I recall step counters in busses that duly recorded how many people got on and off. And that was more than a score years ago. Now you could do more sophisticated things, perhaps even have the bus weigh itself, count heads with the ubiquitous cctvs in busses; combine the measurements, apply AI techniques, the whole shebang. Individual traveler tagging as this RFID thing effectively does (costing you your privacy while you get on the bus; you're just happy the wait is over) is actually quite unsophisticated and needlessly invasive by comparison.
On a larger note, personally I don't think the whole privatisation racket is all that useful. Speaking (again) about the Netherlands, the cheapest bidder gets the contract with the province. To do that they basically underbid, then halfway through say "ifn yer dun' pay us mo' monies, we go titsup and you got no bus service, so pay up guv" and payin' up the provinces invariably do.
The note you should take is less of the extortion racket (all bus companies do exactly that, otherwise they just don't get the concession) or that provinces sign fantastibad contracts and roll over at the slightest poke from bus companies, but moreso the simple observation that from the beginning and through and through the approach spells the death of the "free market" idea the whole privatisation rigamole was there to make everything better with in the first place: The traveler gets no choice, so there is no performance pressure, thus the free market drive isn't. Thus necessarily failing in what it set out to do.
As such, I think it's more useful to simply pay for the fares somehow, mandate that cash must be accepted, and/or if you insist on elektrickery whatnots at the very least provide a general electronic, _anonymous_ payment system for the bus fares. But as a council you could also buy up the whole bus company and provide flat-fee fares for everyone as a public service. It's _public_ transport, and it's probably time we remembered why we have it. It's more like the reason councils support roads rather than why individuals own cars.