Lecture #21: Fare Technology & Policy - PowerPoint Presentation

1. Lecture #21: Fare Technology & Policy[Course Instructor][Course Semester][Course Number]Materials developed by C. Brakewood, K. Watkins, and J. LaMondia.

2. Outline Motivation: Why should we care about fares?Key “parameters” of a transit fare system:Policy Structure TechnologyTechnology used in new fare payment systems:Open payment systemsMobile ticketing systems

3. Motivation: Why should we care about fares? The fare system impacts many aspects of the transit system, including…Finance: important source of revenuePlanning: fare technology provides data about ridershipOperations: fare technology impacts dwell times and subsequently service reliabilityfares affect demand and subsequently amount of service

4. Motivation Fares can be highly political & subject to public scrutiny.https://www.newschannel5.com/news/fares-increasing-for-wego-bus-servicehttp://www.fox32chicago.com/news/local/angry-cta-riders-voice-their-concerns-over-potential-fare-hike

5. Farebox recovery ratio (also called fare recovery ratio) is the percent of operating expenses which are met by the fares paid by passengers. Farebox Recovery Ratio = total fare revenue divided by total operating expenses.While fares are highly visible, they cover only a fraction of operating costs.MotivationSource: 2015 APTA Factbook, page 26Table 26: Funding SourcesReport Year 2013Funding sources data from 1926 through 2013 can be found in the 2015 Public Transportation Fact Book, Appendix A: Historical Tables at www.apta.com

6. “Parameters” of a Fare SystemThe primary parameters of a transit agency’s fare system:Policy Structure TechnologyThese 3 parameters are closely interrelated: “Policy generally sets the direction for the strategy and specific structure, but technology choices can also affect the structure selected.”Source: TCRP Report 94, page 13

7. Parameter 1: Fare PolicyDefinition: establishes principles and goals underlying and guiding the agency’s pricing-related decisionsExample: Mandated fare recovery ratioSources: TCRP Report 94, page 14

8. Parameter 2: Fare StructureFare StrategyGeneral approach: flat vs. differentiated (zonal, distance)Transfer policyPayment OptionsForms of fare payment (period passes, multi-ride tickets, etc.)Pricing LevelsActual pricing levels, including discountsSources: TCRP Report 94, page 14-15

9. 2A. Fare Strategy – Base FareBasic fare strategies fall into 2 groups:Flat fares: pay the same fare regardless of the length of the trip, time of day, speed, or quality of serviceAdvantages: easy to administer & understand Differentiated fares: fares differ depending on length of trip (zonal or distance), time (peak or off-peak), or service (express vs. local, rail vs. bus) Advantages: efficiency and equity Sources: TCRP Report 94, page 16

10. Example of Differentiated FaresWMATA in Washington DC has:Distance-based faresTime-based fares (peak and peak-of-the-peak)Service-based (rail differs from bus)Image source: greatergreaterwashington.org

11. 2A. Fare Strategy - TransfersMany systems require riders to transfer between routes or between modesMost transit agencies offer free or reduced-price transfersWhat do you think? Should transit systems charge the full fare, have reduced fares, or have free transfers?Sources: TCRP Report 94, page 17Free / Reduced price transfers:Advantage: passenger convenienceDisadvantages: revenue foregone, difficulty determining validity of transfer

12. 2B. Payment OptionsSingle-rideMulti-ridePeriod passStored valuePost paymentSource: TCRP Report 94, page 20

13. Other Payment OptionsInitial purchase bonusGuaranteed last ride (negative balance)Capping (typically timed-based)Reduced fare (discounts): Seniors, students (e.g., university pass programs), etc.

14. 2C. Pricing LevelsPricing levels vary by mode.Source: 2012 APTA Factbook

15. 2C. Pricing Levels… Can fares be fair?Transit subsidies v. car subsidiesWe calculate the farebox ratio for transit, shouldn’t we do the same for cars? E.g., fuel tax, registration & other feesFree FaresIf we accounted for all the invisible subsidies to the motorist and set equal transit subsidies, Jarett walker argues that we would see huge growth in transit funding. This could make it possible to eliminate fares. No big-city transit agency has free fares.Jarrett Walker, Human Transit, Chapter 11

16. Parameter 3: TechnologyType of Fare Collection – refers to the manner in which fares are paid or inspected (e.g., barriers)Fare Media – instrument used for payment

17. 3A: Types of Fare CollectionBarrierPay on BoardSelf Service or Proof of Payment (POP)Conductor Validated Image credits: Candace BrakewoodImage of faregates: http://web.mit.edu/2.744/www/Results/studentSubmissions/humanUseAnalysis/jasminef/

18. 3A: Types of Fare CollectionFare collection types certain for transit modesSource: TCRP Report 94, page 23Table 2-13 Use of Fare Collection Approaches by Mode

19. Comparison of Fare Collection ApproachesFactor / IssueProof of Payment (POP)Conductor-validatedPay on boardingBarrierEquipment NeededTicket Vending Machines (TVMs), validators, Ticket Office Machines (TOMs), hand-held readersTVMs, TOMs, validators, hand-held readersFareboxes, ticket processing unitsFaregates, TVMs, add-fare machinesStation or platform characteristicsOpen (elevated) or on-street platformOpen platformNARequires space for gates and TVMs, and defined entry/exitHandling large passenger volumesCrowded cars can interfere with inspection. May require high number of TVMsCrowded cars can interfere with inspection.Slows boardingDoesn’t affect ability to collect faresFare evasionDepends on inspection pattern, fine structure, level of crowdingMinimal, since conductor inspects or collects fare from everyone; could be problem at congested timesCaused by using invalid pass or transfer. Also caused by crowding at boarding pointCaused by faregate “jumping”, short-swiping farecardsHandling intermodal transfersTransfer from bus can be used as POP on LRT; POP can include transfer to busTransfer from other mode can be shown to conductor(see other approaches)Transfer from bus must be machine-readable; transfer to bus must be issued with rail ticketHandling zonal faresMore complicated (to use and to enforce); must include origin for validationCommuter rail lines invariably zonedRider tells driver destination (or zone), pays accordinglyRequires exit gates and add-fare machinesSource: Adapted from TCRP Report 94, page 24

20. Comparison of Fare Collection ApproachesFactor / IssueProof of Payment (POP)Conductor-validatedPay on boardingBarrierUse of Automatic Fare Collection (AFC)Use to buy POP ticket, or have to validate farecard or have pass (inspectors need hand-held readers)Conductors need hand-held farecard readers / processing unitsNeed ticket processing units / card readers; ease of revaluing is issueFaregates read farecard and deduct value or indicate valid passSecurity and customer serviceInspectors provide presence on vehicles and platforms. Added security needed at other times.Conductors provide presence on all trainsDriver responsible for security and customer assistance on busIf no ticket agents, security needed in stations and on trainsCustomer convenienceNeeds validation of multiride or stored value tickets; may be queues to buy or validate, but not to boardNo need to prepay or validate, no need for exact change, and no queuing to pay or boardNeeds either prepayment (pass or multiride option) or exact change; may be queuesDepends on types of payment accepted in gates (easiest if cash accepted); may be queuesCapital costsLower than barrier unless high vol. Requires many TVMsLower than POP; may be lowest (depending on number of TVMs used)Lowest costs; fareboxes, but no TVMsCost of faregates high, but requires fewer TVMs than for POP (validation at faregate)Operating costsHigher labor cost than barrier.Highest labor costLowest labor costLower labor cost than POP.Source: Adapted from TCRP Report 94, page 24

21. 3B: Types of Fare MediaCashTokensPaper TicketMagnetic Stripe magnetic variations along longitudinal “tracks” in the stripe can store a certain amount of dataSmart Cards small plastic card with an embedded integrated circuit or processor that is used to store data and perform simple fare logicContactless credit/ debit card (emerging)Mobile phones (emerging)Image sources: http://welovetypography.com/post/2636 and http://en.wikipedia.org/wiki/MetroCard_(New_York_City)

22. Magnetic StripeSmart CardsStrengthsCards are inexpensive (< 10 cents)Cards can be readily vended from point-of-sale devices (TVMs) or possibly from fareboxes (TVMs that vend smart cards are much more expensive)If cards are used for stored value (rather than rides), when the card balance drops to a small level, some customers may purchase a new card rather than revaluing the old one. This means that residual value may never be used, which could become extra revenue.Data capacity and security features needed to support multiple card applications. Such partnerships can help spread system costs and make card use more attractive.Data capacity and processing also enable introduction of special features:Registering the card, so that value is not lost with the cardAutomatic revalue from credit cardAutomatic employer or other transit benefits on cardsContactless easy to use for disabled/ seniorsWeaknessesData capacity may be too limited to support multiple agency pass or multiride options. May be limited to stored value.Card readers require considerable maintenance / cleaning. Card slots are vulnerable to insertion of foreign items Card readers tend to be more expensive to purchase.Cards are expensive ($1.5 to $10 each). To ensure cards are retained, a fee or deposit may be required, raising equity objections. Not suited for one time use for visitors. Variety of card interfaces in marketplace complicate potential to integrate with other regions or applications.Magnetic Stripe v. Smart CardsSource: Adapted from TCRP Report 94, page 27

23. 3B: Types of Fare MediaCashTokensPaper TicketMagnetic Stripe magnetic variations along longitudinal “tracks” in the stripe can store a certain amount of dataSmart Cards small plastic card with an embedded integrated circuit or processor that is used to store data and perform simple fare logicContactless credit/ debit card Mobile phonesImage sources: http://welovetypography.com/post/2636 and http://en.wikipedia.org/wiki/MetroCard_(New_York_City)

24. A Brief History of Fare PaymentsAdult Fare$1.00Your MTAPaper Tickets AFC Systems Apps & Tokens & BankcardsOne-WayAdult Fare$1.00Your MTAOne RideYour MTA Card

25. New Fare Payment TechnologyTRCP Report 177 (Next Generation Fare Payment Systems for Public Transportation) Chapters 4-6

26. Transit fare payment system devicesSource: TCRP Report 177, Chapter 5, Page 25

27. Framework for Transit Fare Payment DesignSource: TCRP Report 177, Chapter 4, Page 21

28. Single (or Multi) Agency, Proprietary, Card-Based, Closed Payments SystemThe proprietary, card-based closed payment typology is the prevalent fare payment system in use today in large transit systems. Some examples include:CharlieCard, serving the Boston, Massachusetts, metropolitan area, operating across heavy rail, bus, and express bus systemsClipper, serving the San Francisco, California, metropolitan area, operating across multiple bus, heavy rail, commuter rail, and ferry systemsORCA card, serving the Seattle, Washington, and Puget Sound area, operating across multiple bus, heavy rail, light rail, commuter rail, water taxi, and ferry systemsSource: TCRP Report 177, Chapter 4, Page 21

29. Single (or Multi) Agency, Standards-Based, Account-Based, Open Payments SystemThese transit fare payment systems) offer the greatest potential flexibility for transit agencies and riders, since the system is standards- and account-based. Some examples include:Chicago Transit AuthorityTransport for LondonSource: TCRP Report 177, Chapter 4, Page 23Image: https://www.theguardian.com/money/2014/sep/16/london-tube-contactless-payments-underground-oyster

30. Mobile Payments – Technology OptionsSource: TCRP Report 177, Chapter 6, Page 37

31. Mobile Payments: Flash Pass and Bar CodeSource: TCRP Report 177, Chapter 6, Page 33

32. Mobile Payments: Near Field CommunicationsSource: TCRP Report 177, Chapter 6, Page 34

33. Mobile Payments: SMS / Text MessagingImage source: https://play.google.com/store/apps/details?id=se.anyro.slsms

34. Mobile PaymentsSource: TCRP Report 177, Chapter 6, Page 36

35. Increasing Availability of Fare Payment AppsAs of March 2019, there were at least 110 transit operators in the United States with mobile fare payment apps. Image source: Okunieff, P. (2017). TCRP Synthesis 125: Multiagency Electronic Fare Payment SystemsData source: research by Candace Brakewood for TCRP Synthesis 148

36. How do Mobile Payments work in the USA?TCRP Synthesis 148: Business Models for Mobile Fare Apps (2020)

37. TCRP Synthesis 148: Survey FindingsMain reasons to deployImproving the customer experienceReducing cash handlingDecreasing the cost of fare collectionVaries by transit modeNumerous examples on bus, light rail, commuter rail, and ferriesFew examples of heavy rail Primary method for validating fare products is visual validation by a conductor, inspector, or driver. Transit agencies hire outside vendors to develop and maintain apps; in-house transit agency staff not responsible for software development. A handful of companies (5-6) have most of the market in the USA + Canada. Many agencies had business arrangements that did not have any upfront costs; paid vendor based on a percentage of sales.Note: Survey conducted in spring 2019. Changes may have occurred since then.Image source: CapMetro

38. Five Business Models (1/5)Model 1: Shared AppMultiple transit agencies use the same mobile fare payment app provided by a single vendorQuick to implementTypically low costUsually does not include integration with preexisting fare payment systemsValidation is typically done only visuallyCase Example: City of Santa Monica’s Big Blue Bus Image source: https://www.bigbluebus.com/Newsroom/News/BBB-Accepts-Mobile-Tickets.aspx

39. Five Business Models (2/5)Model 2: White Label App“White label” name because the app is developed by a vendor but rebranded to look as if it were made by the transit agencyRelatively quick to deployComparatively low costUsually not integrated with preexisting fare payment systemsTypically rely only on visual inspectionCase Example: Denver’s Regional Transportation District

40. Five Business Models (3/5)Model 3: White Label App with Validation Hardware Similar to the previous model except includes hardware for validation, such as readers installed on transit vehicles Additional vendor typically facilitates hardware installation and integrationCosts are usually higher Deployment time may be longerCase Example: Austin’s Capital Metropolitan Transportation Authority

41. Five Business Models (4/5)Model 4: Open Payment AppStandards-based (commonly called open payment) and account-based systemsMobile fare payment app is used by riders to manage transit accounts (e.g., reloading value or purchasing passes) Transit accounts can be loaded into mobile wallets (e.g., Apple Pay, Google Pay) using virtual cardsFare products can be validated in different ways, such as tapping Near Field Communication (NFC) on the user’s phone at readersStill an emerging model Usually part of a fully integrated system, so costs are currently highCase Example: Chicago Transit Authority Image source: https://www.ventrachicago.com/coming-soon/

42. Five Business Models (5/5)Model 5: SDK OnlyOnly a Software Development Kit (or SDK) is procured from a mobile fare payment app vendorSDK can be integrated into other smartphone apps, such as real-time information or Uber’s appRelatively low costs Validation is done visually Typically limited integration with the transit agency’s preexisting fare payment systemCase Example: St. Catharines Transit Commission

43. Future TrendsConvergence toward the mobile phone because multifunctional (provides travel information, payment media, etc.)Importance of standards and interoperabilityIncreased flexibility in fare structures enabled by technology

44. ConclusionsThe primary parameters of a transit agency’s fare system:Policy: overarching guidanceStructure: strategy (flat vs. differentiated, transfer), payment options (e.g., period passes, multi-ride) & pricing levels Technology: type of fare collection (e.g., barrier, POP) & fare mediaFare policies, structures and technologies are closely interrelated.The real purpose of a fare system is to bring in a needed level of revenue while imposing a minimum of delay, hassle, confusion, and perverse incentives. Effective fare systems focus on these outcomes, support the goals of the network design, and accept that they will never be perfectly fair. – Jarrett Walker

45. ReferencesThe materials in this lecture were taken from:TCRP Report 94: Fare Policies, Structures and Technologies: UpdateTCRP Report 177: Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation2015 APTA Factbook Walker, J. (2011). Human transit: How clearer thinking about public transit can enrich our communities and our lives. Chapter 11. Island Press.CTA Ventra: www.ventrachicago.com/ TCRP Synthesis 125: Multiagency Electronic Fare Payment SystemsTCRP Synthesis 148: Mobile Fare Payment Apps Business Models