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Findings of Institutional Requirements for Interoperable Smartcard Fare Payment Systems 23 may be a "virtual" funds pool where each agency holds its own share of the total amount. Exam- ples of how the money within the funds pool can be used are Periodic movement of funds between member agencies to compensate for fare payments, pur- chases, or loads by one participant's cardholders on another participant's system; Periodic payment of transit services used by cardholders; and Coverage of charge-backs for transactions that should not have been posted. Revenue is generated by investing the funds pool float (i.e., interest earned on unallocated funds) contained within the funds pool. The member agencies must decide how the float should be invested [e.g., certificates of deposits (CDs) or money markets] so that the money can grow in a low-risk manner, or alternatively, how the funds may be used to meet the working capital needs of the agencies. It can be a challenge for the member agencies to agree how to allocate the float. 2.2.2.1 Funds Pool Float Strategies Regional programs that have followed a central clearinghouse model have developed float allo- cation formulas to arrive at how revenue from e-cash sales within the funds pool float is distrib- uted among the participating agencies. The formulas are typically tied to the amount of electronic purse (or transit-specific purse) loads that occur on equipment at a given agency. Responsibility for negotiating the float allocation formula is usually assigned to the finance committee. 2.2.3 Financial Exposure and Risk Associated with Advanced Features Smartcard technology allows for features not supported by other fare payment technologies, including Autoload--The automatic loading of fare value once a specified threshold is reached; and Balance Protection--Value replacement insurance if a card is lost or stolen. Although beneficial to both the patron and agency, these features represent a potential risk for the member agencies. The challenge for participating agencies is agreeing on a common way of managing the risk of added functionality. 2.2.3.1 Autoload The autoload feature involves linking a smartcard to a debit or credit account that automati- cally adds funds from the account to the smartcard when a predetermined value threshold is reached. Depending on how the feature is implemented, autoload can result in a situation where a card has been loaded with additional value before receiving bank authorization to debit the linked account. The autoload feature can be implemented following one of two models. In a post-funded autoload model, the card is loaded with additional funds once it reaches a predetermined threshold, and the funds are then subsequently obtained from the linked account. In a pre-funded autoload model, when the card balance falls below a predetermined threshold, a load request is initiated, the funds are obtained, and the card is loaded with the additional value on the next entry to the system. An additional pre-funded autoload type is a directed autoload, where the patron requests a load of the card for a given value and the funds are approved in advance of an autoload issuance. 2.2.3.2 Balance Protection The balance protection feature replaces the value that was on the card when it becomes lost, stolen, or damaged. The balance protection can also leave the member agencies at risk of losing fare revenue. If a card with balance protection is lost or stolen, the risk of the card being used