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

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30 Chapter Overview This chapter highlights several emerging technologies and practices that can provide public transit agencies with a variety of options to improve and enhance their own operations, while offering riders increased convenience. These include: • Availability and security of contactless bankcards, which increase the potential ridership base for public transit agencies; • Availability of prepaid and reloadable payment cards, which offer options for unbanked or underbanked transit customers; • Advances in mobile payments and mobile technology, which can be incorporated into next generation transit fare payment systems; • Acceptance of smart card ID credentials on transit, which can improve customer convenience through integration with transit benefit programs; and, • Convergence of mobile payments, travel and planning information across multiple modes of transportation. Availability and Security of Contactless Bankcards Each of the leading credit card associations has deployed branded contactless bankcards, and are working to encourage their member financial institutions to make them available to their customers. They have also worked together to develop international standards that improve card security in order to reduce the risk of fraud associated with magnetic stripe technology. Availability of Contactless Bankcards Many banks and other financial institutions now issue credit and debit cards incorporating contactless smart card technology. Examples of the branded contactless cards available include: • MasterCard PayPass • Visa PayWave • American Express ExpressPay • Discover Zip Transit fare payment systems that include both standards-based and account-based attributes are capable of accepting these financial payment cards as fare media, thereby becoming open pay- ment systems. Utah Transit Authority was the first transit agency in the United States to accept contactless transit fare payment cards issued by financial institutions when they implemented C H A P T E R 6 Emerging Payment Technologies and Payment Convergence

Emerging Payment Technologies and Payment Convergence 31 an open loop transit fare payments system. While the percentage of riders using these cards has been relatively small, they provide an additional payment option for riders who do not have a transit payment card or pass.28 Higher Security: The EMV Card To reduce the risks of fraud with magnetic credit and debit cards, financial institutions are introducing smart cards with a secure microprocessor chip in them which provides strong secu- rity for payment transactions and the data stored on the cards. A consortium of financial institu- tions developed open standard specifications for these cards and card acceptance devices called “EMV,” named after the initiators of the approach. The specification is managed by EMVCo, which is owned by a consortium of organizations from the payments industry. EMV cards have been implemented in at least 80 countries throughout the world; retailers in these countries have reported significant reductions in fraud.29 The EMV card typically has a contact chip which is read when the card is inserted into a card reader (see Figure 6-1). A personal identification number (PIN) or signature may be required as an additional form of identity authentication. In Europe, for example, most merchants require a “chip and PIN” for retail purchases. In the United States a chip and signature approach is likely to be used initially. The credit card associations are providing incentives to merchants to implement EMV-compliant cards and devices by offering them protection from liability for fraudulent transactions. Many of these incentives require adoption of EMV technology by October 1, 2015. Dual Interface Cards: Security and Speed The new transit payment programs being implemented in Chicago; Portland; Philadel- phia; Washington, DC; and other regions are requiring that the new payment system be open loop and accept EMV-compliant cards issued by financial institutions. To maintain the rapid transaction times required in transit (up to 0.5 seconds), these cards must have a contactless interface. Because the contact interface will be required for banking and retail uses, cards issued by financial institutions will have to have both contact and contactless interfaces if they are to be used on transit. These cards are called “dual interface” cards (see Figure 6-2). Although dual interface cards are widely available in Europe, they have not seen widespread distribution in the United States due to the higher cost (approximately $1.00 more per card). Greater use of dual interface cards will also be influenced by the increased use of smartphones that allow mobile payments using near field communication technology (discussed later in this chapter). Prepaid and Reloadable Payment Cards Another form of payment that could be accepted using the open loop payment approach is a prepaid or reloadable payment card. In the retail sector, prepaid cards have replaced paper gift certificates. They provide people with an electronic payment medium that functions like a debit card. These cards are issued by companies or financial institutions, and are popular among people who do not have bank accounts, or who prefer not to use a personal credit or debit card. Since transit agencies must provide service for all customers, prepaid cards provide an option to customers who do not qualify for a credit or debit card, or who prefer not to have a relation- ship with a financial institution or use a financial institution card for transit. Prepaid cards can be loaded and reloaded with value at retail outlets, ticket booths, and automated kiosks. Source: www.ingenico.us Figure 6-1. EMV card and reader.

32 Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation Banks are the legal issuer of any “branded” prepaid card (e.g., MasterCard, Visa). However, a financial institution may license the use of its Bank Identification Number (BIN) to a transit agency or other third party; the licensee then takes responsibility for marking and operating the prepaid card program. These “transit agency prepaid cards” can be used for transit fare payment and sometimes for other retail payments. The Utah Transit Authority (see Figure 6-3), the Los Angeles Metro and the Chicago Transit Authority were among the first U.S. transit agencies to accept prepaid payment cards. Mobile Technology The widespread use of smartphones has revolutionized the transit landscape, as an increas- ing percentage of riders carry these devices. According to the Federal Reserve, over 61 per- cent of Americans owned a smartphone as of 2013, with significant smartphone ownership among unbanked and underbanked populations (49 percent and 64 percent, respectively).30 With 192 million Americans carrying these devices, public transit agencies have developed a number of solutions to deliver ticketing and payment services to riders equipped with smart- phone technologies. Use of mobile phones and devices for transit payment can eliminate the need to issue sepa- rate fare media to these customers, lowering operational costs to the transit agency. The use of a mobile transit application can also facilitate delivery of other information to help riders plan and take their transit trips (e.g., schedule information, system maps, and service updates). The most common uses of mobile technology include visual or flash passes for mobile ticket- ing and the use of a near field communication (NFC) enabled smartphone or other contactless device for mobile payments. There are also a number of other mobile technology approaches Embedded Contactless Computer Chip Embedded Antenna Coil Dual Interface Smart Card: Contactless and EMV Chip Surface-Mounted EMV Contact Chip Figure 6-2. Dual-Interface Card (Contactless & EMV Chip). Source: UTA Figure 6-3. Utah Transit Authority prepaid card.

Emerging Payment Technologies and Payment Convergence 33 under development which eliminate the need for a rider to activate a mobile ticket or initiate a mobile payment. Flash Pass The most common form of mobile payment which has been adopted in the United States for transit payments is when the mobile device hosts a ticketing application which emulates a paper ticket or pass. The “virtual ticket” appears on the device screen, and is used as a flash pass in a proof-of-payment or conductor validated environment.31 This approach has a low barrier to entry to deploy a mobile ticketing solution, particularly in a proof-of-payment environment where no ticket-reader infrastructure is required. In this scenario, a rider activates the ticket, and displays it to the conductor. Some transit authorities, such as MBTA in Boston and TriMet in Portland, OR, have included color and animation in the mobile ticket image which deters counterfeiting (see Figure 6-4: when the ticket is activated, the activation date and time appear, while the tri-colored bar slowly shifts colors). In a conductor validated environment, the ticketing application typically displays a two dimensional bar code, or “QR code,” which fare inspectors can validate with a mobile reader (see Figure 6-5). An added security feature in both proof-of-payment and conductor validated environments, the virtual ticket “expires” after a fixed period of time, and is no longer available for display by the rider. Source: MBTA Figure 6-4. Animated flash pass. Source: Masabi Figure 6-5. Conductor scanning mobile ticket.

34 Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation Several transit agencies and contract transit providers are using this flash pass approach to augment their existing fare systems, including: • Capital Metropolitan Transportation Authority (Austin, Texas), CapMetro.32 • Dallas Area Rapid Transit (DART), GoPass.33 • Massachusetts Bay Transportation Authority (MBTA), mTicket.34 • Nassau Inter-County Express (NICE), goMobile.35 • New Jersey Transit (NJT), MyTix.36 • New York Waterways, Mobile Ticket.37 • Tri-County Metropolitan Transportation District of Oregon (TriMet), Mobile Ticket.38 Near Field Communications Near Field Communication (NFC) is a mobile payment technology that utilizes radio frequency (RF) communication technology to exchange data securely.39 Devices with NFC technology are designed to the contactless smart card standards, and operate with the same card readers and infrastructure. When presented to a card reader, they function similar to a contactless credit, debit or prepaid transit card to initiate a fare payment transaction.40 Recently released smart phones by a number of manufacturers are equipped with NFC technology including Apple, Blackberry, HTC, LG, Motorola, Nokia, and Samsung. Mobile payments that use NFC technology require a third-party “trusted service manager” (TSM) to bring the service providers together and manage the secure payment credentials. Several wireless communications companies have formed partnerships with TSMs to provide NFC payment services, while third parties have developed mobile wallet or “ePurse” applica- tions for devices incorporating NFC technology (see Figure 6-6). Each mobile wallet can contain data for multiple payment cards, including credit cards, debit cards, prepaid cards, and compatible transit agency fare payment cards. This feature allows the user to select the payment card they wish to use for a specific transaction. Many NFC compatible mobile phones include an Integrated Secure Element, a separate computer chip that ensures that transactions stored on the device and payment transactions are secure. Other NFC technology approaches include Host Card Emulation (HCE) and moving the secure element to the Cloud, both of which seek to emulate a smart card, but which avoid the cost of incorporating a secure element in the device.41 Source: Google Figure 6-6. Mobile wallet and NFC reader.

Emerging Payment Technologies and Payment Convergence 35 NFC payments have been successfully demonstrated in several transit agencies. Recent devel- opments in mobile payment technology are likely to accelerate the adoption of NFC technology among transit riders and transit agencies. Another development was the creation of an industry consortium (Open Mobile Ticketing Alliance or OMTA) that seeks to develop open standards for mobile ticketing. SMS Ticketing (Text Messaging) Several public transit agencies in Scandinavia and elsewhere in Europe have developed transit fare payment systems that utilize the short message service (SMS) texting capability of a cell phone. This approach is similar to the flash pass, since the ticket information is displayed on the rider’s mobile device. Unlike the flash pass, which can only be used on a smart phone, an SMS ticket can be delivered to any cell phone that can send and receive text messages. To purchase an SMS ticket, a rider sends a text message to the transit agency, and receives a text message back from the transit agency. The message sent by the rider varies from transit agency to transit agency, but is typically a pre-determined code that represents the fare for a particular type of ticket, such as a period pass (e.g., 30 minutes or 24 hours) or a distance pass (e.g., for travel between designated fare zones). The message received from the transit agency provides information on the fare, including any expiration details. The SMS “ticket” is then presented upon boarding or when requested by a conductor or operator. A transit agency considering an SMS-based fare collection program must coordinate closely with one or more telephone service providers, in order to develop business rules for payment or billing. In some SMS ticketing programs, the cost of the fare is deducted from a prepaid phone card account; in others, the cost of the fare is billed to the rider’s cell phone account, and col- lected as part of a monthly bill. On Uppsala County’s transit system in Sweden, riders intending to use the SMS ticketing program must register their cell phone or smartphone in advance and set up an account linking their phone number to a separate credit or debit card. Passive Mobile Payment Approaches There are a number of mobile technologies under development that have potential applica- tion in transit fare payment systems. These technologies utilize passive interaction between the rider’s smartphone and readers located at the transit system point-of-entry, such as a fare gate or at the boarding and exit doors of buses or trams. In a passive environment, the rider does not have to physically interact with his/her mobile device to display a flash pass, activate a ticket or authorize a fare payment transaction. Instead, the readers at the point-of-entry are able to auto- matically detect the time and/or location that a rider enters and departs the transit system. That information is passed to the central transit agency computer and used to calculate the correct fare according to the fare system rules, and then authorize the fare payment transaction. In these passive mobile payment systems, a customer sets up an account with a transit agency, provides payment information (e.g., a bankcard), and registers a mobile device; the mobile device must be compatible with the device reading/detection technology used in the transit sys- tem (e.g., Bluetooth or NFC). The rider may also need to configure their mobile device to permit automatic communication with the transit agency’s readers. Two such systems under evaluation are Bluetooth Smart and Be-In-Be-Out. Bluetooth Smart Bluetooth Smart (also known as Bluetooth Low Energy, or Bluetooth LE) technology requires less energy than the original Bluetooth communications. Bluetooth Smart technology uses

36 Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation Bluetooth beacons that detect nearby mobile phones or devices (see Figure 6-7). Many smart- phones and tablets currently include Bluetooth Smart technology, including devices from Apple, Google, Microsoft, and Samsung. As Bluetooth Smart technology becomes widespread in con- sumer mobile devices it could be an alternative to NFC communications. The sensors could be used for hands free payment transactions or could be used to send traveler information, rider rewards, or other offers and incentives. Several demonstration projects are underway in the U.S. and Europe, as software developers and service providers seek ways to apply this technology.42 Be-In-Be-Out (BIBO) The Be-In-Be-Out payment scheme involves a device on-board the transit bus which would detect contactless fare media or mobile devices. When a customer boards the bus, the on-board transceiver detects the payment device, and the payment transaction is automatically initiated. A processor on board the vehicle then transmits the transaction information to the fare pro- cessor at the transit system or payment system provider. A proof of concept demonstration of the BIBO payment concept was demonstrated in Germany in 2012 (see Figure 6-8). The demonstration lasted 6 months, and involved 30 buses and 150 passengers with contactless key fob devices.43 Table 6-1 compares the various approaches to mobile payment technologies. Source: www.bluetooth.com Figure 6-7. Bluetooth and Bluetooth smart devices. Source: Dresdner Verkehrsbetriebe AG Figure 6-8. BIBO demonstration project in Dresden, Germany.

Emerging Payment Technologies and Payment Convergence 37 Scope Efficiency Penetraon Technical Maturity Flash Pass and Bar Code Flash pass cannot be used at fare gates or barriers, which prevents integration in a fully gated system. Bar code allows use at fare gates or barriers, but requires installation of bar code readers. Allows customers to buy tickets online, or to print tickets at home. No productivity improvements in systems with 100 percent visual inspection (i.e., most commuter rail systems), since it requires same staffing level as paper ticket system. Can be used by any passenger with a smartphone. Technically mature, with many operational systems throughout the U.S. and internationally. Near Field Communicaons (NFC) Enabled Devices Can be used in gated and non-gated systems. Allows integration across transit modes and between transit agencies. Can support visual inspection when paired with mobile ticketing app. Can support customers using compatible ID cards issued by employers, colleges, or gov’t agencies. Supports validators and self-service devices at un- gated stations. May increase efficiency of ticketing by reducing inspection labor. Market penetration not yet sufficient to be the primary mobile payment technology, but the number of NFC-enabled devices is increasing. Not all carriers may offer NFC-enabled phones. Secure element technology (device, cloud and host card emulation) is mature. SMS / Text Message (Visual) Cannot be used at fare gates or barriers, which limits regional integration in a gated system. Same as for Flash Pass (see above). Can be used by any passenger with a cell phone, including non- smartphones. Technically mature, primarily internationally, with several operational systems. Passive Ticke ng (Bluetooth Smart, BIBO) Can be used in gated and non-gated systems. Allows integration across transit modes and between transit agencies. Can support visual inspection as needed. Supports validators and self-service devices at un- gated stations. May increase efficiency of ticketing by reducing inspection labor. Requires prior set up and configuration by rider to allow passive interaction. Not sufficient to be the primary mobile payment technology. Only some riders may elect to allow passive interaction. Not technically mature, with limited number of systems under development. Table 6-1. Comparison of mobile payment technologies. Acceptance of Smart Card ID Credentials on Transit Many of the contactless identification badges issued by private employers, colleges and univer- sities, and federal, state and local governments comply with the ISO 14443 communications stan- dards. This feature could be leveraged to grant cardholders access to a transit system. As discussed in Chapter 3 and Chapter 4, the transit agency’s transit fare payment system must be designed to accept open payments in order to accept smart card IDs as fare media since accepting smart card ID credentials require both a standards-based design and an account-based architecture. The ability to use a contactless identification card for transit services is beneficial in a number of ways. Employers can link their employees’ ID cards to a transit payment account, which itself could be linked to a transit benefits account. This would eliminate the need for separate transit benefit vouchers or transit benefit debit cards, and would virtually eliminate the possibility of employees fraudulently selling their transit benefits. The contactless smart card technology used for federal government ID credentials is compat- ible with the contactless technology used in transit. As a result of Homeland Security Presidential

38 Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation Directive 12 in 2004, all federal government employees have been issued smart card identification cards, with identifying information about the employee encrypted on the chip on the card. The cards have both contact and contactless interfaces, and are used for access to computer networks and government facilities. Specifications for several types of smart card ID’s have been developed and are being imple- mented by public and private organizations. Civilian federal agencies have issued over five million Personal Identity Verification (PIV) cards to federal employees and contractors (see Figure 6-9). Department of Defense employees have been issued a similar card called the Common Access Card (CAC). Specifications have been developed for credentials of state and local government transit agency employees and employees of companies that do business with government transit agencies called PIV-I (PIV Interoperable) or CIV (Commercial Identity Verification) card. PIV, CAC, PIV-I and CIV cards are all technically interoperable, but are issued using different security policies which vary with the needs of the issuing organizations. A similar smart card credential called the Transportation Worker Identification Credential, or TWIC, is required for anyone needing unescorted access to maritime and port facilities. In 2012, the Utah Transit Authority (UTA) demonstrated acceptance on transit of ID cre- dentials used by several federal agencies in the Salt Lake City area. The demonstration was very well received by transit users, and the transit authority would like to implement the program throughout the region.44 The new fare payment systems being implemented by both Washington Metro/WMATA and SEPTA will accept PIV cards as fare media. In UTA’s proof of concept demonstrations, the user ID number on the card was transmit- ted without any encryption presenting potential risks of the ID number being intercepted by someone trying to “skim” (steal) the number on the card. This risk can be mitigated by using a new communications protocol (OPACITY) that has been developed to provide security for Figure 6-9. U.S. federal government PIV card.

Emerging Payment Technologies and Payment Convergence 39 contactless payments using government ID’s. OPACITY (Open Protocol for Access Control, Identification and Ticketing with Privacy) is a series of authentication and security protocols developed to provide secure and high-speed transactions for transit fare payment and physical access to facilities. Contactless smart cards, or mobile devices with secure element chips, can use the OPACITY protocol to prevent the interception or alteration of data during a contactless transaction. The OPACITY protocol will be tested in pilot applications in different use cases for physical access and transit payments.45 Payment Convergence for Public Transit and Travel One of the emerging strategies in public transit is “convergence.” Convergence is the combi- nation or integration of payments systems from different transportation modes, payment sys- tems and traveler information systems. One of the objectives of convergence is to integrate route planning, ticketing, payment and travel across all modes of transportation. Convergence seeks to merge all aspects of travel and transportation, including multimodal public transit, parking, and tolls, by linking together two or more aspects of a traveler’s journey. The availability of planning information and real-time data allows travelers to make smarter travel decisions. Some of the goals of a convergence strategy include: • Integration of travel planning and ticketing across multiple modes, through a single mobile application; • Demand management, by incentivizing travel through pricing, rewards or credits, social nudges and competition; • Increasing agency revenue through increased ridership; • Improving customer service and enhancing the customer experience. This section explores convergence from the perspective of public transit fare payment sys- tems. It provides examples of convergence programs that have been implemented by transit agencies, as well as other approaches under development or evaluation. Changing Trends in Travel and Transit Market research has noted that urban residents like to have choices in how they travel, and the way they make choices is now relatively situational, and not necessarily based on long-standing habits.46 Transit travelers can easily get information to help them plan a trip, tell them exactly when the next bus or train will arrive, and pay for their trip with mobile ticketing or a mobile device or wallet. Taking a convergence approach can address changing transportation habits of key demo- graphic sectors of transit ridership. A 2012 study on transportation habits of younger Americans (16 to 34 years of age) found that they are moving away from car ownership towards the use of public transportation and alternative transportation methods.47 This same population group, which represents an estimated 86.8 million people (28 percent of the U.S. population in 2013) is also the largest group of smartphone users, with over 80 percent reporting smartphone owner- ship.48 Among the report’s findings were: From 2001 to 2009, young people (16 to 34-years-old) who lived in households with annual incomes of over $70,000 increased their use of public transit by 100 percent, biking by 122 percent, and walking by 37 percent. According to a survey by the National Association for Realtors, conducted in March 2011, 62 percent of people ages 18–29 said they would prefer to live in an area with smart growth (defined as a place with a mix of single family houses, apartments, and condominiums, with stores, restaurants, libraries, schools and access to public transportation nearby) as opposed to sprawl. Travel PayPlan

40 Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation Improvements in technology make transportation alternatives more convenient. Websites and smart phone apps that provide real-time transit data make public transportation easier to use, particularly for infrequent users. Meanwhile, technology has opened the door for new transportation alternatives, such as the car-sharing and bike-sharing services that have taken root in numerous American cities. Public transportation is more compatible with a lifestyle based on mobility and peer-to-peer connectivity than driving. Bus and train riders can often talk on the phone, text or work safely while riding, while many state gov- ernments are outlawing using mobile devices while driving. This information suggests that public transit efforts that address convergence between trans- portation and technology could yield benefits for public transit agencies and customers. The following section offers examples where public transit agencies have partnered with other trans- portation service providers to offer customers more efficient travel options. Transit Facility Parking Payment Using Transit Fare Cards Several transit agencies accept the payment card used on their rail system for parking at rail tran- sit stations. In some cases, like Washington Metro, transit contactless payment cards are sold and accepted for payment at all parking facilities near rail stations (see Figure 6-10).49 These arrange- ments are convenient for transit customers, and can help ensure that parking is available at the facilities for transit riders. Some transit agencies give discounts to transit riders to encourage park- and-ride use. Transit Facility Parking Payment Using Mobile Payment Applications Some transit agencies, like the MBTA in Boston, have implemented mobile payment systems for park-and-ride lots. Riders can download an application to their mobile device and register with a commercial payment processor. When they park their car, the driver enters the location number into the parking application. Customers can register to receive reminders that tell them when the time covered by their parking payment is ending, and they can add value without having to return to the parking location. The mobile parking application is not integrated with mobile transit payment applications, but commuter rail tickets and passes can be purchased using a different mobile application. Source: WMATA Figure 6-10. Use of SmarTrip fare card at Washington Metro lot.

Emerging Payment Technologies and Payment Convergence 41 Reducing Downtown Congestion by Sharing Parking Data Los Angeles is home to an innovative parking demonstration called ExpressPark. The goals of this program are to make it easier for drivers to find parking spaces, and reduce congestion downtown. In Los Angeles, as much as 30 percent of the traffic downtown at some times of day is people looking for a place to park. ExpressPark varies parking fees according to demand, and provides information on prices and the locations of available parking via mobile phone applications (see Figure 6-11), or dynamic message signs. Drivers can pay with credit or debit cards or with mobile payment systems. ExpressPark is not integrated with ExpressLanes, which is probably an indication of the chal- lenges of linking programs where the technology investments and revenues are controlled by different transit agencies. Transit and Toll Payment Convergence: Metro ExpressLanes In many regions, transportation managers are attempting to better manage transportation demand to reduce congestion. In Los Angeles, a demonstration called Metro ExpressLanes was initiated in 2013 to evaluate different types of travel alternatives. The goal of the demonstration was to “move more people, not more cars.”50 The LA Metro, in cooperation with Caltrans, implemented a toll system in two highly congested freeways (the I-110 and the I-10), with variable toll charges based upon congestion levels and the number of passengers in the vehicle. The program also provided travelers with other travel choices such as express buses, and made improvements to bike and rail facilities. Travelers were given the option of linking their toll and transit accounts, and were given incentives to help reduce congestion. For example, if a traveler took 32 transit rides at peak Source: ParkMe.com Figure 6-11. Mobile parking app.

42 Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation times, they received a $5 toll credit, and the more often they used car pools or took transit, the more chances they had to win gift cards.51 LA Metro also offered rewards to travelers who referred others to the program, and announced the rewards given on social media. After one year, the demonstration resulted in increased transit ridership by 14 percent, and 110 new van pools were created. Over $10,000 in toll credits were awarded, and 480 commuters received gift cards. This outcome suggests that incentives, social nudges, and “competition” can motivate travelers to change their behavior. The ExpressLanes program was made permanent in April 2014. Universal or Linked Transportation Accounts Account-based payment systems can facilitate convergence of transit and toll payment sys- tems. Different payment media can be used (e.g., transit smart card, toll radio frequency tag), but the travelers’ payment accounts are linked. In some regions, transportation planners have envisioned a Universal Transportation Account, which would integrate travelers’ payments for any mode of transportation. Agencies could also reduce costs and increase customer convenience by consolidating common functions such as customer service call centers from multiple agencies into a single one-stop-shop provider. An alternative, and perhaps more easily implemented, approach would be to link the travelers’ accounts for various modes. This will provide convenience to cus- tomers, and the ability to give cross-modal incentives. The International Organization for Standardization (ISO) Technical Committee 204 for Intelligent Transport Systems currently has a joint study group examining convergence of pay- ment systems across public transit and toll roads through linkage of payment accounts. The group is led by representatives from South Africa and includes key participation from the United States, Norway, Korea, and Japan. The study group’s goal is to identify an international standard work item to facilitate convergence, such as development of critical application programming interfaces, business rules, and roles and responsibilities for actors within a multimodal conver- gence program. Integration of Transit Mobile Payment Services with Traveler Information and Third-Party Events Software applications on mobile phones and devices can be used for door-to-door trip plan- ning, enabling the traveler to use a single application to plan, travel and pay for the trip. For example, a traveler could use the planning function of the application to identify which route to take; find out the scheduled departure and arrival times; and get information on the fare or ticket types available. Using the mobile payment and ticketing function application, the traveler would be able to purchase a mobile ticket, and in some instances, might even be able to reserve a specific seat on a particular train. When the traveler arrives at the station, he or she simply displays the mobile ticket and begins the journey. In some instances, transit agencies have partnered with event organizers, concert venues, and sporting arenas, to deliver mobile ticketing packages that include both a transit flash pass and a virtual event ticket creating a convenient, “one-stop” service for passengers and patrons. In 2014, for example, Dallas Area Rapid Transit (DART) partnered with the organizers of the Texas State Fair to encourage fair goers to use public transit to travel to the fairgrounds. Fairgoers were eligible for a discounted general admission tickets when purchased through DART’s GoPass mobile transit ticketing application (see Figure 6-12); the GoPass application was also used to display the fairground admission ticket. In technology heavy transit communities such as Boston and San Francisco, transit authori- ties make operational data available to application developers and sponsor “hackathons” to identify convergence opportunities and stimulate development of new applications.52

Emerging Payment Technologies and Payment Convergence 43 Integrating Transit with Shared-Use Mobility Options As urban populations grow, a more diverse set of transportation choices is emerging, including bike, car, scooter, electric vehicle and ride-share programs. These transportation choices are being built into our cities using a “complete streets” approach. Many of these services are complimen- tary to public transit, and provide ways for customers to travel the “last mile” to and from transit stations. More accurate and accessible information on transportation choices is becoming available and delivered to travelers through mobile devices, the internet, and dynamic message signs. In the last decade, there has been a significant increase in the number of public and private shared-use mobility programs. Programs such as car-share, ride-share and bike-share empha- size transportation access rather than ownership. Studies have shown that transit riders are the predominant users of shared-use transportation programs, which points towards potential for greater integration of transit and shared-use programs payment systems.53 One of the fastest growing transportation trends is bicycling.54 Bike-share programs have started in cities across the country and help solve the “last mile” problem for many travelers by providing a way to get from a transit station to a final destination (see Figure 6-13). Smartphone and mobile applications developed for bike-share programs provide users with real-time information on the availability of bikes and docking stations, as well as route planning advice and payment accounts information. Transit and bike-share payment systems could be linked together, allowing use of either system’s payment card on the other’s system, or by linking accounts across both systems. Transit agencies have also established partnerships with car-sharing services, in an effort to address the travel needs of non-car owners. Several demonstration programs have been established, including: • TriMet, at three park-and-ride locations in greater Portland, Oregon55 • Metrolinx, at three GO Transit stations in greater Toronto, Canada56 • NJ Transit, at five stations in suburban Northern New Jersey57 • Chicago Transit Authority, at five locations in Greater Chicago, Illinois58 Source: Dallas Area Rapid Transit Figure 6-12. Screenshot of DART GoPass mobile ticketing app.

44 Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation Source: BCycle Figure 6-13. Bicycle docking station and bicycles. “This is where the idea of having a unified system really starts to make sense,” Telles said. “Take the idea of the card with the bike share program the [mobility authority] is developing and you could use the card at a parking meter and also at a bike share station. So with it, you can get a bike, pay for parking, take toll roads and cross the bridges. We are now talking about a unified system where you could pay into one account to use for all these mobility uses.” Raymond Telles, Executive Director Camino Real Regional Mobility Authority Las Cruces Sun-News, May 24, 2014 Enhanced Data Analytics “Smart city” infrastructure is expected to grow significantly over the next decade, as commu- nities expand the installation and use of networked information and communications technol- ogy. Much of this growth will be in transportation.59 Both the vast amount and greater variety of data being generated by various transit sources is extremely valuable to transportation planners and managers for service planning and operations management. Use of traditional sources of transit data such as automated passenger counters can be merged with statistical or census data to better understand existing and potential ridership demand in specific service areas (see Figure 6-14). These sources can be augmented by data generated by transit fare payment systems which use smartcard technology since each smartcard has a unique identifier that allows the agency to track the travel patterns of individual cards. In a zone or distance-based fare system, origin and destination data can be used to describe travelers’ entire journey. When flat fares are used, planners typically have been able to see only where trips originate. Recent research by the Massachusetts Institute of Technology for the MBTA in Boston linked origin data for sequential passenger trips, enabling the transit agency to infer origin-destination trip pairs. This data enables the transit authority to identify the ridership and revenue generated on each part of the transit system by time of day.60 Account-based fare payment systems may

Emerging Payment Technologies and Payment Convergence 45 also be able to access specific demographic data (e.g., residence address, age, etc.) associated with the transit rider’s account. Chapter 6 Review • The four major credit card associations are issuing contactless bankcards that can be used as fare media in open payment transit fare payment systems. • The security of contactless bankcards will increase with the adoption of new EMV security standards in 2015. • Contactless smartcard technology can be used for prepaid and reloadable payment cards, which are attractive to unbanked and underbanked riders. • Advances in mobile payments technology, as well as the increased number of smartphones in use, present an opportunity for transit agencies to include smart devices in their fare payment system strategy. • Identification cards that use smartcard technology can be used at fare media on transit fare payment systems that incorporate an open payments design. • By incorporating a convergence approach to its fare payment system, a transit agency can integrate route planning, mobile ticketing, and mobile payments across multiple modes of travel, creating a more seamless travel experience. • Changing travel habits, particularly among residents of urban areas, offers opportunities to integrate transit travel and mobile payment accounts with shared-use programs such as bike-share and car-share. • The granularity of system-wide traveler data can be improved through the use of smart tech- nology and mobile payments applications. Figure 6-14. Transit passenger data, City of Austin, Texas.