What’s the Cost of Open Payment Systems?
Implementation of open payment systems is a complex process that requires you to address technical, cultural and financial issues.
In summary, this process is not just a technical matter. It is about people, policies and politics. It requires considerable due diligence in developing the business rules, establishing the deliverables and the contractual agreement – a marriage with a pre-nuptial agreement.
Where Are We Today?
New York Metropolitan Transportation Authority (MTA)/Port Authority Trans-Hudson (Path): New York’s recent pilot ended in November 2010. The MTA and its regional partners expect to release a specification later this year. Knowing the scope and scale of its multi-modal/multi-agency operation, one can only guess that it will be at least three to five years before any significant starts occur.
Chicago Transit Authority (CTA): Chicago is in the process of evaluating the proposals it received. Perhaps we will hear about its next step — selection of their contractor — by end of 2011.
The Washington Metropolitan Area Transit Authority (Metro): Washington, D.C., started its procurement process in January 2011 and has shortlisted candidate teams. It now proceeds to the next stage —and perhaps it will be one to two years before the contract award, followed by the design phase.
Southeastern Pennsylvania Trans-portation Authority (SEPTA): Philadelphia is expected to announce its selection of the contractor in mid-September 2011. It is expected to be about two to three years before the start of any noticeable transition changes.
Dallas Area Rapid Transit (DART): Is also reported to be assessing its options.
There is a lot of work in progress, but soon we should see the results of SEPTA’s approximately three-year process culminating in the selection of the contractor in fall 2011. In a separate move, PATCO, in Lindenwold, N.J., announced it expects to start its open payment system pilot in fall of 2011. That will serve as another guiding point for others.
The Smart Card Alliance (SCA) is addressing many details about this subject and it will include information about the pilot tests and other technology matters in a whitepaper titled Transit and Contactless Open Payments: An Emerging Approach for Fare Collection, expected to be released in fall 2011.
It should be noted that Utah Transit Authority (UTA) has done considerable pioneering work in this arena. UTA took many bold and innovative steps with its procurement process. Its experience is serving as an operational test bed for many people. It has helped transit agencies and bank card industry to work toward open payment systems implementation.
Understanding Transit Market for Fare Products — An Affordability Issue
There is big difference between the use of bank cards at retail stores and payment made to obtain a transit farecard. Consider the realities of the following characteristics of transit payments. One should not be left with the impression that ALL transit transactions will be in the form of open payment method.
Transit systems invariably have three distinct market tiers. They are based upon what the riders can budget. Riders typically buy a monthly pass, a weekly pass, 10-trip tickets or pay on a daily basis using a bank card to pay their daily ride ticket or they pay cash.
The purchases made by the same people at Wal-Mart, Best Buy or other retail stores are generally based on seasonal and discretionary spending habits. But with transit, payments are budget-minded spending necessities — to buy monthly/weekly/daily spending. It is a necessity.
Across the nation, over many decades policies have been crafted to offer different fare products with varied pricing schemes. Overall the choices fit into roughly three payment tiers.
They are:
Tier 1 — The Pay in Advance for Monthly Pass
This market suits persons who budget to buy monthly passes. Many pay in advance by using a subscription service or their company corporate pass program. Alternatively, they go to a ticket window, retail sales outlet or a vending machine at a station to purchase a monthly pass.
Subscription service enrollment often uses ACH or direct debit from a customer’s account to a transit agency’s account. This approach is popular as witnessed by its success in Washington, Chicago, Boston and Seattle. Typically this involves only 10 to 11 electronic payment transactions — per annum for each enrollee.
