Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation (2015)

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

75 The evolution of transit fare payment systems brings with it a lexicon of terms that may be unfamiliar to some transit agency professionals. The key terms and basic definitions used in this report are provided below; some of these terms and concepts are discussed in greater detail in the body of this report. Account-based: a transit fare payment system in which the fare medium serves as to associate the rider with information held in a separate account. No fare value is carried on the fare medium itself. (See also “card-based.”) Back-end: the transit system devices that interact with front-end devices as part of any fare calculation, fare collection, and/or fare payment transactions. (See also “front-end.”) Card-based: a transit fare payment system in which fare value is carried on the fare medium itself. (See also “account-based.”) Central agency computers: the transit agency computer system that manages its fare payment system. The central computers collect and process data from front-end devices to manage all aspects of fare calculation, fare collection, and fare payment. They also exchange information with front-end devices about authorized and/or unauthorized fare media, system health and other aspects of system operation. The central agency computers may also collect ridership data from front-end devices. Closed payment (closed loop) system: a transit fare payment system that uses fare media that can only be used within a single transit system or partnership of transit systems. All proprietary fare payment systems are closed loop systems. (See also “open payment” and “proprietary systems or design.”) Convergence: the combination or integration of payments systems from different transportation modes, such as transit and toll or transit and parking. Fare media: The instruments (cash, token, ticket, fare card, mobile device, etc.) accepted by a transit system to grant riders access to transit services. Front-end: the transit system devices (card readers, fare boxes, fare gates, validators, barriers) that interact with a transit rider and a rider’s fare medium and/or payment medium at the point- of-entry into the transit system. Ticket vending machines and other ticket sales mechanisms such as internet websites are generally considered front-end devices. (See also “back-end.”) Interoperability: the capability of a transit fare payment system and its components (such as fare media, card readers, etc.) to work with or use the parts or equipment of another system. Interoperability includes the capacity to exchange information. (See also “standards-based” and “proprietary design.”) A P P E N D I X A Definition of Terms

76 Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation Mobile application: a software application developed specifically for use on small, wireless computing devices such as a smartphone, rather than desktop or laptop computers. Mobile applications typically require a wireless connection for full functionality. Mobile payments: a point-of-sale payment transaction made through a mobile device (such as a smartphone, “smart watch,” or other smart device), in which the mobile device functions as a contactless payment card. For the purpose of this report, a web-based or in-app purchase of a transit fare using a mobile device or smartphone is not considered a mobile payment. (See also “mobile ticketing.”) Mobile ticketing: a process whereby a transit rider can order, pay for, obtain and validate a tran- sit ticket using a mobile device such as a smartphone, “smart watch”, or other mobile device. Mobile ticketing is a separate function from mobile payment. (See also “mobile payments.”) Open payment (open loop) system: an account-based transit fare payment system that is able to accept third-party payment media such as bank cards and mobile device as its fare media. All open payment systems are both standards- and account-based systems. (See also “account based,” “closed payment systems,” and “standards-based systems or design.”) Point-of-entry: the point at which a rider gains access to the transit system to utilize transit services. A point-of-entry in a gated system uses a turnstile, barrier, platform reader or a fare- box to control access. In an un-gated system, access may be entirely unrestricted (allowing passengers unimpeded access to board a transit vehicle), or require use of a ticket validator prior to boarding. Payment media: any instrument, such as cash, credit cards, debit cards, benefit accounts, employer transit accounts, or mobile device that may be used to purchase transit services or fare media. Proprietary system or design: a transit fare payment system in which the design and technology is developed and owned by a contracted manufacturer and sold or licensed for use by a transit agency. Proprietary designs based systems tend to have a low level of interoperability (See also “standards-based” and “interoperability.”) Smartcard (or smart card): a transit fare card, bankcard, or identification card or other creden- tial that includes an embedded computer chip and antenna. Smartphone: a mobile phone that can connect to the internet, and receive, download, and transmit data. Most smartphones allow users to download applications (“apps”), and many are equipped with near field communications technology. Standards-based system or design: a transit fare payment system in which the design and tech- nology follows public, non-proprietary standards and specifications established for the finan- cial payments industry. Well-managed standards-based systems tend to have a high level of interoperability, and have been independently tested to confirm compliance. (See also “pro- prietary design” and “interoperability.”) Stored value fare card: a prepaid fare card that can be programed or “loaded” with a specific dollar value or other prepaid fare options that is then decremented with use. System architecture: the organization of the components of a transit fare payment system, their relationship to each other, and the rules and processes governing their interaction. Typology, Transit fare payment system: a configuration of design attributes or characteristics of a transit fare payment system into a functional framework. In this report, four characteristics are used to create transit fare payment system typologies: 1. Transit system scope: single agency or multiagency; 2. Design and technology: proprietary or standards-based technology;

Definition of Terms 77 3. Fare system architecture: card-based or account-based; and 4. Payment architecture: closed payments or open payments. Unbanked household: a household that does not currently have a checking or savings account (as defined by the FDIC). Underbanked household: a household that has a checking and/or a savings account and had used non-bank money orders, non-bank check cashing services, non-bank remittances, payday loans, rent-to-own services, pawn shops, or refund anticipation loans in the past 12 months (as defined by the FDIC).