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.

1 Background The design and operation of transit fare payment systems continually evolve, as new tech- nologies and practices emerge and gain widespread acceptance by riders and operators. Recent advances in the payments industry, as well as emerging technologies such as smart bankcards and mobile devices, are creating opportunities for the development of the next generation of public transit fare payment systems. Next generation transit fare payment systems promise to yield a number of valuable benefits to riders and transit agencies, which can improve the customer experience, streamline transit system operation, and integrate transit more effectively within the broader context of mobility management. This report is intended to assist transit agencies and other practitioners with decision-making related to next generation transit fare payment systems. It provides an overview of transit fare payment system design and technology, and delineates a typology of design approaches in use and under development. The report describes the attributes of next generation transit fare payment systems, and how those attributes can be configured to provide varying levels of functionality and flexibility. The report also identifies how changes in technology and practice can be leveraged to create transit fare payment systems that are more capable and adaptable to future changes and developments. Finally, the report describes different strategies and approaches for next generation transit fare payment for public transportation to account for the variety of transit agencies and circumstances within the transit community. This will address accounting for legacy fare systems, managing capital costs, and other strategic and practical considerations.1 Research Approach This report is developed through a targeted literature review and interviews with professionals involved in the public transit fare payment industry, including public transit agencies, private sector vendors, consultants and experts from the transportation, financial, and mobile payments industries. The literature review provides a background into the history of public transit fare payment systems and emerging trends and issues. The evolution of transit fare payment media is examined using resources that provide benchmark information such as the following TCRP Reports: • TCRP Report 10: Fare Policies, Structures, and Technologies; • TCRP Report 32: Multipurpose Transit Payment Media; C H A P T E R 1 Introduction and Research Approach

2 Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation • TCRP Report 94: Fare Policies, Structures, and Technologies: Update; and, • TCRP Report 115: Smartcard Interoperability Issues for the Transit Industry. Information on transit payment system research initiatives is captured through peer-review publications such as TRB and academic papers and studies. Emerging trends and current transit industry issues are established through reports and white papers produced by profes- sional associations, such as the Smart Card Alliance, as well as by professionals in the field. Finally, the self-defined needs of transit agencies large and small are identified using Requests for Proposals (RFPs) recently published by transit agencies such as the Washington Metro- politan Area Transportation Authority (WMATA) in Washington, DC and the Whatcom Transportation Authority (WTA) in Bellingham, Washington. This literature review provides a technical background, identifying how transit payment has changed, what new technologies are being incorporated, and the needs of transit agencies and their approaches to the next generation of transit fare payment systems. Targeted industry interviews are used to determine the technologies, business models, gover- nance approaches, and fare media in deployment, under consideration, or currently being studied. Industries include Public Transit, Financial Payments, Smart Card, and Mobile Payments. Inter- viewees are selected to provide insight into transit payment systems from various perspectives, identifying the unique challenges and needs that distinguish transit agencies: • Public Sector: – Larger transit agencies (regional/multi-region, single transit agency and multi-transit agency, multimodal) – Smaller transit agencies (single transit agency local authorities, mostly single-modal) • Private Sector: – Transit fare payment equipment suppliers and system integrators – Financial payment institutions – Mobile payments and mobile ticketing suppliers – Consultants This report focuses primarily on transit fare payment systems that employ contactless smart card technology, as well as emerging and forward leaning transit fare payment systems that have been implemented or are in implementation. Consequently, examination and study of conventional transit fare payment solutions such as cash and coin, tokens, and magnetic stripe technologies are not analyzed in the study. Subjects uncovered in literature study and in inter- views with subject matter experts are examined in more depth. The primary focus of this project is the U.S. marketplace; due to resource constraints the information related to foreign transit agencies is limited. Report Overview The report is structured as follows: • Chapter 2: Planning for a Next Generation Transit Fare Payment System. This chapter provides a broad overview of the planning and policy issues that a transit agency must con- sider when designing and implementing a new transit fare payment system. • Chapter 3: Design Attributes of Transit Fare Payment Systems. This section describes the key features or approaches used in the design of current and forward leaning fare payment systems. • Chapter 4: Transit Fare Payment System Typologies. This chapter presents a proposed framework or typology that configures fare payment system design attributes in different ways to create four functional fare payment systems.

Introduction and Research Approach 3 • Chapter 5: Transit Fare Payment System Technology. This section provides an overview of the key technology elements found in fare payment systems. • Chapter 6: Emerging Payment Technologies and Payment Convergence. This chapter pres- ents an overview of new and inventive technologies used in fare payment systems, and describes how existing technology can be used in innovative ways for transit fare payments. It also intro- duces the concept of payment convergence, where multiple payment systems (e.g., transit and toll, or transit and parking) are integrated to create a unified travel payment process. • Chapter 7: Next Generation Transit Fare Payment System Case Studies. This chapter presents case studies for three recent new transit fare payment system implementation projects. The first two studies discuss implementation of fare payment systems that accept open payments, while the third discusses a more conventional upgrade of magnetic stripe technology to a smartcard-based, proprietary closed fare payment system. • Chapter 8: Evaluating Public Transit Fare Payment System Typologies and Implementa- tion Strategies. The final chapter discusses the relative advantages of each transit fare payment system typology, and presents strategies and best practices for transit agencies to use in the acquisition and implementation of a new fare payment system. • Appendix A: Definition of Terms. This appendix defines key terms used in this report; readers unfamiliar with recent developments in transit fare payment systems should familiarize themselves with the terms in the section. • Appendix B: Examples of Transit Agency Fare Payment System Goals. This appendix offers examples of the goals and objectives established by five transit agencies in the design and implementation process for their new fare payment systems.