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

Chapter: Chapter 7 - Next Generation Transit Fare Payment System Case Studies

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Suggested Citation:"Chapter 7 - Next Generation Transit Fare Payment System Case Studies." National Academies of Sciences, Engineering, and Medicine. 2015. Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation. Washington, DC: The National Academies Press. doi: 10.17226/22158.
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Suggested Citation:"Chapter 7 - Next Generation Transit Fare Payment System Case Studies." National Academies of Sciences, Engineering, and Medicine. 2015. Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation. Washington, DC: The National Academies Press. doi: 10.17226/22158.
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Suggested Citation:"Chapter 7 - Next Generation Transit Fare Payment System Case Studies." National Academies of Sciences, Engineering, and Medicine. 2015. Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation. Washington, DC: The National Academies Press. doi: 10.17226/22158.
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Suggested Citation:"Chapter 7 - Next Generation Transit Fare Payment System Case Studies." National Academies of Sciences, Engineering, and Medicine. 2015. Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation. Washington, DC: The National Academies Press. doi: 10.17226/22158.
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Suggested Citation:"Chapter 7 - Next Generation Transit Fare Payment System Case Studies." National Academies of Sciences, Engineering, and Medicine. 2015. Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation. Washington, DC: The National Academies Press. doi: 10.17226/22158.
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Suggested Citation:"Chapter 7 - Next Generation Transit Fare Payment System Case Studies." National Academies of Sciences, Engineering, and Medicine. 2015. Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation. Washington, DC: The National Academies Press. doi: 10.17226/22158.
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Suggested Citation:"Chapter 7 - Next Generation Transit Fare Payment System Case Studies." National Academies of Sciences, Engineering, and Medicine. 2015. Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation. Washington, DC: The National Academies Press. doi: 10.17226/22158.
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Suggested Citation:"Chapter 7 - Next Generation Transit Fare Payment System Case Studies." National Academies of Sciences, Engineering, and Medicine. 2015. Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation. Washington, DC: The National Academies Press. doi: 10.17226/22158.
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Suggested Citation:"Chapter 7 - Next Generation Transit Fare Payment System Case Studies." National Academies of Sciences, Engineering, and Medicine. 2015. Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation. Washington, DC: The National Academies Press. doi: 10.17226/22158.
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Suggested Citation:"Chapter 7 - Next Generation Transit Fare Payment System Case Studies." National Academies of Sciences, Engineering, and Medicine. 2015. Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation. Washington, DC: The National Academies Press. doi: 10.17226/22158.
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Suggested Citation:"Chapter 7 - Next Generation Transit Fare Payment System Case Studies." National Academies of Sciences, Engineering, and Medicine. 2015. Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation. Washington, DC: The National Academies Press. doi: 10.17226/22158.
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Suggested Citation:"Chapter 7 - Next Generation Transit Fare Payment System Case Studies." National Academies of Sciences, Engineering, and Medicine. 2015. Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation. Washington, DC: The National Academies Press. doi: 10.17226/22158.
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Suggested Citation:"Chapter 7 - Next Generation Transit Fare Payment System Case Studies." National Academies of Sciences, Engineering, and Medicine. 2015. Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation. Washington, DC: The National Academies Press. doi: 10.17226/22158.
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Suggested Citation:"Chapter 7 - Next Generation Transit Fare Payment System Case Studies." National Academies of Sciences, Engineering, and Medicine. 2015. Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation. Washington, DC: The National Academies Press. doi: 10.17226/22158.
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Suggested Citation:"Chapter 7 - Next Generation Transit Fare Payment System Case Studies." National Academies of Sciences, Engineering, and Medicine. 2015. Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation. Washington, DC: The National Academies Press. doi: 10.17226/22158.
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46 Introduction This chapter contains case studies that describe recent next generation transit fare payment system projects from three U.S. transit agencies. Each of the case studies is described in terms of transit fare payment system design and typology, with conclusions and lessons learned with respect to design and implementation. Case Study 1: Utah Transit Authority (UTA)61 Introduction The Utah Transit Authority (UTA) began operation on August 10, 1970 in Salt Lake County with 67 buses. Today, UTA serves approximately 1.8 million people in a 1,600 square mile ser- vice area that stretches over six counties from Payson to Brigham City. It operates a fleet of 520 buses out of four garages, 80 paratransit vehicles, 46 light rail vehicles on four light rail lines over 35 miles, and 63 commuter rail cars and 18 locomotives on a 44-mile commuter rail line. UTA is the regional transit provider for the primary urbanized areas of Utah. Two additional light rail lines and a doubling of commuter rail mileage will be added by 2015.62,63 UTA uses a flat fare structure on “local” services—Local Bus, TRAX, and Streetcar. Other pricing exists for “premium” services; express buses are priced at a higher rate and FrontRunner commuter rail uses a distance-based fare structure. Legacy Transit Fare Payment System and History of Development UTA started its payment system effort with virtually no legacy in automated fare collection systems, and was therefore free to explore the latest advances and opportunities in fare collection technology. At that time, the payments industry had just announced its launch of contactless media under the brands of ExpressPay (American Express), Zip (Discover), PayPass (MasterCard), and PayWave (Visa).64 When UTA began its investigation of electronic fare collection systems in 2005, its three pri- mary goals were: 1. Customer convenience/ease of use; 2. Revenue collection efficiency/effectiveness; and, 3. Data capture to inform operations and planning.65 C H A P T E R 7 Next Generation Transit Fare Payment System Case Studies UTA established business goals which drove the payment system design and acquisition.

Next Generation Transit Fare Payment System Case Studies 47 The ability to accept contactless credit and debit cards for direct payment of transit fares was a decision factor for UTA. They saw several benefits for UTA with this approach: • Provide convenience to riders who already have contactless financial industry payment smart cards; • Achieve automatic interoperability with other transit agencies who would accept financial payment smart cards; • Leverage investments and programs of the payments industry; • Commoditization of devices; • Established standards for business rules and security; and, • Potential for co-promotion with financial sector issuers. On the system side, UTA technical staff saw that use of an open payments, account-based pay- ment system would give them enhanced architecture flexibility that could simplify system devel- opment and modification, with potential cost savings.66 UTA also felt that an open, account-based payment system would provide advantages to the transit agency and its customers. Throughout their investigation of fare payment system options, UTA developed additional objectives it felt a new system might attain.67 These included: • The potential to move to a distance-based fare (in beta-testing as of late 2014);68 • Ease the operators’ burden for fare collection; • Simplify the fare system for both customers and operators; and, • Reduce the cost of fare collection. Pilot Project UTA management decided to pursue an evolutionary approach to their development and implementation of an automated system. In 2006, UTA began an electronic fare collection pilot on 41 ski service buses. The purpose of the pilot was to learn about the development and deploy- ment of such a system by operating it on a relatively small number of buses. Partners included four ski resorts that issued picture passes to their employees on contactless smart cards. The pilot also included acceptance of contactless smart cards issued by the payment brands MasterCard, Visa, and American Express.69 The pilot objectives were to: 1. Solve an immediate problem—accounting for the use of employee passes issued by and paid for by ski resorts; 2. Learn whether transit fares could be collected using the new contactless credit and debit cards; and,70 3. Test the account-based architecture approach. The pilot was deemed a success. UTA was able to learn about many of the processes that it would need to manage in a full open payment system deployment. The internal and external stakeholders for the system were able to get real-world exposure to the technology. The pilot was continued for another year and UTA decided to develop and deploy an open payments fare collection system on all of its fixed route bus and rail service. UTA’s experience with the pilot informed their development requirements for their full-deployment system.71 These requirements included: • An account-based architecture, which they felt would ease implementation of fare changes and creation and launch of new fare products. • Tap-On/Tap-Off to allow UTA to capture origin/destination data, as well as position them to modify the fare structure to a distance-based fare. • Ability to support its well established third-party paid pass programs associated with employers (Co-op Transit Pass and Eco Pass) (see Figure 7-1), universities (Ed Pass) and, ski resorts (Ski Pass). UTA used a pilot implementation test to gain experience with open payments.

48 Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation • A hosted back office requiring compliance to accept and process financial payments. • Card validators and readers certified to accept and process contactless financial payment cards. • Ability to maintain cold and hot lists of card numbers for third-party issued employer and student credentials and financial payment cards. UTA Transit Fare Payment System Deployment On January 1, 2009, UTA launched the new system. The UTA system was the first open pay- ments system to be implemented on a U.S. transit system. It included readers at the entrances of 520 fixed route buses and 170 validators installed on 35 TRAX light rail and FrontRunner com- muter rail platforms. These readers and validators are connected to UTA-owned and developed wireless communications gateways on buses with both 3G connectivity and Wi-Fi connections at garages and optical fiber to all platforms. Internet links take the transaction data from each device to a back office payment management system hosted by the payment system vendor, VIX Technology.72 The initial fare products offered were contactless financial payment cards for single adult fares and third-party paid passes. The system also supported transfers between transit services. Third- party paid passes support UTA’s institutional transit programs with local employers, colleges and universities. The Eco Pass is a contactless card that employers issue to their participating employees, the Ed Pass is issued by colleges and universities to their students, and the Ski Pass accepts employee credentials from participating employees of five ski resorts within the UTA service area.73,74 These contactless smart card products were augmented by the acceptance of cash and coin, tokens, and various flash passes (monthly passes and day passes). UTA has implemented an open payments, account-based approach that requires only real- time authentication of the contactless medium at their validators. This authentication deter- mines if the payment medium being used is valid. Because of communications delays in some situations, they accept authorization of the transactions several seconds later.75 The price of each trip is calculated as the tap-on/tap-off actions are received and then sub- mitted for full authorization and settlement. This authorization determines if the account Source: UTA Figure 7-1. UTA Eco Pass card and reader.

Next Generation Transit Fare Payment System Case Studies 49 holder has sufficient funds or authority to make the payment. If the card is declined, it is hot listed and will not be accepted by the system going forward until the customer arranges for payment for the unpaid trip and card acceptance is restored.76 UTA was comfortable assuming the “risk of the first tap” because if a transaction is not authorized they immediately hotlist the invalid fare medium and transmit it out to system end-points to prevent further unauthorized transactions.77 The system’s account-based architecture accepts payment from ISO 14443/NFC-compliant contactless devices to authenticate valid transit riders and access their centrally managed accounts to authorize transit fare payment. Due to the system’s centralized nature, a wide variety of NFC- enabled devices can be integrated into the existing system and used to access rider accounts to make a transit payment. Thus, this system is flexible to expand to new NFC-enabled fare media and to link a UTA customer account to an account in another transportation system, such as a toll system. Therefore, if UTA and the Utah Department of Transportation come to an agreement, it is feasible to link a customer’s transit payments and toll fees through their central accounts.78,79 An account-based architecture requires constant (or near-constant) communication between the on-board reader units and the centralized account to authorize payment transactions as quickly as possible. UTA readers on buses communicate with the central system using secure 3G communications. When operating on a bus, there is concern of the bus “dropping” out of contact with the account, adversely affecting the system. To facilitate payment validation for off-line operation, each bus reader stores a “hotlist” and a “coldlist” of contactless media that is updated every 2–3 minutes when the reader is connected to the centralized system. Hot lists are lists of cards that are known to be unauthorized for use at the UTA system (due to non-payment of the last transaction). Cold lists are lists of Eco Pass, Ed Pass and Ski Pass credentials that are known to be authorized for use on UTA’s system (essentially active employees or students of the businesses, universities, or ski resorts that are part of the these UTA institutional pass programs).80,81 UTA leaders believe they have a system that uses a “flexible, agile architecture” that allows them to continually evaluate and implement their fare policy and structure as well as new fare medium technologies without excessive integration.82 UTA Transit Fare Payment System Developments Continual Experimentation Today, UTA operates their account-based, contractor-hosted system and accepts a variety of transit fare payment media. They accept passes for employees, students and resort customers under their Eco Pass, Ed Pass, and Ski Pass programs. They also accept contactless credit and debit cards and the Google Wallet mobile applications. The system is still augmented by payment by flash passes and cash. Since the launch of their system, UTA has continued to evaluate and introduce new transit fare payment options. Among those studied and developed to various stages include: • Special fares for seniors and disabled individuals; • Open loop prepaid partnerships; • Contactless co-branded cards; • Acceptance of government benefits distribution cards; • System-wide pay-per-trip distance-based fares; • Acceptance of federal government Personal Identity Verification (PIV) cards for administer- ing employee transportation benefits; and • Use of third-party access and identity media for prepaid or post-paid payment per trip.83 Account-based architectures facilitate convergence of transit and toll accounts, enabling a multi-modal approach to regional travel demand.

50 Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation A proof of concept demonstration of accepting government-issued PIV identification cre- dentials was conducted in 2012. This demonstration involved six federal agency partners and 36 employees. The technical approach was to simply read the unique Identification Number (UID) of the employees’ PIV and CAC cards and compare to a cold list of the 36 trial PIV cards. There was no secure data exchange between the PIV and CAC cards and UTA readers.84 UTA would like to accept federal credentials in the future, as it would reduce the number of fare media issued, simplify administration of transit benefit programs and reduce the potential for fraud in benefit programs. UTA also has been involved in a mobile payments demonstration since October 2012 with Softcard (formerly known as “Isis Wallet”). Softcard is a mobile wallet developed and managed by AT&T, T-Mobile and Verizon. As part of the launch to raise awareness with customers, Soft- card offered free rides on bus, TRAX and FrontRunner services for anyone using mobile pay- ments through Jan. 31, 2013. Customers tap the mobile payment device to the contactless logo on a reader. The system automatically recognizes the type of card/device and responds accord- ingly.85 Softcard used the Salt Lake City, UT pilot and a second pilot in Austin, TX to move to a nation-wide rollout in November 2013.86 Limited Penetration of Open Loop Media UTA’s system cannot distinguish between transactions using contactless credit/debit cards, Google Wallet or Softcard applications. Therefore transaction volumes of the mobile wallet applications fall within the contactless financial card transactions that UTA observes. To date, these various open loop financial media transactions are only 1 to 2 percent of their total trans- action volume. This has been constant throughout the life of the system. Some reasons they see for this lack of penetration are: 1. UTA did not pursue a major marketing campaign targeting acceptance of contactless bank cards; and, 2. There has not been extensive issuance of contactless cards by financial payments industry in the region. Development of FarePay Since acceptance of contactless credit and debit cards mobile wallet payment applications has accounted for only 1 to 2 percent of UTA’s transactions, UTA explored its options for closed loop transit smart cards.87 UTA investigated gift cards and closed loop prepaid cards (i.e., a transit agency smart card), and had vendors demonstrate the technology at the transit authority. This information informed their decision to pursue a third-party contactless payment card solution; essentially, they believed that a transit card could be sold like a gift card. They evaluated general purpose reloadable cards which could be used for any type of purchase, as well as a closed loop transit card approach which could only be used on transit. They chose to develop a closed loop prepaid card program in order to minimize any costs for their customers, such as fees for card reload and carrying balances often associated with third- party prepaid reloadable cards. UTA wanted to leverage the capabilities of the prepaid card industry, however. They decided to engage in a contract for the card issuance and management as well as development of a third-party sales network.88 In October of 2013, UTA launched the UTA FarePay card. It is a transit-only prepaid con- tactless smart card that interfaces with existing contactless readers in their system. The UTA’s account-based architecture facilitated introduction of the prepaid card. The UTA FarePay card

Next Generation Transit Fare Payment System Case Studies 51 utilizes contactless technology to interface with NFC readers installed on transit vehicles that link riders to their account when making transit payments. Transit riders must pre-load their UTA FarePay accounts. UTA’s initial contact was with InComm, a company that manufactures, issues, and manages the FarePay cards. They arrange for sale of the cards in a merchant network of locations in the Salt Lake City area. At rollout, there were 30 locations, and that network has grown to approxi- mately 250 locations in 6 months. The FarePay card is sold for $3.00 to cover the costs of card manufacturing, distribution, and management. Customers can load value at retail locations in the distribution network or on the FarePay website with no fees. They are not charged a fee for carrying a balance; all customer funds are available for paying UTA fares. The cards are initially anonymous. UTA has no interest in collecting personal information about riders. However, customers can register the card to be eligible for balance protection if their card is lost or stolen, and FarePay’s auto-reload feature. UTA gave incentives to its customers to use FarePay by offering a 20 percent fare dis- count ($2.00 versus $2.50). UTA has seen a very strong penetration of FarePay among their customers that use contactless media. In the first 6 months, FarePay has become 5 percent of all “taps” on the UTA system. UTA sees this as a significant penetration, given that the Eco, Ed, and Ski Pass options are approximately 50 percent of all taps. UTA sees that FarePay has quickly surpassed all other open loop media use. UTA is now evaluating its strategy for moving customers to contactless media, and FarePay is a key element of their future plans. Working Towards Real-Time Transaction Authorization The FarePay program has highlighted the need for UTA to attain real-time authorization of all transactions in their system. Prior to the rollout of FarePay, the vast majority of their contactless media (50 percent of all system transactions) are third-party passes under their Eco Pass, Ed Pass, and Ski Pass programs, so their risk exposure was seen as quite limited. However, since the rollout of FarePay, UTA is now actively driving their customers from flash passes to contactless media. Since FarePay is a prepaid instrument, UTA feels they must reduce risk by trying to do real-time authorization within 0.5 seconds. UTA now observes that virtually 100 percent of rail transactions and greater than 75 percent of bus transactions achieve authorizations within 0.5 seconds.89 Conclusions and Lessons Learned The initial motivation for UTA to accept open loop contactless credit and debit cards led them to implement an account-based, open payment architecture (see Figure 7-2). UTA Hybrid solution allows use of UTA- issued fare media Standards Based ProprietarySingle Agency Account Based Card Based Multiagency Open Payments Closed Payments Figure 7-2. Utah Transit Authority payment system design typology.

52 Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation feels this system architecture gives them the flexibility to enhance and expand their customer offerings to provide more choices and enrich their customers’ experience on UTA. UTA managers feel that the account-based architecture enables them to make fare policy changes more simply than a card-based architecture, and with minimal cost. They feel that they are better positioned to be able to implement strategies such as a distance-based fare structure. They feel that distance-based fares may benefit riders who take shorter trips by actually low- ering their fares. UTA took a very deliberate approach in the development and implementation of its pay- ment system, opting to do pilot tests and demonstrations that they evaluated prior to full sys- tem deployment. UTA also developed a relationship with their payment system vendor which included co-ownership of any intellectual property for the payment system software. UTA feels that this allows them opportunities to partner with new organizations and to develop their sys- tem as they see fit. UTA managers report that these two elements give UTA the flexibility to achieve their pay- ment system goals and enhance their customers’ experience. They feel that their system is future proofed, meaning that new approaches, such as mobile applications, acceptance of cre- dentials, and other new technologies can be leveraged as long as a compatible communications interface is used. UTA management has taken a deliberate and strategic approach to leveraging their payment system to achieve policy goals. They structured the payment system evolution to: • Train their customers who use contactless media to tap-on and tap-off, which has positioned them to both capture boarding and alighting data for operational use, and position the transit agency to potentially move to a distance-based fare. • Continually evaluate payment technologies and approaches, such as acceptance of PIV credentials and demonstration of Google Wallet and Softcard mobile NFC-based payment applications. • Continually evaluate payment options for unbanked and underbanked customers. This approach led to the development of the FarePay closed loop transit card, which UTA feels fits customer needs and will be a mainstay of their future system. Source: UTA Figure 7-3. UTA light rail station and commuter train.

Next Generation Transit Fare Payment System Case Studies 53 Case Study 2: Southeastern Pennsylvania Transportation Authority (SEPTA)90 Introduction The Southeastern Pennsylvania Transportation Authority (SEPTA) is a transit agency of the Commonwealth of Pennsylvania, created by the state legislature in 1964. SEPTA is the nation’s sixth-largest public transportation system. SEPTA took the assets of multiple bank- rupt private companies and shaped them into a vital public transportation network man- aged by a single transit authority focused on meeting the travel needs of the region. SEPTA is a vital regional asset, with a service area that includes the heavily populated southeastern Pennsylvania.91 Today SEPTA serves the city and county of Philadelphia, as well as Bucks, Chester, Delaware, and Montgomery counties, a total area of over 2,200 square miles and a population of 4 million.92 SEPTA service also extends to Trenton and West Trenton, New Jersey, and Newark, Delaware. System- wide, SEPTA recorded 337.3 million trips during Fiscal Year 2013 and approximately 1.4 million unlinked passenger trips were generated each weekday. SEPTA has an average weekday ridership of over 1.0 million trips.93 SEPTA is a multimodal transit system as it provides a vast network of fixed route services including 118 bus routes, a subway and subway-elevated line, 13 regional rail lines, 8 trolley lines, 3 trackless trolley routes, an inter-urban high-speed rail line, and customized community service (see Figure 7-4). SEPTA Railroad Operations serves all five counties with approximately 126,000 unlinked passenger trips on commuter rail per weekday in Fiscal Year 2013. This service also operates in Newark, Delaware and to Trenton and West Trenton, New Jersey. SEPTA set a new Regional Rail ridership record, with 36,023,000 trips taken by customers during Fiscal Year 2013. Regional rail ridership has increased by 50 percent over the last 15 years. Approximately 30 percent of Regional Rail passengers utilize other SEPTA services, driving the vision for a comprehensive payment system with common fare media. Suburban Operations (Victory and Frontier Divisions) provide service in the suburbs, north and west of the City of Philadelphia, with a network of 46 bus, trolley, and heavy rail routes providing approximately 74,000 unlinked passenger trips per weekday in Fiscal Year 2013. Cus- tomized Community Transportation (CCT) serves Philadelphia and the surrounding coun- ties and schedules approximately 7,300 customized weekday trips for seniors and persons with disabilities. SEPTA’s four small bus circulator routes and shuttle services connect fixed route opera- tions to business, retail, health and educational centers, as well as to park-and-ride facilities. In Fiscal Year 2013, these services provided transportation for approximately 4,400 passengers per weekday.94

54 Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation SEPTA Fare Payment System Evolution The legacy SEPTA fare payment system has been in existence for decades. For all modes except commuter rail (Regional Rail), a flat fare system is used with paper transfers available for purchase. Regional Rail uses a zonal fare structure and passenger fares are paid to or validated by conductors on-board trains. The transit system accepts read-only magnetic stripe fixed-calendar daily, weekly, and monthly passes for both transit (Transpass) and railroad (Trailpass). Cash, coins, and metal tokens as well as paper transfers are also accepted. Regional Rail passengers can pay with cash and coin, a single trip or 10-trip tickets, or weekly and monthly passes that the conductor verifies by sight. SEPTA examined a fare system upgrade in the 1990s and considered the card-based, proprie- tary read-write magnetic systems of the day. While the timing was never right for a procurement of a new fare payment system, SEPTA management and staff kept abreast of payment system developments and technical advances and continued to operate its legacy system. Source: SEPTA Figure 7-4. SEPTA rail systems map.

Next Generation Transit Fare Payment System Case Studies 55 Events changed beginning in 2008 when the SEPTA system was subject to spare parts short- ages and the end of the system’s useful life was at hand. The reliability and functionality of the existing fare collection system could not be improved due to the age of the electronics and limita- tions of the existing computer operating system. Also, a portion of the collection process relied heavily on manual procedures.95 Additionally, the legacy fare payment system was deemed to be a barrier to transit use. While frequent riders learned to navigate the current system, first time and infrequent riders often found the system confusing and challenging to use. Many expressed frustration about payment methods that vary by mode and the often cumbersome process of purchasing tokens and paper tickets and transfers.96 Due to these issues, SEPTA staff began to actively plan for a new fare payment system. SEPTA’s Next Generation Fare Payment System: New Payment Technologies SEPTA management and staff were very aware of transit payment systems technical and business developments through involvement in industry conferences such as the APTA and the Smart Card Alliance as well as peer-to-peer information sharing. This knowledge of the state-of-the-art of pay- ment systems allowed SEPTA staff to focus their efforts quickly in the planning process that began in earnest in 2008. The business drivers for the move to the New Payment Technology (NPT) were: 1. Replace SEPTA’s old fare system which was at the end of its useful life; 2. Use an account-based system to achieve more control for rider convenience and allow cus- tomers to get “maximum value for their riding dollar”;97 3. Leverage advancements in fare payment technology and approaches that offer more options to customers and SEPTA; and 4. Build a state-of-the-art system with a limited availability of capital funding. SEPTA staff concluded that there were two general approaches available in the 2008 time- frame: “a proprietary, card-based approach, and an open system approach using cards issued by financial institutions, as demonstrated in the New York MTA pilots that had taken place over in the late 2000s.” SEPTA also had “a motivation to bring in tried and tested elements so riders know them from payments they use in their daily lives.”98 Ultimately, SEPTA management selected the standards-based, account-based, open payments typology (see Figure 7-5). They have opted for a hybrid solution that will allow both closed transit media as well as open loop contactless financial payment cards, with potentially mobile payment applications, thus expanding payment options for passengers. SEPTA management was very aware of technical and business developments in the financial payments industry. Since financial payment cards were a key fare payment option in the new Transit agency officials stayed abreast of payment system developments outside the transit industry through industry conferences and other avenues. Hybrid solution allows use of SEPTA-issued fare media Standards Based Proprietary Single Agency Card Based Multiagency Open Payments Closed Payments Account Based Figure 7-5. SEPTA fare payment system design typology.

56 Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation system, SEPTA required compliance with EMV standards. EMV is a technology that includes a smart card chip and requires a user PIN for purchases to help protect personal and transac- tion data. EMV chip technology is becoming the global standard for credit card and debit card payments. Named after its original developers (Europay, MasterCard and Visa), this smart chip technology features payment instruments (cards, mobile phones, etc.) with embedded microprocessor chips that store and protect cardholder data. This standard has many names worldwide and may also be referred to as: “chip and PIN” or “chip and signature.”99 Procurement Approach The payment system program was complicated by limited availability of capital fund- ing, thus SEPTA officials sought to leverage public-private partnerships to build their new fare payment system. SEPTA determined that the procurement approach would be to do a Design, Build, Operate, and Maintain (DBOM) that would outsource all or selected fare payment functions. SEPTA eventually chose Xerox (specifically ACS, a Xerox Company) to deliver the new system in November 2011. Financing for the project was through a unique financing approach that accumulated international investment through individuals and businesses. NPT Program Implementation Approach SEPTA worked with their contractor Xerox to plan the design, build and rollout of the NPT program. Updating the fare collection system is a large undertaking that will span several years. The NPT installation project is divided into three phases, with completion expected by early 2016.100 Phase I. Design, testing, and manufacturing Phase II. Transit installation (bus, trolley, subway) Phase III. Regional rail installation SEPTA and Xerox are completing the design, testing, and manufacturing stage of the project. There have been challenges merging legacy systems with the NPT program back-office functional- ity such as reports, accounting, and general ledger applications. The project is currently in the pro- cess of installation with new goals of beginning a pilot test of the system that includes SEPTA and Xerox employees and other stakeholders to test all payment options, interfaces, and the process of ordering, delivering, activating, personalizing, purchasing fare products and using fare media. The next step after the pilot test is a “soft-launch”/beta test where installation will increase from 10 percent of the system to 50 percent. At this level, the system will officially launch and continue towards 100 percent installation. During this transition, SEPTA requires that the legacy payment system and new payment system are both available for customer use. At a point to be determined, SEPTA will cease issuance of legacy fare media. Bus passengers can still pay cash or use the new payment system media. The final phase of the installation is to adopt the new fare payment system on its Regional Rail commuter system. This service mode operates 13 lines running to more than 150 active stations, using a zone or distance-based fare program. It also employs a conventional, open boarding and full conductor inspection approach for fare payment and collection. SEPTA has selected a hybrid model for this service mode, combining barrier and non-barrier approaches. Five of SEPTA’s Regional Rail stations are located in downtown Philadelphia and serve as the origin/terminating point for more than 90 percent of all trips. At these stations, SEPTA will install 375 gates and require a tap-in or a tap-out by Regional Rail passengers to collect fares. For non-downtown stations, validators will be installed at all Regional Rail platforms at which pas- sengers will tap-in or tap-out. Conductors will focus their responsibilities on train operations, Pilot tests allow the transit agency, vendors, and riders to ensure func- tionality and identify issues prior to full system-wide implementation.

Next Generation Transit Fare Payment System Case Studies 57 while performing limited on-board inspections, selling single fares and allowing passengers to replenish their accounts. For SEPTA, this hybrid barrier/barrier-free model for commuter rail was a cost-effective solution. New Fare Media The new system will accept both bank and non-bank-issued payment media that comply with the ISO 14443 contactless interface standard. The agency issued fare media will be a general purpose reloadable MasterCard-branded contactless smart card valid across all SEPTA services. Riders may choose to use the card only for transit fare payment purposes (pass purchase, stored value, etc.) as well as a general purpose reloadable card allowing regular debit card purchases. In addition to web-based and telephone center sales, channels for cards sales include vending devices at downtown rail stations, agency sales locations and over 1,000 retail locations through- out the service area. Customers can also add value or products to their accounts through vending machines, a website, or by enabling “subscriptions.” The SEPTA-branded, transit-only card is a key element in SEPTA’s strategy as it gives them a greater level of control over the fare media and the ability to add customers. Agency issued cards can be linked to a customer’s credit/debit card or bank account to provide automatic value add when needed. SEPTA officials have seen the success of E-ZPass at using this automated value- added approach in the toll industry and built it into their new payment system. In addition, SEPTA has outsourced the provision of its agency branded fare card to a prepaid card manager in a revenue sharing agreement that intends to provide a significant new revenue stream to the agency. Future Payment Research SEPTA is still in the midst of fielding their new fare system, thus their attention is fixed on its successful launch and operation. However, management and staff remain aware of advancement in the payment industry that can impact their system. SEPTA requires EMV compliance, so the design will welcome EMV chip cards as they become available in the United States. SEPTA also sees mobile payments as a potentially beneficial option for their customers. They are aware of these developments and believe their system will be ready to accept mobile payment applications. Future pilot programs for mobile payment applications or EMV are not planned until the core system is fully functional. SEPTA feels that their decision to move forward with an account-based technical architecture that allows flexibility at the front-end devices (fare gates, validators, and fare boxes) will keep it nimble enough to examine and accept payment types as they become available in the industry. Case Study 3: Whatcom Transportation Authority (WTA)101 Introduction Whatcom Transportation Authority (WTA) provides public transportation services through- out Whatcom County in Northwest Washington State approximately 100 miles north of Seattle. WTA serves the city of Bellingham as well as the smaller towns and communities of Ferndale, Lynden, Blaine and Birch Bay, Lummi Nation, Sudden Valley, Kendall, Everson, Nooksack, and

58 Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation Sumas. WTA also cooperates with Skagit Transit in neighboring Skagit County, to provide ser- vice between Bellingham and Mount Vernon. Service is offered seven days a week, with more limited service on Saturdays, Sundays and evenings. Services include: • 60 fixed route buses (including eight hybrid electric buses) that provide 4.9 million fixed route boardings, or approximately 17,000 boardings per weekday; • Specialized transportation: 37 minibuses providing 600 paratransit trips per weekday; • Vanpool program: 39 vanpool vans; and • Four transit centers: Bellingham Station, Cordata Station (in North Bellingham), Ferndale Station and Lynden Station. WTA’s fixed route service includes a network of four high-frequency corridors within Bellingham. WTA plays a major role transporting students to and from Western Washington University; students comprise 38 percent of fixed route ridership. Between 2002 and 2012, WTA ridership increased by 84 percent and in 2008, WTA was recognized by the Federal Transit Administration for achieving the highest annual ridership increase in the nation. WTA’s mission is to enhance its community by: • Delivering safe, reliable, efficient, and friendly service. • Offering environmentally sound transportation choices. • Providing leadership in creating innovative transportation solutions. • Partnering with our community to improve transportation systems. Legacy Transit Fare Payment System and History of Development WTA collects fares on its 60 fixed route buses at GFI fare boxes. WTA’s cash fare is $1.00 per ride within Whatcom County and $2.00 when traveling between Whatcom and Skagit counties. Fare media accepted includes cash, tokens, and magnetic stripe monthly, quarterly and annual passes (as well as reduced and student monthly and quarterly passes). WTA has a network of retail sales locations as well as a web portal (note: web portal at http://www.ridewta.com/store only sells full fare passes and tokens). Due to its proximity to Seattle, WTA has the ability to join with the Sound Transit ORCA program. They chose not to join due to a very small passenger crossover with ORCA, the fact that Skagit county is a buffer between Whatcom County and the ORCA program service area and Skagit is not joining ORCA, and finally anecdotal evidence that costs to join and participate in ORCA were higher than WTA was willing to pay. Kitsap County does belong to the ORCA program, but adjoins the ORCA service area. WTA began to investigate a transit fare payment system upgrade. The driving element of their planning was the need to replace existing fare boxes reaching the end of their life. WTA had Urban- ized Area Formula Funding program (49 U.S.C. 5307) funds102 that they programmed for this capital improvement. They decided to piggyback their smart card solution on top of the farebox upgrade. WTA had the following technical goals for their new fare system: • Replace obsolete fare boxes, • Develop new pass distribution processes, • Offer new fare options, and • Improve data management. WTA also had business goals they wished to achieve. Among them was the desire to future-proof their system, so it could support fare policy adjustments such as distance-based fares as well as support the use of stored value cards and potentially bank cards. They wanted a system that used readily available commercial hardware (e.g., fareboxes), that could be provided by a single vendor. WTA established business goals which drove the payment system acquisition.

Next Generation Transit Fare Payment System Case Studies 59 WTA’s main fare media objective was to migrate away from flash pass. This would address their goals for data capture as well as new fare options. They wanted to transition monthly or quarterly passes to “rolling” passes that are 31-day or other timeframes that begin when the cus- tomer first uses them. This will alleviate sales surges at the beginning of the month. Migrating from a flash pass also eliminates driver conflict issues by making the acceptance or rejection of the fare card the role of the reader. Ultimately, WTA determined that a proprietary, card-based, closed system was the best solu- tion to their needs (see Figure 7-6). Request for Proposal (RFP) Process WTA used RFPs from Sun Tran in Tucson, Arizona and the Spokane Transit Authority (STA) as templates. Their main requirement of a farebox upgrade steered their process and resulted in three proposals. WTA selected the GFI proposal (see Figure 7-7). The new fare system features include new GFI Odyssey fare boxes and a card-based smart card solution. The total project cost for new fare Proprietary Single Agency Card-Based Closed Payments Standards BasedMultiagency Account Based Open Payments Figure 7-6. Whatcom Transit Authority fare system typology. WTA obtained information from their peers on payment system acqui- sition and implementation experiences. Source:www.ridewta.com Figure 7-7. Whatcom Transit Authority new farebox.

60 Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation boxes with a smart card fare system is $2M of which the farebox upgrade was $1.5M. The fare media will be pass-based with no stored value product initially. The pass types include 1-day, 31-day, 90-day, annual, and an 11 ride ticket for $10. The tentative project schedule included three key milestones: • Mid-April 2014: replace fare boxes. • Late summer 2014: new fare configuration and launch of smart card. • Fall 2014: launch of web portal (www.ridewta.com). Lessons Learned and Fare System Implications for Small Transit Agencies Through their experience in their procurement, WTA officials identified several implications for small transit agencies that wish to upgrade their transit fare payment systems. WTA officials believe that once they implement their system, they may be a model for other small transit agen- cies in Washington State. They feel that their experience can inform other future fare system pro- curements. They stated that they gained valuable insights through peer-to-peer exchange with other smaller transit agencies. One point that they cited is that small, bus-only transit agencies must focus on the farebox as their primary need and let that drive their fare system procurement. When a farebox replacement is placed at the forefront of fare system planning and imple- mentation, the group of vendors and the approach to a contactless smart card solution is pared down considerably. WTA officials believe proposals for small transit agencies that lead their fare system procurements with a farebox replacement are limited due to two factors: 1. The limited number of farebox vendors; and, 2. The limited number of vendors with a combination of proven farebox technology and a deep smart card system integration ability (including back office, web portal, etc.). Their perception was that larger system integrators who might be able to offer open, account- based payment systems do not have an offering for small transit agencies, and farebox vendors have limited system integration capabilities. Therefore, they feel that the closed, card-based architecture may be the only real option available for small transit agencies at this time. They feel that the single transit agency, closed payment system, card-based smart card solution using readily available commercial hardware equipment fits their needs well.

Next: Chapter 8 - Evaluating Public Transit Fare Payment System Typologies and Implementation Strategies »
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TRB’s Transit Cooperative Research Program (TCRP) Report 177: Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation explores attributes, implementation strategies, and applications of next generation transit fare payment (NGFP) systems. The report documents the state of the practice of emerging fare payments options for public transportation; develops a typology of available and anticipated options for NGFP that can serve a broad range of transit agencies and stakeholders in the United States; and evaluates the pros and cons of the options presented in the typology.

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