaction and showing them all the way.”

These lessons will be of particular relevance to Dubai and other Gulf cities as they undertake smart city initiatives and open new transport networks to meet the challenges of urbanisation.

But one thing is clear, it will take collaboration between governments, the private sector and residents to meet the challenges urbanisation will bring.

“City officials often say they don’t have enough money, but the private sector says [the issue is] policy,” said Dr Frank Rijsberman, director general of the Global Green Growth Institute.

“Some cities are still thinking they have to do everything, I think getting out of the way and being more of a platform is the right answer.”