Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter.
Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.
OCR for page 22
22 Smartcard Interoperability Issues for the Transit Industry
2.2 Financial Management Issues
Financial integrity is the highest priority for any agency participating in an interoperable fare
payment system. This section discusses the key financial management decisions and issues that
must be addressed, including
· Transaction clearing and settlement,
· Funds pool management, and
· Financial exposure risk associated with advanced features.
2.2.1 Transaction Clearing and Settlement
In a fare payment program where multiple operators are selling fare value accepted by more
than one operator, transaction clearing and settlement allows each agency to be reimbursed for
the services provided, regardless of where the fare product is purchased. Again, the challenge is
obtaining agreement from all participating agencies on an approach to transaction clearing and
settlement. As presented in Section 2.1.2, clearing and settlement can be accomplished applying
either a centralized or decentralized model.
2.2.1.1 Centralized Clearing and Settlement
In a centralized clearinghouse, all transaction information (purchases and fare payments) is
transmitted to a central system where the net settlement position for each operator is calculated,
usually by using settlement software. Differences in sales versus usage will determine whether a
given member agency is owed or owes money. The centralized model can be performed in house
by one of the member agencies or outsourced to a third party.
2.2.1.2 Decentralized Clearing and Settlement
In a decentralized clearinghouse, the member agencies establish financial relationships
with each other to enable the movement of funds. The decentralized model often takes advan-
tage of existing infrastructure, but, because of multiple points of aggregation, effort is often
duplicated.
In both centralized and decentralized models, the frequency at which settlement occurs must
be decided by the participating agencies. In a high-transaction environment where large amounts
of money are involved, settlement is usually performed daily. However, in an environment where
transaction volume is relatively low or where an agency's existing procedures have revenue col-
lection performed at intervals of multiple days, the increased cost of daily settlement may not be
warranted.
2.2.1.3 Clearing and Settlement Strategies
The finance departments of the participating agencies must be intimately involved in the
project to address financial management decisions. Ideally, a separate finance committee--
consisting of financial professionals supported by technical experts from each agency--should
be formed. This type of organization is necessary given the responsibility of having to make deci-
sions that affect the movement and management of funds within interoperable fare payment sys-
tems. The finance committee would decide whether clearing and settlement should be
centralized or decentralized.
2.2.2 Funds Pool Management
The funds pool is created as a result of revenue collected (card loads) but not yet used in the
system. The funds pool may be in a central account managed on behalf of the participants or it
