Multiagency Electronic Fare Payment Systems (2017)

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SUMMARY Electronic fare payment systems have had a transformative impact on transit services in the United States. The advent of electronic fare systems in the 1990s enabled better data collection, integrated fare solutions, customer conveniences, and other advantages over the transit token or ticket that they replaced. Since early 2000, multiagency electronic fare payment systems (EFPS), such as the SmarTrip in the Washington Metro area, have been adopted by groups of transit operators supporting multiple modes. These associated fare systems provide customers with common payment instruments such as a smart card that can be used across a region and on services offered by different providers. More recently, emerging fare payment technologies using mobile devices and third-party contactless media are gaining acceptance in the United States as multiagency fare media. Although the current fare systems make travel more convenient for passengers, they are complex and can be challenging to implement. This synthesis reviews current systems and identifies their major challenges and benefits; describes the use of electronic fare systems in multimodal, multiagency environments; and reviews next-generation approaches through existing implementation case examples. The study also explores the choices made by agencies to overcome challenges. The synthesis documents EFPS strategies related to: • Governance and program administration policies; • Integration related to fare policy strategies; • Multiagency procurement and deployment approaches; • Next-generation EFPS, including integration with non-traditional mobility partners; and • Uses and analysis of fare collection data. This study did not examine deployment or operating costs of multiagency EFPS. Report authors undertook a survey of the multiagency EFPS in the United States and several in Canada, as well as a literature search of the experiences and trends of the last 20 years. There are only a few multiagency regions in North America that have deployed electronic fare payment systems that support EFPS. Of the 40 deployed electronic fare systems, only 27 are considered multimodal or multiagency. The survey was sent to the multiagency systems, with 23 responding for a 85% response rate. The focus of the survey was on governance, fare policy integration, procurement strategies, integration issues, and data analytics. Follow-up interviews were conducted with several agencies to acquire additional information related to emerging business models and analysis capabilities. Agency staffs shared their experiences on a variety of topics, including the changing architecture of fare payment systems, integration with new disruptive mobility services, and data analytics and visualization techniques. These are discussed in the case examples in appropriate chapters. The literature search revealed that the past 20 years’ predictions of fare system trends in TCRP publications have been shown to be correct, albeit emerging slowly. Smart card-based systems comprise the majority of the multiagency EFPS in the United States and Canada; yet, over the last MULTIAGENCY ELECTRONIC FARE PAYMENT SYSTEMS

2 two decades, fewer than 40 transit smart card systems have been deployed in the United States, and fewer than 25 regional systems have been rolled out in this country since the initial deploy- ment of the Washington Metropolitan Area Transit Authority (WMATA) in 2000. Although many regions are still working on their first smart card deployment, several regions are beginning second- generation efforts. A multiagency EFPS provides the following types of benefits: • Enhanced customer convenience through the use of a single fare instrument to access regional travel; • Increased ridership through seamless regional travel and discounts and loyalty benefits to customers; • Reduced fare collection costs through reduction of cash collections, fraud, and abuse; • Better collection of rider information through electronic collection and analysis capabilities; • Agencies’ ability to modify fare policies and structures more effectively and quickly through electronic means; and the additional ability to integrate fare policies and structures; and • Increased timeliness, accuracy, and equity in reconciling, allocating, and settling revenues to agency partners. Next-generation systems are characterized by open architecture, open payment, and open speci- fications. The systems do not depend on smart cards storing all the transaction information; rather they rely on a “back office” where the customer’s account, travel and transaction histories, payment methods, stored value, profile, and preferences are stored. The card is replaced by open specification media such as contactless bank cards (licensed specifications), quick response codes, and mobile ticketing apps that work on mobile devices, fob, or other wearable devices using near field com- munications to communicate a secure token or identification that links to the customer account. The fare calculations and transactions are processed in the back office, thereby reducing reliance on field equipment. Customer choices and expectations are driving the adoption of mobile payments and consumer payment instruments such as credit, debit, prepaid cards, and mobile wallets. For example, in just four years since the first mobile ticketing app appeared, more than 30 agencies have either deployed them or plan to deploy them by the end of 2016. Moreover, the migration of media to customer- preferred alternatives supports integration with non-traditional mobility services as discussed in the Ventra (Chicago) and DART (Dallas) area examples in chapter six. Survey respondents administer a wide range of transit modes in their multimodal, multiagency transit services. Almost all multiagency EFPS support local bus, and many incorporate express bus services and bus rapid transit. Half of the respondents also integrate rail—commuter, heavy (subway) or light rail services—and ADA paratransit. Several include ferry, vanpool, and other options; only four include parking. Many multiagency systems indicated that they are developing strategies to integrate transportation network companies or bikeshare services. The business and technical models to include these disruptive mobility providers have not yet been explored by multiagency EFPS. A multiagency electronic fare system establishes policies and rules for making decisions and pro- viding leadership, organizational structure procurement approach, financial management, and opera- tions and maintenance of the system. The multiagency environment in which the EFPS is deployed requires buy-in from the regional stakeholders. Even though most programs are led by a transit agency, the governance and decision-making is usually done by consensus. As one respondent put it, “Trust, transparency, and communication” among all regional participants is necessary to build a multiagency payment system. Survey respondents were consistent in characterizing the consensus process as both frustrating but appreciated by agencies. Consensus takes time and patience, but in the end, consensus produces “better and more lasting systems and relationships.” A multiagency fare system where there is one governing authority found that regional stakeholders had little “investment” in the program deployment, and were slow to opt in to the multiagency EFPS.

3 Based on survey responses, regional agencies appear to address a wide range of fare policies factors, including: • Structures (flat, zone/distance); • Rider classes (e.g., regular, discount); • Products (e.g., passes, single use, stored value, restricted passes); and • Media (e.g., branded/proprietary smart card, bank card, limited use media, mobile NFC, mobile bar code). Many multiagency EFPS support multiple combinations of the four strategies. Most EFPS offer more than one payment media—smart card, e-payment, credit card, paper ticket (with or without Q-code)—and several types of fare products for different rider classes. The major issue identified by respondents was the lack of homogeneity and the complexity of the business rules associated with fare policies and structures. Although most agencies support a common set of fare policies, includ- ing transfers between agency services (60%–70%), respondents noted the challenge of alignment or accommodation of the diverse policies. One respondent recommended that the fare policy should be in place prior to implementation. Our “greatest weakness [was] that the rules were not set in the very beginning for a unified fare payment structure across all transit agencies.” Another respondent commented on the “high costs” of accommodating differences in fare payment structures “due to customization across agencies.” EFPS deployments tend to be complex, as noted by survey respondents; to that end, many agen- cies choose to use the tried and tested turnkey or Design-Build-Operate-Maintain model. Several respondents report hiring a system integrator to stage their deployment over many years. Some are procuring systems separately—fare equipment, customer service centers, maintenance, mobile ticketing, and retail networks—and requiring the system integrator to tie them together. Fare payment systems often span agency-wide business areas, covering all modes (including para- transit and demand responsive modes), financial management, performance, planning, operations, maintenance, and customer services. Regional systems usually hire a program management company to help them navigate planning, financial, procurement and deployment details. These consultants help agencies minimize such challenges as payment and banking rules, vendor conflict, lock-in, technology obsolescence, and new technology testing. The 2010 Smart Card Alliance white paper on “Planning for New Fare Payment and Collection Systems: Cost Considerations and Procurement Guidelines” compares the multiagency EFPS to typical infrastructure or rolling stock procurements. In the discussion, the paper contrasts the modern EFPS with software/data-driven systems that do not follow the typical construction or infrastructure models, arguing that a different procurement and development model should be followed: “Unlike rolling stock and heavy infrastructure projects . . . payment systems [operate in the] continually evolv- ing fields of telecommunications and information science . . . [and] often require systems integration and need extensive coordination with supporting capital projects.” Survey respondents pointed to four primary issues, described in more detail in chapter eight, Conclusions and Suggestions for Further Research: • Deploy the new payments system in stages; • Do not deploy the new system until all problems are worked out; • Increase outreach and education efforts; and • Extend deadlines for decommissioning older systems and transitioning to new ones. New business models and technologies may begin to overtake the card-based fare system. In just four years, almost as many mobile ticketing and fare app deployments have emerged as existing regional card-based systems. The number of mobile fare app deployments double almost every year. Another trend is to the account-based fare system. Many new and almost all agencies with second- generation procurements are migrating to an account-based payment system. Card-based fare payment

4 systems rely on the smart card to store information on value and transactions. In a card-based system, the card and card validator accepts or denies entry to a system; updating the fare policies and media technology requires updating every validator in the system. Most account-based system models rely on communications technology advancements because transactions sent to the back office for recording and processing are handled in under a second. The account-based architecture can be integrated with multiple providers and different media technologies as well as non-traditional providers. Some mobility providers such as carshare and bikeshare services require back office registration and on-line payment methods to participate. The account-based model aligns with the needs of these different types of mobility providers. Regional programs adopting account-based systems indicate that integrating non-traditional partners is not difficult. Several agencies are poised to announce integration programs over the next few months. Ventra, the Chicago-area EFPS, has started to integrate some of these services into its customer account functionality. Because the account-based system is not dependent on the media reader processing a transaction, agencies may deploy alternative customer media such as mobile and wearable devices, even secure identification cards that conform to banking card standards. For example, Ventra, the first fully deployed account-based, open payment system in the United States, integrated a mobile ticketing app that provides a banking card alternative to the smart card for its users. Customers may show or view transaction histories and stored value credit, or add value dynamically from their app. The data capture capabilities of EFPS enable the collection, aggregation, and integration of a significant amount of information. Smart card or media usage can be tracked by instance or day, or over time. When applied to algorithms, the data can be analyzed to reveal general or specific travel behavior. Agencies, academics, and vendors are using fare data in modeling long- and short-term plans and generating performance measures and other analytics. Organizations that manage regional fare systems are also exploiting their data sets more extensively. The major published studies on fare data analysis fall into three categories, according to a literature review on the subject in 2011 by Pelletier: • Strategic planning (travel time analysis, demand forecasting, mode choice, user behavior, and ridership profiles); • Tactical planning (trip data, pattern behavior, service adjustments, origin-destination data, journeys, and transfers); • Operational tracking (revenue, crowding, provisioning better travel time and load information to customers, and equipment performance and maintenance). Yet many agencies are not fully taking advantage of fare data, as an audit of LA TAP, the Los Angeles transit pass, by Bazilio Cobb Associates concluded. WMATA planners have shown that the richness of their subway data (tap on-tap off) can produce interesting studies on travel behavior, travel times, and crowding during peak or off-peak hours, inclement weather, and holidays. WMATA’s data analysis capabilities are driven by data management best practices from collection, cleaning, and integration with other data sources. This study provides information about current practices related to governance structures, fare integration and methods, procurement and deployment approaches, new architectures and technologies, and data analytics. The review did not cover other issues such as costs, revenue settlement, and allo- cation among partner organizations, partner agency integration issues, and new models for including non-traditional mobility partners.