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CHAPTER 2 Findings of Institutional Requirements for Interoperable Smartcard Fare Payment Systems As the interoperability model shows, the first step toward creating an interoperable smartcard payment system is to identify the institutional requirements of the participants. Fare payment interoperability, regardless of technology used (e.g., smartcard, paper-based, or magnetic stripe) requires significant planning and cooperation among the participating agencies. In the transit industry, agencies have traditionally operated autonomously. Each agency's organizational cul- tures, policies, procedures, and fare-collection equipment are different. Transit agencies considering implementing an interoperable smartcard fare payment system must address numerous institutional and technological issues that may create barriers to imple- mentation. This chapter focuses on the key institutional issues that have presented themselves during the implementation of recent U.S. and Canadian transit-based interoperable smartcard projects. This chapter also discusses strategies to overcome these barriers. The institutional issues have been categorized as follows: Management and Organizational Issues--Organizational cultures of the participating agen- cies and their effects on management decision-making processes; Financial Management Issues--The need to ensure that each participant does not lose rev- enue through participation; Patron Impact Issues--Maximizing the use of the smartcard fare payment system by transit patrons (riders); Equipment Design Issues--Ensuring equipment interoperability as an aspect of system design; and Transit Industry Issues--Impeding the progress of dealing with the behavior of traditional sys- tem suppliers. Institutional requirements are formally documented in a policy statement. The policy state- ment becomes the reference for making decisions related to a smartcard project. 2.1 Management and Organizational Issues One of the most significant challenges to interoperable smartcard fare payment system imple- mentation is how the existing organizational cultures affect the participating transit agencies. Creating an interoperable fare payment system requires participating transit agencies to work together. Transit agencies that may have had limited or no previous interaction must work closely with one another for program direction and control. Key management and organizational issues that need to be addressed on the road to inter- operability include 14