March 2012

Transit moves to open fare payment

by Nicole Schlosser, Senior Editor

Last year, METRO reported in its Feb./March issue on transit agencies laying the groundwork for open fare payment systems. These systems use technology that enables credit cards or mobile devices to communicate by touching them to or bringing them into close contact with fare boxes.

This year, METRO checked in on the progress the Southeastern Pennsylvania Transportation Authority (SEPTA) is making as it moves toward implementing its own open payment system in 2015. Meanwhile, the Chicago Transit Authority (CTA) has plans to open a system in 2014. Both agencies anticipate gains in time and data that will help them better plan schedules and routes.

Evolving process
Because many transit properties are looking to outsource fare collection activities, freeing them from manufacturing, encoding, branding, distributing and selling fare cards, so they can focus on their core goal of transporting people, they are turning to open fare systems, which can collect fares more cost-effectively.

That's part of what's driving the open fare payment movement, but it's still evolving.

"We are in the final stages of an evolution from cash, to magnetic stripe cards, to closed system smart cards, and now, toward an open standards solution making use of payment media and methods standardized by financial institutions," Kim Green, president, GFI Genfare, says.

To date, he adds, major projects are using a phased approach allowing the legacy fare system components to coexist while new fare technology is introduced.

"It is important that this transition is well planned so there is enough time for passenger familiarization and fine tuning of operational details," says Green.

He also notes that it will take some time to prove that open fare payment will work cost-effectively in the largest 10 transit agencies in North America, including those in New York, Chicago and Philadelphia, which have economies of scale working in their favor as they move to open payment systems. It will take even more time to adapt the model to mid-size and smaller agencies with a smaller passenger base.

In 2011, as SEPTA, like many other transit systems, struggled with lower ridership and funding, it decided that instead of purchasing a new fare collection system, it would upgrade its existing equipment as phase one in moving toward an eventual open fare payment system. The agency recently took the next steps, creating a program to help manage the project and awarding a contract to ACS Transport Solutions Group (ACS) last November.

SEPTA created the "New Payment Technologies" (NPT) program to usher in its open payment system. It will replace tokens, paper tickets and magnetic strip passes with contactless payment devices installed in vehicles and stations.

In early 2011, SEPTA upgraded 1,850 fare boxes to make them ready for the contactless payment technology, John McGee, chief officer, new payment technologies, SEPTA, says. Riders will be able to use a variety of contactless credit or debit cards and smart phones to pay for their fares.
"The fare box [upgrade] was a complimentary project to this," McGee says. "We knew we were going to do a larger open payment project, and we readied the fare boxes to be able to continue to collect cash into the future."

Under the $129.5 million contract, the agency will receive equipment and services for the installation of an open fare payment system under its NPT program. ACS will design, install, integrate and operate the system.
For customers who prefer using cash, SEPTA will offer for purchase pre-paid cards equipped with contactless payment technology.

The system will calculate all fares in the back end, as opposed to on board the vehicle or the card itself, operating similar to Visa and Mastercard, McGee explains. The agency will choose a processor for debit and credit transactions.

McGee agrees with Green that open fare payment can provide an efficient and cost-effective option for transit operations.

"From our point of view, this next-generation payment system offered extraordinary levels of convenience, speed and accuracy for our customers," McGee says. "It's designed to allow people to use what they have in their pocket or on their person as opposed to buying a special form of transit currency."

Another benefit is that the new payment technology will provide significantly more real-time business intelligence, including more precise information on daily trips, special events and unexpected crowding, allowing SEPTA to better manage its resources to modify services.
"We'll be able to see that occurring and react as quickly as we can," McGee says.

The three-year transition period will consist of design and testing work in the first year; component installation in the second year, including new vending machines and turnstiles on the subway elevated system; and turning on the system in the third year, first on buses and trolleys, followed by the Market-Frankford and Broad Street rail lines, and then, the regional rail system.

One of the challenges that SEPTA foresees is getting the public to transition smoothly to the new system. The agency decided to keep some existing transit fare elements during the transition. To help mitigate any confusion for riders, the agency is conducting a customer and community education and awareness program, which includes a website,, to distribute the latest information on the NPT program.

"We've also done a lot of research and outreach already on what customers feel [are] the strengths and weaknesses of our existing [system and] changes they would like to see," McGee says.

Additionally, SEPTA assembled a stakeholder advisory group to provide guidance on fare collection policy issues made up of all of the funding agencies involved, including representatives from counties served by the agency, the city of Philadelphia, Pennsylvania Department of Transportation and citizens groups.

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