National Academies Press: OpenBook

Business Models for Mobile Fare Apps (2020)

Chapter: Chapter 1 - Introduction

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Suggested Citation:"Chapter 1 - Introduction." National Academies of Sciences, Engineering, and Medicine. 2020. Business Models for Mobile Fare Apps. Washington, DC: The National Academies Press. doi: 10.17226/25798.
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Suggested Citation:"Chapter 1 - Introduction." National Academies of Sciences, Engineering, and Medicine. 2020. Business Models for Mobile Fare Apps. Washington, DC: The National Academies Press. doi: 10.17226/25798.
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Suggested Citation:"Chapter 1 - Introduction." National Academies of Sciences, Engineering, and Medicine. 2020. Business Models for Mobile Fare Apps. Washington, DC: The National Academies Press. doi: 10.17226/25798.
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5 Introduction This chapter provides an introduction to this study. First, important background information is provided about mobile fare payment applications (or apps). Next, the objectives of the study are set forth. Then, the technical approach used to carry out the study is described, and the last part summarizes the structure of the report that follows. Background A rapidly evolving area in the public transit industry is fare collection systems, and one increasingly common consideration in planning and deploying new fare payment systems is mobile payment. The term mobile payment refers to using a portable electronic device such as a cell phone, smartphone, or tablet to pay for a product or service. In the context of public transit, mobile devices can be used to pay transit fares. In the United States and Canada, this is typically done using a mobile fare payment app on a smartphone. The phrase mobile fare payment app refers to a software application on a smartphone or other portable electronic device such as a tablet that allows transit riders to pay for and access public transit services. These software applications are typically downloaded from Google Play for Android devices or the Apple App Store for iOS devices (e.g., iPhones or iPads). The term mobile ticketing application (or app) is sometimes used instead of mobile fare payment app. These phrases are generally used synonymously in the industry; however, some transit agencies prefer to use the word pass instead of ticket to refer to transit fares. Therefore, the generic term mobile fare payment app is used throughout this report. An example of a mobile fare payment app is shown in Figure 1. After downloading this app, the user can select a specific transit pass in the mobile fare payment app (Figure 1a and b) and C H A P T E R 1 Mobile Payment refers to using a portable electronic device such as a smartphone or tablet to pay for a product or service. Mobile Fare Payment App is a software application on a smartphone or other similar electronic device that allows transit riders to pay for and access public transit services. Mobile fare payment apps are typically downloaded from Google Play for Android devices or the Apple App Store for iOS devices. Mobile Ticketing App is often used synonymously with the term mobile fare payment app.

6 Business Models for Mobile Fare Apps then use a credit or debit card or other form of electronic payment to complete the purchase. When the user is ready to make a transit trip, the user typically activates the pass before boarding the transit vehicle (Figure 1c). Once the user has entered the transit system, there are numerous methods that the transit agency can use to validate the user’s pass. One common method is visual validation (Figure 1d) by an inspector, conductor, or driver. Other methods of validation, such as Quick Response (QR) Codes, are discussed later in this report. Over the last decade, the number of transit agencies in the United States and Canada with mobile fare payment apps such as the one shown in Figure 1 has rapidly grown, and many agencies are utilizing different business models with varying costs. Objectives of the Study In light of the rapid growth in mobile fare payment apps, this study aimed to synthesize different business models used by transit agencies in the United States and Canada to deploy mobile fare payment apps. The scope of the study considered numerous aspects of the business arrangements used to deploy and support mobile fare payment apps, including the following: 1. Upfront costs, 2. Ongoing costs, 3. Integration between different transit agencies, 4. Integration with the agency’s existing fare payment system, 5. Type of transit mode (e.g., bus or rail), 6. Contract terms (e.g., roles and responsibilities), 7. Validation methods (e.g., visual inspection), 8. Time frame to market, 9. Performance metrics, 10. Customer adoption and satisfaction, 11. Products associated with the app (e.g., traveler tools or reporting), 12. Accessibility of the app, and 13. Road map for the future. (a) Select Fare Type (b) Select Fare (c) Activate Pass (d) Mobile Pass Figure 1. Example of a mobile fare payment app (Source: Token Transit).

Introduction 7 Technical Approach The technical approach for this study had three parts. First, a review of prior literature pertaining to mobile fare payment apps was conducted. Second, an e-mail survey of transit agencies and operators that have mobile fare payment apps in the United States and Canada was conducted. The survey included over 60 questions on various aspects on mobile fare pay- ment apps including costs, vendors, and business arrangements, and a total of 62 responses were received. Third, detailed case examples were collected via telephone interviews with representatives from six transit agencies. The agencies selected for the case examples had different approaches to mobile fare payment apps, which were compared and categorized to identify different models. Organization of the Report This report is organized as follows. Chapter 1: Introduction provides background information, delineates the study objectives, and describes the technical approach of this study. Chapter 2: Literature Review presents a summary of recent literature on transit mobile fare payment apps, focusing on the United States and Canada. Chapter 3: Transit Agency Survey describes the methodology and results of an online survey of 62 transit agencies in the United States and Canada that had mobile fare payment apps. The chapter is divided into three main parts: the first part summarizes the data collection proce- dure, the second part presents the results organized by topic, and the final section summarizes key findings. Chapter 4: Case Examples provides a detailed summary of six transit agencies that have taken different approaches to deploying mobile fare payment apps. The following six transit agencies were selected as examples to demonstrate different approaches: Big Blue Bus in Santa Monica, the Regional Transportation District (RTD) in Denver, the Capital Metropolitan Transportation Authority (CapMetro) in Austin, Dallas Area Rapid Transit (DART) in Dallas, the Chicago Transit Authority (CTA) in Chicago, and St. Catharines Transit Commission in Ontario. Each case example includes a description of the mobile fare payment app, a timeline for deployment of the app, details on the role of the vendor(s), discussion of integration of the mobile fare payment app, and lessons learned. Chapter 5: Models and Emerging Trends presents five different models for mobile fare payment apps that were developed based on the results of the survey and case examples. The five models are compared along numerous dimensions, including the level of configuration and customiza- tion of the app, the typical costs, the method of validation, and the level of integration with the agency’s preexisting fare payment system. Chapter 6: Conclusions and Future Research summarizes the key findings from this study. Important areas for future research are also identified. Appendix A: Survey Participants lists the 62 transit agencies and organizations that participated in the survey. Appendix B: Survey Instrument contains the entire set of 69 survey questions, organized in 11 parts. Appendix C: Case Example Interview Guide is organized in seven areas of questions that were used to conduct semistructured interviews with staff from transit agencies that served as case examples.

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Five different business models for mobile fare payment apps are examined, as the world of apps used by transit agencies in the United States and Canada continues to steadily grow.

The TRB Transit Cooperative Research Program's TCRP Synthesis 148: Business Models for Mobile Fare Apps documents current practices and experiences of transit agencies that offer mobile fare payment applications to transit riders.

The report includes case examples from six cities: Santa Monica, Denver, Austin, Chicago, Dallas, and Ontario, Canada.

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